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

Saturday, July 23, 2016

week ending Jul 23

Fed Officials Gain Confidence They Can Raise Rates This Year - WSJ: Federal Reserve officials are looking more confidently toward an interest-rate increase before the end of the year, possibly as soon as September, as financial markets have stabilized after Britain’s vote to leave the European Union and the economy shows signs of picking up. Policy makers at the central bank are almost certain to leave rates unchanged when they meet July 26-27, according to their public comments and interviews with officials. But the message in their postmeeting policy statement could be that the economy is on a more solid footing than it seemed to be when officials last gathered in June, setting the stage for raising interest rates if economic data hold up in the months ahead. Such a message would get the attention of futures markets, which view the chances of the Fed making a move by September as low. In early June, traders on the Chicago Mercantile Exchange put a probability of greater than 60% on the bank raising short-term rates by at least a quarter percentage point as soon as September, according to the CME. CME 0.78 % But that chance dropped sharply after a weak May jobs report and the June 23 Brexit vote, standing at just 12% on Monday before rising to 18% on Tuesday.Stock markets initially fell but later bounced back after the Brexit vote, with U.S. indexes hitting record highs and the dollar stabilizing. Moreover, the June jobs report was better than expected, putting a September move by the Fed back on the table. Many officials have said they can be patient before raising rates again, meaning a July move is highly unlikely. But new rounds of strong economic data—particularly on hiring or an uptick in inflation—could increase their sense of urgency in the months after their meeting next week. Atlanta Fed President Dennis Lockhart, a centrist at the central bank whose views often represent a middle ground among officials, told reporters last week it remains likely the Fed will raise rates this year, adding, “I wouldn’t rule out as many as two” increases.

Why the Fed Can't and Shouldn't Raise Interest Rates – Duy -  The Federal Reserve eschews balance sheet policy – changes in the amount or composition of assets held by the central bank – in the early stages of its plans to normalize the extraordinary monetary policy it instituted in the wake of the financial crisis. Instead, the Fed’s normalization plans currently focuses on raising the federal funds rate. But the central bank may need to use both rate policy and balance sheet policy simultaneously to reach the objectives of its dual mandate – or price stability with maximum sustainable employment – while sustaining a financial environment consistent with those objectives. The flattening of the U.S. yield curve as investors see little chance of rates rising in the longer term should serve as a red flag that their focus on short-term interest rates may be doomed to failure. One of the defining features of this tightening cycle is the same as the cycles that came before – the yield curve is flattening, and very quickly. The spread between 10-year and two-year U.S. Treasuries has collapsed to 88 basis points at a time when the federal funds target rate is 25-50bps. This suggests that the Fed actually has very little room to raise short-term rates. If additional rates hikes compress the yield curve further, the capacity for maturity transformation – effectively the process of borrowing on shorter time frames to lend on longer time frames – will soon be compromised.  Federal Reserve Governor Daniel Tarullo sees the threat. Speaking with the Wall Street Journal, he said: Tarullo said he didn't think that the worry that low interest rates may fuel asset bubbles was an “immediate concern.”The Fed governor, who is the quarterback of the Fed's efforts to regulate banks, questioned whether raising rates would ease financial stability concerns in an environment where the market was pessimistic about the economic outlook.“If markets do regard economic prospects as only modest or moderate going forward, then raising short-term rates is almost surely going to flatten the yield curve, which generally speaking is not good for financial intermediation, and in some sense could exacerbate financial stability concerns,” Tarullo said.

The Fed is Trapped in a Rate Hike Talk Cycle -- Street Journal reports Fed officials are once again signaling their desire to raise interest rates: Federal Reserve officials are looking more confidently toward an interest-rate increase before year-end, possibly as early as September, now that financial markets have stabilized after Britain’s vote to leave the European Union and the economy shows signs of picking up.  This narrative should sound familiar. Since mid-2014 the Fed has been talking up interest rate hikes--as seen by the movements in fed fund futures rate--but only has a 25 basis point rate increase to show for it. This is because the Fed's plans often bump up against unexpected economic developments. And lately, this seems to be happening in a cycle that goes as follows: the Fed talks up interest rate hikes → bad economic news emerges → the Fed dials down its rate hike talk → good economic news emerges → repeat cycle.To see this cycle, recall what has happened this year. After the FOMC did its 25 basis point hike in December 2015, FOMC members were talking up four more rate hikes in 2016. Then in early 2016 concerns emerged about financial stress and the global economy that caused Fed officials to dial back their rate hike talk. By the time of the March FOMC meeting, some members were even concerned about raising rates in April. Over the next few months, however, incoming economic data was improving so Fed officials once again began dialing up their tightening talk. A rate hike at the June FOMC seemed possible. The rate hike rhetoric quickly changed, however, when the the awful May jobs report--only 38,000 jobs--came out on June 3. Indeed, the FOMC passed on a rate hike at its June meeting.  The Brexit vote reinforced those concerns. Now the cycle is starting over. The gangbuster June employment report and strong retail sales are causing Fed officials to get itchy trigger fingers again, as seen in the above Wall Street Journal article. Fed officials are increasingly "confident" they can raise rates in September this year. But will they be able to follow through? Or will this cycle repeat itself? t is almost inevitable, in my view, that this cycle will repeat itself for two reasons:

Former Fed Governor Admits "Fed Is Not Data Dependent; It Is Propping Up Asset Markets" -- Earlier this year, Peter Schiff picked up on something few reported on when a former Federal Reserve president admitted the central bank created a phony wealth effect by pumping up stocks and other asset markets through its monetary policy. Several months later, analysis proved this was true, showing that 93% of the entire stock market move since 2008 was caused by Federal Reserve policy. Today, the Fed continues to focus on propping up asset markets. Even a former Federal Reserve governor admits this is the case. Kevin Warsh appeared CNBC’s Squawk Box on Thursday and said the Fed isn’t really “data dependent” in the sense that it is looking at the overall economy. It is really market dependent. "They look to me asset price dependent more than they look data dependent. When the stock market falls like it did in the beginning of this year, they say, ‘Oh, we better not do anything.’ Stock markets are now at career highs. I suspect when they meet over the course of the next 10 days they will suggest, ‘Oh, now they look like they can be somewhat more responsible.’ I don’t like changing policy meeting to meeting based on data, or even with what the S&P 500 is doing. I like making it based on what’s happening on the real side of the economy, and that has not been very convenient over the last six to nine months.” Which is exactly what the market is pricing too... Warsh went on to make another point that Peter has been harping on for months – the US economy isn’t in very good shape, and the Fed simply can’t raise rates. The bad news is the real side of the economy in the US has deteriorated since September; quarterly earnings will now be down six quarters in a row. That’s the first time that’s happened outside of a recession. The Fed had a long window to tighten policy, to raise rates – 2013, 2014, 2015, and it strikes me they missed that wide-open window.”

Don't Try This Crazy Trick on the Economy - Narayana Kocherlakota - Some economists argue that the Federal Reserve should take a highly unconventional approach to ending a long period of below-target inflation: Instead of keeping interest rates low to spur economic activity and push up prices, it should raise rates.  Labeled "Neo-Fisherism" by my Bloomberg colleague Noah Smith (after the famous monetary economist Irving Fisher), it's an idea I once entertained. Allow me to explain why I now think it’s dangerous.  Neo-Fisherites believe that modern economies are self-stabilizing. Specifically, they think that, regardless of what monetary policy makers do or don’t do, the real interest rate -- the rate that matters for people's and businesses' decisions to borrow and spend -- has to adjust over the longer run to ensure that the economy is in equilibrium. Because the real rate consists simply of the nominal rate minus inflation expectations, this leads to some unusual policy recommendations.  Traditional economic models, by contrast, predict the opposite. If the central bank raises rates and credibly commits to keeping them high, people and businesses become less willing to borrow money to invest and spend. This undermines demand for goods and services, putting downward pressure on employment and prices. As a result, the economy can plunge into a deflationary spiral of the kind that afflicted the U.S. in the early 1930s. So who’s right? Let's look at the recent evidence in the U.S. Here's a chart showing the short-term interest rate that the Fed controls, along with a measure of longer-term inflation expectations derived from the prices of Treasury securities:

Pointing a Finger at the Fed in the Lehman Disaster -- Now a widely respected academic — Laurence M. Ball, chairman of the economics department at Johns Hopkins University and author of “Money, Banking and Financial Markets” — has produced the most comprehensive and persuasive argument yet that the Federal Reserve could have saved Lehman from the precipitous and chaotic bankruptcy that occurred that fateful weekend in September 2008. He recently presented the result of four years of research, “The Fed and Lehman Brothers,” to a group of economists gathered in Cambridge, Mass. In especially strong language for an academic, Professor Ball takes issue with the established narrative that the Fed was powerless to lend to Lehman in its waning hours: “Fed officials have not been transparent about the Lehman crisis. Their explanations for their actions rest on flawed economic and legal reasoning and dubious factual claims.” By focusing narrowly on a claim by the Fed that it had no choice but to let Lehman fail, Professor Ball, in his 214-page paper, has brought much needed clarity and rigor to the historical record. His conclusions directly contradict accounts in testimony, memoirs and myriad media interviews by the principal decision makers — Henry M. Paulson Jr., the former Treasury secretary; Ben S. Bernanke, then the Fed chairman; and Timothy F. Geithner, who was president of the New York Fed. As Mr. Bernanke told the Financial Crisis Inquiry Commission in 2010, the “only way we could have saved Lehman would have been by breaking the law, and I’m not sure I’m willing to accept those consequences for the Federal Reserve and for our systems of laws.” But after what seems an exhaustive review of a now voluminous record of transcripts, exhibits and other evidence from multiple official inquiries, Professor Ball concludes there is “no evidence” that the decision-makers “examined the adequacy of Lehman’s collateral, or that legal barriers deterred them from assisting the firm.”

Fed made the poor even poorer, a former insider says -  One common criticism of the Federal Reserve is that its policies benefited Wall Street and not Main Street in the wake of the financial crisis. The argument is that the Fed’s unconventional policy of buying bonds pushed up the value of stocks and bonds that mainly belong to wealthy Americans. In a new blog post, former Minneapolis Fed President Narayana Kocherlakota twists this argument on its head, although he agrees that the Fed did make the poor even poorer. He cites data from the Fed’s Survey of Consumer Finances showing that the typical family in the bottom of the wealth distribution was worse off in 2013 than it had been in any year going back to 1989. Kocherlakota, now an economics professor at the University of Rochester, said the Fed didn’t buy enough assets. “Inequality rose because monetary policy was too tight, not because it was too easy,” said Kocherlakota, a noted dove on the Fed’s policy committee. The Fed should have done more to support home prices, he argued, although he doesn’t say exactly what policies he had in mind.

Koo: Why US Quantitative Easing “worked” better than other QEs - The US, the UK, Japan, and Europe all implemented quantitative easing (QE) policies, but the understanding of how those policies work apparently differs greatly from country to country, leading to very different outcomes. With the US economy doing better than the rest, there has been some debate in Europe as to why that is the case.  With the US economy doing better than the rest, there has been some debate in Europe as to why that is the case. When most people hear the term quantitative easing they think of the argument made by professors Milton Friedman and Paul Krugman who stated that inflation is “everywhere and always a monetary phenomenon.” The implication here is that the central bank, which is responsible for the supply of money, should be able to manage the inflation rate. According to this view, inflation can always be created if the central bank runs the printing presses and prints enough money. Professor Krugman emphasized this point repeatedly in a two-hour debate with the author that was published in the November 1999 issue of Bungei Shunju, a leading monthly magazine in Japan. The heads of central banks in post-2008 Japan, the UK and Europe have also stated that their QE policies will increase the lending and money supply, thereby enabling them to reach their inflation targets. But QE did not boost money supply in Japan, UK or Europe. All of these countries, however, have been in severe balance sheet recessions with the private sector as a group deleveraging massively in spite of zero or negative interest rates since the bursting of the asset bubbles in 2008 (1990 in the case of Japan). They have been deleveraging because the collapse of debt-financed bubbles left them with a huge debt overhang.

Core Inflation Falls to 1.4 Percent if Shelter is Excluded - Dean Baker --The Fed rate hike gang got excited yesterday about the release of the June Consumer Price Index data. As the NYT reported, a 0.2 percent June rise in the core CPI took the year over year rate to 2.3 percent. That is slightly above the 2.0 percent target set by the Fed, although the Fed uses the core personal consumption expenditure index, which shows a 1.6 percent advance over the last year.  However even the CPI figure can be a bit deceiving. The shelter component (essentially rent and owners' equivalent rent) accounts for over 40 percent of the core index. This component is the factor responsible for the modest increase in the core CPI in recent months. Excluding the shelter component the core CPI actually fell modestly from 1.6 percent to 1.4 percent over the prior twelve months. It is reasonable to exclude shelter when assessing patterns in inflation since its price follows a qualitatively different dynamic than most goods and services. Rent reflects supply and demand conditions in the housing market. The factor driving rent increases is an inadequate supply of housing. While higher interest rates will in general be expected to dampen inflation by weakening the labor market and putting downward pressure on wages, this would not be the case with rents. Higher interest rates will slow construction and in this way make the shortage of housing worse. For this reason inflation caused by rising house costs would not be a good rationale for raising interest rates.

Criticisms of NGDP futures targeting - Zak David, a quant trader, recently wrote a post criticizing Scott Sumner's idea of NGDP futures market targeting. Sumner fired back with a defense of the idea, and Zak responded with an update to his post. I want to see if I can explain Zak's ideas in a little greater detail. Basically, he's right. To recap, the original NGDP futures targeting idea goes something like this:

  • 1. The Fed sets an NGDP target (say, 5%).
  • 2. The Fed then offers to enter into any number of NGDP futures contract with anyone who wants, at a price equal to the target. So if I take a $1000 long position in these futures, and NGDP comes in at 10% (double the target), I get $2000 back. If I take a $1000 short position, and NGDP comes in at 2.5% (half the target), I get $2000 back. And so on. The Fed is always on the other side of the deal, and I can make as many of these deals as I want (assuming I can post sufficient margin).
  • 3. The Fed then makes monetary policy automatically in response to people entering into these contracts with it. If a person takes a long position in NGDP futures, the Fed tightens a bit to make sure NGDP doesn't actually come in above target.

Zak had three main criticisms of this idea:

  • A) Informed traders will not trade in this market,
  • B) Manipulators will trade in the market, and
  • C) Data revisions will introduce noise into monetary policy.

I'll ignore (C) and try to explain (A) and (B). Keep in mind that I'm not saying anything new in this post; just restating Zak's argument in my own words.

White House Cuts Economic Growth Forecasts - WSJ: —The White House cut its forecasts for economic growth and interest rates, resulting in slight reductions in projected deficits over the coming decade. The new estimates were published Friday in the White House budget office’s “Mid-Session Review,” which updates the economic and fiscal projections made in the president’s February budget presentation to Congress.   The White House now forecasts that gross domestic product will rise 1.9% this year and 2.5% in 2017, down from estimates of 2.6% for both years in its February forecast. It reduced long-run growth forecasts, for years after 2018, to 2.2% from 2.3%. Gross domestic product grew at a seasonally adjusted annual rate of 1.1% in the first quarter, the weakest pace in a year, due largely to a slowdown in business investment. Meantime, the White House reduced its forecasts of government borrowing costs, which trimmed projected budget deficits beginning next year. It now projects deficits to fall to 2.3% of GDP in 2017, from 2.6% in the February forecast, and to 1.7% in 2018, from 2.3%. The deficit is expected to rise to 3.3% of GDP this year, from 2.5% last year, a projection that was unchanged in Friday’s report. The increase largely reflects policy changes resulting from last fall’s bipartisan budget and tax agreements.

June 2016 Leading Economic Index Improves Indicating Moderate Growth Ahead.: The Conference Board Leading Economic Index (LEI) for the U.S declined this month - and the authors state "while the LEI continues to point to moderating economic growth in the U.S. through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and a moderating outlook in labor markets". This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index's value at -0.1 % to 0.4 % (consensus 0.3 %) versus the +0.3 % reported. ECRI's Weekly Leading Index (WLI) is forecasting slow growth over the next six months. Additional comments from the economists at The Conference Board add context to the index's behavior. The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.3 percent in June to 123.7 (2010 = 100), following a 0.2 percent decline in May, and a 0.5 percent increase in April. "The U.S. LEI picked up in June, reversing its May decline,"  "Improvements in initial claims for unemployment insurance, building permits, and financial indicators were the primary drivers. While the LEI continues to point to moderating economic growth in the U.S. through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and a moderating outlook in labor markets." The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.3 percent in June to 113.8 (2010 = 100), following no change in May, and a 0.2 percent increase in April.

Chicago Fed National Activity Index July 21, 2016: Highlights June was a healthy month for the economy led by a swing upward in production and a bounce back in employment. The national activity index rose to plus 0.16 in June from a revised minus 0.56 in May with production, boosted by strength in manufacturing, contributing 0.18 to the index, vs minus 0.29 in May, and employment, bolstered by the 287,000 gain in nonfarm payrolls, adding 0.06 vs May's minus 0.14. The index's other two components, sales/orders/inventories and personal consumption & housing, held steady at slightly negative readings. June was an important month for the economic outlook, reaffirming strength following what looked like ominous weakness in May.

Chicago Fed: Economic Growth Picked Up in June - “Index shows Economic Growth Picked up in June." This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.16 in June from –0.56 in May. Three of the four broad categories of indicators that make up the index increased from May, and two of the four categories made positive contributions to the index in June. The index’s three-month moving average, CFNAI-MA3, increased to –0.12 in June from –0.39 in May. June’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. The CFNAI Diffusion Index, which is also a three-month moving average, moved up to –0.16 in June from –0.38 in May. Forty of the 85 individual indicators made positive contributions to the CFNAI in June, while 45 made negative contributions. Fifty-eight indicators improved from May to June, while 27 indicators deteriorated. Of the indicators that improved, 19 made negative contributions. [Download PDF News Release] The previous month's CFNAI was revised downward from -0.51 to -0.56.

June 2016 CFNAI Super Index Moving Averages Improves.: The economy's growth improved based on the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average - but remains below the historical trend rate of growth (but well above levels associated with recessions). The three month moving average of the Chicago Fed National Activity Index (CFNAI) which provides a summary quantitative value for all the economic data being released - improved from -0.39 (originally reported as -0.36 last month) to -0.12. Two of the four elements of this index are in contraction. NOTE:

  • This index IS NOT accurate in real time (see caveats below) - and it did miss the start of the 2007 recession.
  • The headlines talk about the single month index which is not used for economic forecasting. Economic predictions are based on the 3 month moving average. The single month index historically is very noisy and the 3 month moving average would be the way to view this index in any event.
  • There was no market expectations from Bloomberg.
  • This index is a rear view mirror of the economy.

How Well Does GDP Measure the Digital Economy? - Digital technologies aren't just changing the way existing companies communicate and keep records, but are creating new kinds of companies (think Uber, AirBnB, or Amazon) and products (think and "free" products like email and websearch or an app like Pokemon Go). Can the old-style methods of measuring GDP keep up? Nadim Ahmad and Paul Schreyer of the OECD tackle this question in "Are GDP and Productivity Measures Up to the Challenges of the Digital Economy?" which appears in teh Spring 2016 issue of International Productivity Monitor. Perhaps a little surprisingly, their overall message is upbeat. Here's the abstract: "Recent years have seen a rapid emergence of disruptive technologies with new forms of intermediation, service provision and consumption, with digitalization being a common characteristic. These include new platforms that facilitate peer-to-peer transactions, such as AirBnB and Uber, new activities such as crowd sourcing, a growing category of the ‘occasional self-employed’ and prevalence of ‘free’ media services, funded by advertising and ‘Big data’. Against a backdrop of slowing rates of measured productivity growth, this has raised questions about the conceptual basis of GDP, and whether current compilation methods are adequate. This article frames the discussion under an umbrella of the Digitalized Economy, covering also statistical challenges where digitalization is a complicating feature such as the measurement of international transactions and knowledgebased assets. It delineates between conceptual and compilation issues and highlights areas where further investigations are merited. The overall conclusion is that, on balance, the accounting framework for GDP looks to be up to the challenges posed by digitalization. Many practical measurement issues remain, however, in particular concerning price changes and where digitalization meets internationalization."

Needed: A Contingency Plan for Secular Stagnation - What if Larry Summers is right? More than two years ago, the Harvard economist and former U.S. Treasury secretary resurrected the Depression-era phrase “secular stagnation” to describe a chronic deficiency of investment relative to savings that has trapped the world in a state of low economic growth largely resistant to monetary policy. Events since have strengthened Mr. Summers’s case. Growth projections have been repeatedly downgraded and expected inflation and bond yields have ground lower. Formerly skeptical economists are less so: Both the International Monetary Fund and the Federal Reserve have implicitly warmed to Mr. Summers’s thesis. With yields taking another leg down after Britain’s vote to leave the European Union, the evidence of secular stagnation, Mr. Summers says, is stronger than ever. If he’s right, the world needs a contingency plan. The most direct response is more expansionary fiscal policy (i.e. lower taxes or higher spending), which would bolster demand and push interest rates up. But policy makers are rightfully wary about acting in the face of so many contradictory signals. In the U.S., unemployment is moving lower and stocks are hitting new highs. Bonds could be pricing in secular stagnation, or merely a greater bias toward hyper-stimulative monetary policy by central banks. What policy makers need, then, is a plan that works if Mr. Summers is right, but has few downside consequences if he is wrong.

The Need for Expansionary Fiscal Policy: DeLong - I understand that we are Sisyphus here. And I accept that:  But would people who ought to know better please stop adding weights to the stone that we are trying to roll uphill? Thus I find myself quite annoyed by the sharp and usually-reliable Greg Ip this morning... Let me back up: Here's the story so far:

  • (1) They say that North Atlantic governments cannot afford to spend more to boost their economies via expansionary fiscal policy right now. We point out that current interest rates on Treasury debt are so low low private company would pass up the ability to borrow to stimulate and invest.
  • (2) They then say that maybe interest-rate will jump up a lot, soon, and thus make borrow to spend to stimulate and invest a bad deal. We point out that financial markets certainly do not expect any such thing. And we points out that, if you are truly worried about longer-run debt sustainability, the standard calculations tell us that debt- and amortization-to-GDP ratios will be lower with aggressive borrow and spend to stimulate and invest policies then with austerity.
  • (3) They then say that financial markets are irrational and wrong--it interest-rate will go up, will go up soon, and will go up far. We point out that fearful financial markets have been better forecasters then their hopes of imminent normalization every year for the past decade.
  • (4) They then say: let's ignore those interest rates and pretend they are not telling us anything about the benefits and costs right now of fiscal expansion. We reply: you are economists--economists are supposed to take prices seriously, not throw the information in them away.
  • (5) They then say: nevertheless, running up the nominal debt through expansionary fiscal policy is somehow risky. We say: do helicopter money, which does not run up the debt.
  • (6) They then say: but even a half booming economy will take the pressure off of governments and bureaucrats to undertake urgent and important structural reforms. We ask: what evidence can you point to to support any claim that useful structural reform is easier in a low-pressure than in a high-pressure economy.

And we are met with silence.

A Shortage of United States Government Debt -- Despite the fact that the United States federal government debt has done these two things since the beginning of the Great Recession:  ...a recent piece by Narayan Kocherlakota, former President of the Federal Reserve Bank of Minneapolis between 2009 and 2015 and current professor of Economics at the University of Rochester, suggests that there simply isn't enough U.S. debt to satisfy the world's insatiable thirst for United States-denominated paper money in the form of Treasury bonds, notes, bills and Treasury Inflation-Protected Securities or TIPS. As you may have noted in the first graph, the federally-sourced public debt has risen from $9.221 trillion on January 2, 2008 to its current level of $19.402, an increase of $10.181 trillion or 110.4 percent in just eight and a half years.  While this massive accumulation of debt should be worrisome despite the federal government's ability to raise nearly endless amounts of revenue through taxation, in fact, the current bond markets show otherwise. Here are two graphs showing what has happened to the yield on 10 year and 30 year Treasuries over the same timeframe: Since bond prices act inversely to yield, falling yields result from rising bond prices.    What is particularly interesting about the current bond market phenomenon is that the Treasury market is "misbehaving" given that the Federal Reserve began its much ballyhooed higher interest rate program on December 16, 2015 when it clearly signalled to the market that there would likely be "gradual increases in the federal funds rate".    If we go back to Dr. Kocherlakota's musings, he notes that in the wake of the Great Depression, the never-ending crisis in Europe and other events that make investors nervous, households businesses and pension plans are looking for safe assets to protect themselves from the next financial debacle.   It is this demand that has pushed Treasury prices up and yields to all-time lows. Let's look at some Treasury statistics.

What Republicans really want is a nanny state - --The problem is that Americans — and conservatives in particular — claim to want small, stingily funded government. But they’re making bigger (and more expensive, and less legally achievable) demands about what government should be responsible for. This cognitive dissonance inevitably leads to disillusionment. In other words: Deep down, Republicans want a nanny state, but they just can’t bring themselves to admit it. What kind of nanny state do these alleged fans of limited government desire? The kind that fulfills their wildest fantasies, yes, but more importantly that cocoons their constituents from offense, discomfort and perhaps even financial distress. As illustrated by the 2016 GOP platform, they want government to protect heterosexual couples from the indignity of having their marriages seen as equal, in the eyes of the law, to marriages between same-sex partners. They likewise want policymakers to bar transgender Americans from using the public bathroom of their choice, lest those in neighboring bathroom stalls feel vaguely threatened. They want government to protect religious freedom, yet they also want government to expel holders of select religious beliefs — a policy that couldn’t possibly pass constitutional muster even if you could figure out a way to implement it. (People can lie about their religious beliefs, after all.) They also want their small, spartan government to round up and deport 11 million undocumented immigrants, quickly and on the cheap, but “in a very humane way, a very nice way.” They want government to keep consumer prices low, but also to curb imports of competing products that help keep those consumer prices low. Avocados, for example. Or electronics. They apparently want government to protect workers from the threat of technological innovation. At least that’s one way to interpret all the stumping for coal, an industry whose main challenge comes from competition from natural gas, which technology has made much cheaper to extract. Or the pandering to U.S. manufacturing, whose output is up but workforce size is not. Again, thanks to technology. They want government to mandate funerals for miscarriages. They want it to micromanage the width of hallways in reproductive health clinics and the medical center affiliations of abortion providers. They want policymakers to protect their constituents from the temptations of pornography and medical marijuana. They want government to lock up or even execute conservatives’ perceived political enemies. They (like the left) even want government to break up the banks. And so on.

Are Obama and Clinton Counting on Republican Majorities to Pass TPP? --- Or should we ask whether the Pope is Catholic?  Why else would President Barack Obama be so determined that November/December’s lame duck Congress, with Republican majorities in both House and Senate, vote on the Trans-Pacific Partnership (TPP)?  And, why did Hillary Clinton and Debbie Wasserman-Schultz’s majority representatives on the Democratic platform committee block any opposition to a vote by the lame duck Congress?  What else explains either phenomenon? Support for the TPP has always been majority Republican, despite considerable Democratic support in the Senate and Obama’s own unflagging dedication.  If lame duck Republican majorities pass the TPP, Obama can claim his vicious, anti-worker trade legacy, and Hillary can take office without taking the heat.  So much for Obama’s 2014 plea to get Cousin Pookie off the couch to vote for the Democrats.  Horrible things often happen between presidential elections in November and the inauguration of new presidents in January.  So, why not ram through the TPP when everyone’s trying to get home for the holidays?  Much as Republicans hate handing Obama any kind of victory, and much as Mitch McConnell, R-KY, Richard Burr, R-NC, and Thomas Till, R-NC, dislike exemptions that would allow TPP-participating nations to issue health warnings without compensating tobacco farmers, they might see this as their last chance too.

Political Opposition to Trade Deals, the Republican Platform–and the Facts - Political support for trade has been a high-profile casualty of the 2016 presidential election. Hillary Clinton walked back her earlier support for the Trans-Pacific Partnership (TPP) agreement with U.S. allies in Asia, perhaps not surprising given the opposition to trade deals among her primary rival, Vermont Sen. Bernie Sanders, and key Democratic constituencies such as labor unions. More notably, the Republican platform set to be approved this week at the GOP convention in Cleveland abandons previous support for the TPP and echoes Donald Trump’s “America First” language on trade. The Republican platform’s evolution tracks with the views of party voters: Pew Research Center polling in March found that 53% of Republicans–and 67% of Trump supporters–think trade agreements have been a “bad thing” for the U.S. Just 34% of Democrats hold the same view. So it’s perhaps surprising that the about-face in the platform’s wording did not include more specific anti-TPP or anti-NAFTA language, which also would have mirrored Mr. Trump’s stated positions. But the data don’t bear out the growth in anti-trade sentiments. Trade in general, and trade agreements specifically, are a boon for the U.S. economy overall, especially to national income. There are few propositions on which economists–otherwise a fractious lot–are in greater agreement. And since U.S. barriers to trade tend to be quite low, deals such as the TPP often asymmetrically benefit U.S. firms by helping to level the international playing field. Meanwhile, some popular arguments against trade agreements do not hold up under scrutiny. Job losses in the manufacturing sector, frequently blamed on trade deals, often have far more to do with technology and fewer workers being required to produce goods as automation improves. This trend is moving to service industries thanks to artificial intelligence; ironically, it may shift the manufacturing advantage away from low-wage countries and back to the U.S. and other highly developed economies.

TPP Foes Plan Campaign to Forestall Lame-Duck Vote - Unions and their allies in Congress are getting an early start on preventing a so-called lame-duck vote on the Trans-Pacific Partnership, vowing to spend the Congressional recess educating constituents and union members about the trade deal they say will cost the U.S. jobs. AFL-CIO President Richard Trumka, Rep. Rosa DeLauro (D., Conn.) and several other labor leaders and House Democrats convened a call with reporters Friday to talk down President Barack Obama’s signature trade agreement, which faces an uphill battle in Congress. ‎They are worried the administration and Republican supporters of the TPP could try to use a post-election session of Congress in November or December –the lame-duck session–to get the deal approved in Congress. That would mean the president-elect, who won’t take office until next year, wouldn’t be able to block it, though the presumptive nominees could use their platforms to influence lawmakers and the general public this year. Sen. Clinton, the presumptive Democratic presidential nominee, has said she opposes a lame-duck vote. Donald Trump, the presumptive Republican presidential nominee, has opposed the trade deal. Rep. DeLauro said the administration has been “engaging in a really very aggressive lobbying” campaign to promote the legislation and, “We take them very seriously.” “Our hope is that there is no vote,” said Mr. Trumka, whose organization is the umbrella group for dozens of unions. But, “We’re prepared and ready to fight if there is,” he said.

Anti-TPP Concerts Put a Spotlight on a Hollywood Trade Divide -- Hollywood studios and the music industry are big fans of President Barack Obama’s big Pacific trade agreement. But that’s not stopping a determined group of entertainers from kicking off a cross-country tour on Saturday opposing the Trans-Pacific Partnership, or TPP.The Motion Picture Association of America and the Recording Industry Association of America were quick to embrace the 12-nation Pacific pact, since the TPP has rules designed to crack down on movie and music piracy.The trade agreement still faces an uphill battle in Congress. Hillary Clinton now opposes the TPP while Donald Trump is challenging nearly every trade agreement on the books, saying the TPP is being pushed by special interests that are “raping” the country.At the grassroots level, labor unions and environmental groups are warning that the TPP could shift some labor-intensive American jobs to Vietnam and boost industrial activity in countries with lower environmental standards. (The Obama administration says the TPP has high labor and environmental standards to prevent this.)That’s where the celebrities come in, including Lost’s Evangeline Lilly, who will emcee the first concert in Denver on Saturday, followed by a teach-in to help attendees communicate concerns about the TPP to Congress. The jamboree also includes Tom Morello, guitarist for Rage Against the Machine, and hip-hop artist Talib Kweli. The tour, dubbed Rock Against the TPP, is sponsored by unions including the Teamsters and environmental groups including the Sierra Club—left-leaning groups often allied with celebrities and against the business groups that take the lead backing trade agreements in Congress.

US eyes quick post-Brexit trade deal with UK to get stalled TTIP moving --The US is hoping that a quick trade and investment deal with the UK after it leaves the EU could kickstart the stalled negotiations for the Transatlantic Trade and Investment Partnership (TTIP), which has met increasing resistance on the continent. As well as serving the US's purposes, such an agreement would be welcomed by the UK government as proof that it can recreate the necessary web of trade links post-Brexit. The US secretary of state, John Kerry, has just spent two days in the UK talking with the prime minister's officials and with the new foreign secretary, Boris Johnson, exploring what form such a UK-US trade deal might take.  As The Guardian explains: "The UK cannot formally sign any trade deals with other countries or trading blocs until it has left the EU, but it appears to be accepted that negotiations on the outline shape of such deals can start before that happens."  The Guardian believes such a bilateral deal would "focus on business investment more than trade tariffs." That would make sense because the tariffs between the US and the UK (and the EU) are already very low—the European Commission says "under 3 percent"—and so the economic benefit from lowering them further is minimal. Concentrating on investment issues would also be far simpler to negotiate than haggling over hundreds of bilateral tariffs.

Currency manipulation and manufacturing job loss: Why negotiating “great trade deals” is not the answer -- Donald Trump’s recent speech in Pennsylvania about globalization and U.S. trade policy cited my research nearly 20 times. As a result, people have asked me if I agree with his trade policy prescriptions. The simple answer is no. There are particular issues that we agree on—such as the need to reject the Trans-Pacific Partnership (TPP). As I explain in a recent report (Scott 2016b), the TPP would cost jobs and drive down wages for most U.S. workers. But Trump’s claim, in that speech, that “the negotiation of great trade deals is the quickest way to bring our jobs back” is just wrong. In his speech, the text of which was posted by Politico (2016), Trump says that he would “appoint the toughest and smartest trade negotiators to fight on behalf of American workers,” and immediately renegotiate the North American Free Trade Agreement (NAFTA). Like many of Trump’s statements and plans, this reflects a terrible mix of ignorance and hubris. First, it misses the simple truth—that the entire process by which we negotiate trade deals has been fundamentally captured by corporate interests. The idea that a billionaire who promises to cut taxes and regulations on corporations would negotiate better bargains for American workers is simply absurd. Second, and much more important, it misses the broader truth about what—beyond the recent recession—is causing our job losses. Over the past two decades, currency manipulation by about 20 countries, led by China, has inflated U.S. trade deficits, which (in combination with the lingering effects of the Great Recession) is largely responsible for the loss of more than five million U.S. manufacturing jobs. While Trump’s plan acknowledges the problem of currency manipulation, his plan for dealing with it—imposing tariffs on Chinese goods—would not work, and reveals a lack of understanding of how currency manipulation hurts U.S. workers and what to do about it.

TaxCast on Panama Papers and Brexit - naked capitalism - From Tax Justice Network’s July 21 Taxcast.  We talk to the two journalists who got the Panama Papers scoop, Bastian Obermayer and Frederik Obermaier who’ve written a book about their experience. Plus: what does Brexit mean for tax justice? We discuss the F4 (unholy) alliance between Switzerland, Hong Kong, Singapore and the UK, and the accelerated corporate tax race to the bottom. ‘Unfortunately there is the world people like you and me are living in and there is a second world, a parallel world, the offshore world where people with enough money will always find possibilities to hide their money…there are people out there choosing which law they want to stick to and that is a problem for democracy.’ Frederik Obermaier. Post-Brexit: ‘I think that Britain’s likely development strategy will be to actually deepen its tax haven role sitting offshore Europe.’ John Christensen Featuring: The Tax Justice Network’s John Christensen, Bastian Obermayer and Frederik Obermaier of the Sudduetsche Zeitung newspaper and authors of the new book: The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money. Produced and presented by Naomi Fowler for the Tax Justice Network.

He Made ‘Carried Interest’ Famous. Now He’s Going to Help Write The Law - WSJ:  The tax law professor who helped turn carried interest from a technical tax term into a populist cause is coming to Washington.  Victor Fleischer, whose 2006 academic paper started the debate on how private equity managers are taxed, will become co-chief tax counsel for Senate Finance Committee Democrats. His partner will be Tiffany Smith, already a member of the Finance Democrats’ staff.  Carried interest is the profits share that some investment managers typically get, and it’s taxed at preferential long-term capital gains rates, now 23.8%, compared to the top ordinary income rate of 39.6%. Mr. Fleischer made the case that their work was more like labor income and that the tax law was allowing some of the wealthiest people to pay low tax rates. Democrats jumped on board. When the party controlled the House of Representatives, the House passed bills to tax carried interest as ordinary income, but the measures never got through the Senate. Mr. Fleischer, currently a professor at the University of San Diego, has been writing opinion pieces for The New York Times, including an argument that the administration has authority to raise carried interest taxes, criticism of Donald Trump’s tax plan and questioned private equity fees paid by tax-exempt universities. The job he’s taking could be quite powerful if Congress pursues a major revamp of the tax system and Democrats retake control of the Senate, making Mr. Wyden the Finance panel’s chairman.

Trump’s tax plan would mean a $7.1 billion reward for his family — and cost taxpayers $10 trillion: It seems like Donald Trump has at least one policy idea as president that would benefit — Donald Trump. According to an analysis by Third Way, a Washington, D.C.-based think tank, Trump’s proposed elimination of the federal estate tax would be a $7.1 billion boon for his family. Along with proposed breaks on capital gains and income taxes, Trump’s plan would benefit mostly the wealthy and add $9.5 trillion to the national debt in 10 years. “His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households,” The Urban-Brookings Tax Policy Center notes in its analysis. “The plan would reduce federal revenues by $9.5 trillion over its first decade before accounting for added interest costs or considering macroeconomic feedback effects. The plan would improve incentives to work, save, and invest. However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts.” According to The Hill, the nonpartisan Urban-Brookings Tax Policy Center, the bill to tax payers for the break would be $10 trillion over 10 years. Trump has economic advisers working to reduce the cost of his tax plan but “have not explicitly said they were making any changes to the plan’s treatment of the estate tax,” the Hill reports.

Trump Calls for Restoration of Glass-Steagall, Echoing Warren | American Banker: — Donald Trump has made no secret of his disdain for Sen. Elizabeth Warren, D-Mass., but that is not stopping him from embracing one of her key policy positions as part of the Republican platform — a return to the 1930s-era Glass-Steagall Act. Paul Manafort, the campaign manager for the presumptive Republican presidential nominee, said Monday during a press briefing that reinstating the law, which separated commercial and investment banking, was one of the few changes Trump is proposing in the GOP platform. "There has been some added components to [the platform] that reflect the issues that Mr. Trump has raised during the course of the campaign," Manafort said during a press briefing at the Republican National Convention here. "We also call for reintroduction of the platform of Glass-Steagall so that would create barriers between what the big banks can do and avoid some of the crisis that led to 2008. … The Obama-Clinton years have passed legislation that has been favorable to the big banks, which is why you see all the Wall Street money going to her." Despite Manafort's suggestion that Trump has previously raised the issue during the campaign, it marks a significant shift from the Republican primary, during which Trump said little about banking beyond calling for the repeal of the Dodd-Frank Act. But the move appears to reflect a desire to attract voters who supported Sen. Bernie Sanders, D-Vt., during his failed presidential bid. Sanders made the call to restore Glass-Steagall one of his chief talking points, repeatedly criticizing rival Hillary Clinton for not embracing such a plan. "I was a little surprised, but certainly understand it as a consistent approach to attacking Clinton for her ties to Wall Street. To some extent, it's a pitch to Bernie's supporters,"

GOP platform to call for return to Glass-Steagall | TheHill: Both major political parties are now calling for an overhaul of the financial industry through the return of Glass-Steagall, a Depression-era banking law. Paul Manafort, presumptive Republican presidential nominee Donald Trump Donald Trump's campaign manager, told reporters gathered in Cleveland Monday that the GOP platform would include language advocating for a return of that law, which was repealed under President Bill Clinton.“We also call for a reintroduction of Glass-Steagall, which created barriers between what big banks can do,” he said. Including that language in the GOP platform comes shortly after Democrats agreed to similar language in their own, calling for an “updated and modernized version” of the law. A party platform is not binding but is thought to reflect the values of the party. And the GOP platform has not yet been officially released, although the convention is expected to approve it later Monday. Nonetheless, the embrace of Glass-Steagall by both parties is a telling indication of how unpopular Wall Street remains with the public, years after the financial crisis. Manafort mentioned the return of Glass-Steagall specifically as a cudgel against Hillary Clinton, the presumptive Democratic nominee, arguing it was Democrats that were the ones actually beholden to big banks. “We believe the Obama-Clinton years have passed legislation that has been favorable to the big banks, which is why you see all the Wall Street money going to her,” he said. “We are supporting the small banks and Main Street.”

GOP Lawmakers Blindsided by Trump's Embrace of Glass-Steagall -  The eleventh-hour move by the Donald Trump campaign to add a plan to reinstate the Glass-Steagall Act to the Republican platform caught GOP lawmakers off guard, with some of them expressing disappointment with the decision. While the 1930s-era law, which separated commercial and investment banking activities, is strongly supported by progressive Democrats, it is not popular among most Republican policymakers. "I was completely surprised," Rep. Steve Stivers, R-Ohio, a member of the House Financial Services Committee, said in an interview here hours before Trump's formal nomination Tuesday evening. "It was a late addition. I am not sure how it happened. I was very disappointed that that got included, because frankly I think that will make our banks more vulnerable if we try and put Glass-Steagall back in and make them more likely to fail, because they will be more focused on fewer classifications of assets." Another panel member, Rep. French Hill, R-Ark., was also taken aback. "That issue per se was not something that contributed to the financial crisis," Hill said in a separate interview here. "Commercial bank underwriting and distributing of securities is not something that was a major contributor to the financial crisis." Stivers said the Trump campaign might have been wise to seek more input from the banking industry before including it in the platform. "I think it was put in there and supported by folks who maybe don't understand how banking works," said Stivers, who was interviewed in a subterranean lounge that resembled the kind of speakeasy that would have existed when Glass-Steagall was written. "If we do that, the other thing is we will never be a magnet for money-center organizations, because the biggest banks in the world will be in Europe and Asia instead of here in the United States. They obviously didn't consult very many folks on the Financial Services Committee or folks that knowledgeable, which is too bad."

Policy confusion on Glass-Steagall from the GOP -- Peter J. Wallison - The 2016 Republican platform’s position on Glass-Steagall is, unfortunately, a reflection of the policy confusion of the entire Trump campaign. The statement in the platform about Glass-Steagall comes at the end of a paragraph which, sensibly, attacks the growth of the regulatory state and particularly the Dodd-Frank Act. Then, seemingly out of nowhere, it adds “We support reinstating the Glass-Steagall Act, which prohibits commercial banks from engaging in high risk activities.” There are so many thing wrong with this sentence that it’s hard to list them all in a single blog post. Here are a few:

Is Trump the Community Banking Candidate? | American Banker: — Donald Trump's decision to embrace the reinstatement of the Glass-Steagall Act is part of an effort to cast him as the champion of community banks, according to his top advisers. While the move came as a surprise to the banking industry, a Trump campaign adviser said Wednesday that it was part of a broader focus on helping small businesses. "It is not just about community banks, it is about who really understands local communities," Stephen Moore, a senior economic contributor for the conservative and libertarian activist group FreedomWorks, said in an interview here. "Community banks are critical to small business." Moore said the Trump campaign will highlight the issue over the next few months as emblematic of a stark difference between the Republican nominee and his rival Hillary Clinton."We are going to hammer them on that," he said. That may be difficult to do, as the Democratic platform also calls for restoring Glass-Steagall, and Clinton has joined calls to grant regulatory relief for small institutions. But Moore's comments echo those of Paul Manafort, Trump's campaign manager, who said during a press briefing here on Monday that Clinton is the candidate of the big banks. "They know she is their champion and they have supported her fully; we are supported by small banks and Main Street," Manafort said. Although big banks have never been fans of the Dodd-Frank Act, both Manafort and Moore sought to portray the 2010 financial reform law as a boon for big financial institutions. "We have created a posture where we are actually rewarding the big banks like B of A and Citi and we are seeing the sharks swallow up the minnows," Moore said. "That is horrible because you are going to get a Fannie Mae situation where you are going to have five megabanks that are regulated like utilities."

Both Democrat and Republican Platforms Have Had It With Frankenbanks - Breaking up the dangerous banks on Wall Street that are gambling with their taxpayer-backstopped insured deposits by restoring the Glass-Steagall Act is now a part of the newly adopted platforms of both the Democrat and Republican parties. Under a restored Glass-Steagall Act, banks holding insured deposits would not be allowed to affiliate with Wall Street investment banks and brokerage firms that regularly underwrite risky securities and engage in trillions of dollars of derivative gambles. It would effectively put an end to the idea that these complex banks are too-big-to-fail because the life savings of small savers holding insured deposits in the bank would be at risk. Bernie Sanders’ supporters pushed the Democratic Party to include the provision in its platform. Today’s media spin is that Trump & Company added it in hopes of picking up some Sanders’ supporters who have vowed not to vote for Hillary Clinton.  What has been lost in the frenzy of political posturing is that there already exists a bi-partisan bill in the Senate to restore the Glass-Steagall Act. It’s called the “21st Century Glass-Steagall Act of 2015” and is co-sponsored by progressive Senator Elizabeth Warren and Republican Senator John McCain among others.  McCain’s eyes were opened wide on the need to restore the Glass-Steagall Act when he sat as ranking member of the U.S. Senate’s Permanent Subcommittee on Investigations under the Chairmanship of Senator Carl Levin. That Subcommittee effectively became the missing U.S. Justice Department in exposing serial frauds by the Wall Street mega banks. After the Subcommittee released a scathing 307-page report in 2012, Senator McCain had this to say in his opening remarks at the hearing on the matter: “The ‘London Whale’ incident matters to the federal government because the traders at JPMorgan were making risky bets using excess deposits, portions of which were federally insured. These excess deposits should have been used to provide loans for main-street businesses. Instead, JPMorgan used the money to bet on catastrophic risk.”

How Finance Costs Too Much and Fails to Deliver - naked capitalism -   A healthy financial system is crucial to a stable and productive market economy. But after decades of deregulation, the U.S. financial system has turned into a highly speculative system that has failed spectacularly at doing its job. My new report, “Overcharged: The High Cost of High Finance,” written with Juan Montecino and published by the Roosevelt Institute, describes in detail the massive costs of this failed financial system. The evidence of overcharging is all around us. The most obvious, of course, is the catastrophic financial crisis of 2007-2008 that wiped away $16 trillion—24 percent of household net wealth, led to more than 5.5 million home foreclosures, and caused skyrocketing, hope-crushing unemployment rates. When the government picked up the pieces and committed more than $20 trillion of taxpayers’ money to bail out the largest financial institutions, millions of Americans were left high and dry, angry and frustrated. But the failures of our financial system don’t just arrive in one big bang. They occur on a daily basis, in more mundane ways, often hidden from sight. Asset managers overcharge and underperform. Private equity (PE) general partners earn massive incomes but pay low returns to pension funds and other investors while enjoying unjustifiable tax breaks such as the carried interest exclusion. They do this while, at times, breaking companies and laying off workers for no other reason than their pursuit of short-run capital gains. Payday lenders charge upwards of 400 percent annual interest because many poor people have nowhere else to turn. Meanwhile, many of these payday lenders themselves are tied to the major Wall Street banks. Overcharging Americans means overpaying bankers. A recent Financial Times study found that, in 2015, average annual pay for top Wall Street CEOs jumped by 10 percent to $20.7 million, twice as high as their European counterparts (who, by the way, still earn a pretty farthing). And it is not just those at the top who are overpaid. Sarah Andersen of the Institute for Policy Study showed that in 2014, total U.S. banker bonuses were more than twice as high as the earnings of all U.S. workers who worked full time at the minimum wage.

Brexit Looks Set to Ax $40 Billion From American Company Profits -- Earnings in North America will probably be cut by a record $35 billion to $40 billion in the second or third quarter as businesses gauge the impact of the U.K.’s vote to leave the European Union, said FiREapps, which makes software to help firms reduce the effect of foreign-exchange swings. The Brexit-related headaches follow a period in which companies had a brief respite from currency volatility. Foreign-exchange moves hurt company results by about $20 billion in the first quarter in North America and Europe, down from $36.9 billion in the fourth quarter of 2015, FiREapps data show. “Everybody really wanted to know this time around, ‘what is it actually going to mean?’” said Wolfgang Koester, chief executive officer of FiREapps in Scottsdale, Arizona. “At $35 billion, that would make it the worst quarter impact” in data going back five years. The U.K. vote sent the pound plunging to a 31-year low last month and fueled a rally in the yen, which is sought by investors during times of market turbulence. Dollar fluctuations and currency volatility have posed a “nightmare” for companies, dragging down earnings for 357 North American firms in the fourth quarter, according to FiREapps. That was the most companies under duress since at least 2011. Currency swings can undermine the competitive pricing of companies seeking to sell their products in foreign countries. Firms also take a hit when they account for revenue denominated in weaker overseas currencies, unless they hedged their exposure. Many U.K. businesses have put investment plans on hold amid uncertainty about the U.K.’s future relationship with the EU and other trading partners. For some companies, the main areas of concern are whether they will retain access to low-cost labor from other EU countries as well as the EU common market. Other firms aren’t sure whether they’ll face tariffs or onerous conditions to sell their goods in export markets.

C.E.O.s Meet in Secret Over the Sorry State of Public Companies - Warren E. Buffett quietly walked through the lobby of JPMorgan Chase’s headquarters on Park Avenue in Manhattan last summer and was ushered up to the 49th floor by a security guard, trying to avoid drawing too much attention. Laurence D. Fink, chairman of BlackRock, the world’s largest money manager — with more than $4 trillion — soon was also escorted upstairs. Abby Johnson, the chief executive of Fidelity (which invests more than $2 trillion), and Frederick William McNabb III, chief of Vanguard ($3 trillion), were also shepherded to the elevator.  In all, the parade included about a dozen chief executives of investment firms — T. Rowe Price, State Street — plus the head of a public pension fund and an activist investor. All had arrived for a meeting that they were told they would absolutely have to keep secret.  When they reached the 49th floor, they were met by JPMorgan Chase’s chief executive, Jamie Dimon.  The agenda — shaped over many conversations Mr. Dimon had had with his friend, Mr. Buffett — was to discuss the sorry state of publicly traded companies: too little trust and connection between shareholders and management, too many rules imposed by so-called governance experts and too many idiosyncratic accounting guidelines. As a result, much of the smart money in the United States is going — and staying — private, creating more companies that have less public accountability and transparency.Over a series of meetings, conference calls and email exchanges that later included the chiefs of General Motors, General Electric and Verizon, among others, the group discussed a series of corporate governance “principles” that the participants could all agree on: Topics included compensation for chief executives and board members (more payment in stock, less cash) and earnings guidance (the group is generally not a fan). Along the way, at least two major investors, Fidelity and Wellington Management, dropped out, refusing to sign the list of “principles.”

Did Jamie Dimon’s Secret Meetings With Competitors Violate Antitrust Laws? -- Pam Martens - A mere three months after JPMorgan Chase and three of its competitors (Citicorp, Barclays and the Royal Bank of Scotland) pleaded guilty to a felony charge of conspiring to rig foreign currency trading and paid criminal fines totaling over $2.5 billion, the CEO of JPMorgan Chase, Jamie Dimon, began meeting in secret with his competitors in the asset management field.  On February 1 of this year, the Financial Times reported that “secret summits” had been held beginning in August 2015 between “asset management bosses” including Jamie Dimon, Abby Johnson of Fidelity, Larry Fink of BlackRock, and Tim Armour of Capital Group. The article went on to report that Dimon and Warren Buffett had convened the sessions at JPMorgan’s headquarters in New York to discuss “a statement of best practice on corporate governance.”Secret meetings between competitors, regardless of what they are said to be discussing, is a serious no-no under U.S. antitrust law. A company like JPMorgan Chase, that was charged by the U.S. Justice Department in 2014 with two deferred prosecution felony counts for its egregious conduct in the Bernie Madoff Ponzi scheme and hit again the next year with the felony count in the foreign currency conspiracy is skating on very thin ice. Two trial lawyers, Helen Davis Chaitman and Lance Gotthoffer, have written a book and set up a web site to call the public’s attention to JPMorgan’s mob-like activity. The lawyers write: “In the past four years alone, JPMorgan Chase has paid out $35,735,254,670 in fines and settlements for fraudulent and illegal practices.” In one chapter of the book, they compare JPMorgan Chase to the Gambino crime family and recommend that it be prosecuted under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Study: Top Bank Execs Saw the Crisis Coming and Sold Their Company’s Shares -- Many defenders of finance in the recent crisis suggest that the giant institutions were really taken by surprise when the bubble popped. Otherwise, runs the argument, why wouldn’t they have sold off all the junk? The implication of this “behavioral” view is that banks take on high risks because, for example, they neglect unlikely tail risks and have over-optimistic beliefs about the economy. But there is another, less innocent answer: explicit and implicit bank guarantees by states, such as deposit insurance, provision of central bank liquidity, and bail-outs make it rational for banks to take on excessive risk. Sometimes this “moral hazard” point of view is combined with an “agency failure” account, which stresses how bank managements can escape from control of their shareowners and holders of bank debt. These views of why banks take on excessive risk are testable. In a recent paper we tackle this question by providing sector-wide evidence from US. We examine what bank insiders were doing before the crisis and use executives’ trading with their own bank shares as a proxy for their understanding of risk before the crisis hit in 2007-08. Specifically, we investigate the relationship between bank’s performance in the crisis and bank executives’ sale of their own bank shares in the period prior to the crisis. The paper finds that the top executives’ ex-ante sale of their own bank shares predicts worse bank returns during the crisis; interestingly, effects are insignificant for independent directors’ and other officers’ sales of shares. That is, effects are substantially stronger for the insiders with the highest and best level of information, the top five executives. Moreover, the top five executives’ impact is stronger for banks with higher ex-ante exposure to the real estate bubble, where an increase of one standard deviation of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. Our results suggest that insiders understood the heavy risk-taking in their banks; they were not simply over-optimistic, and hence they sold more of their own shares before the crisis.

The question isn't whether the market is rigged, but how much - It’s always the question of conspiracy theorists. Or those who lose a little too much money in the market. Is the stock market rigged? Talk about a can of worms. If the market is rigged, how is it done? To what degree is it rigged? And if it is, how does it affect the average investor? Yes, the market is 'rigged' The stock market is certainly rigged ... if we define rigged as unfair. High-speed trading gives some traders an advantage over others. However, the effect on the Average Joe long-term investor is minimal. The stock market is certainly rigged ... if we define rigged as an interruption of the normal forces of supply and demand. Central banks around the world engage in various quantitative-easing-type (QE) programs and openly admit to buying equities. This skews “normal” stock-market performance, although we'll never know how much. It's like taking flu medication. You'll never know how good or bad you would have fared without it. Perhaps the most powerful visual of how exactly the various U.S. QE programs affected the S&P 500 is available here. According to one Federal Reserve study, the Fed doesn't even have to spend actual money to drive up stock prices. Holding its regular FOMC meetings is enough. This Fed study shows that the FOMC drove the S&P 55% above fair value. Apparently, the Fed and its global central bank buddies are at it again. The chart below has become quite popular, and shows that central bank liquidity is at its highest level since 2013.

Negative Interest Rates and Their Impact on Savings --Trillions of dollars worth of sovereign bonds are now trading with a negative yield, largely as a result of the actions of the world's central bankers who are discovering that the effectiveness of seven years of non-traditional monetary policies like quantitative easing and "The Twist" are dwindling.  Global economic growth is stagnating despite more than half a decade of zero interest rates, the intention of which was to prod consumers to spend and banks to lend, meaning that central banks are increasingly turning to the completely unproven ability of negative interest rates to restart the global economy.  Like the massive asset purchases during quantitative easing, central bankers really have no concept of the unintended consequences of negative interest rates although, recent research by ING, an Amsterdam-based bank, gives us some idea. Researchers at ING surveyed 13,000 consumers in Europe, Australia and the United States, asking them how they will react if/when interest rates become negative.  This is looking more and more likely given what has happened to central bank policy rates and retail savings interest rates in Europe as shown here: The current European Central Bank official deposit rate sits at -0.2 percent and is expected to drop even further into negative territory given that the current negative rate really has done little to stimulate economic growth in Europe.  For completeness sake, here is what has happened to retail savings rates (savings accounts with balances of less than $100,000) in the United States:  This sustained and lengthy drop in interest rates is interesting given that the Federal Reserve actually raised its policy rate by 0.25 percent back in December 2015 as shown here:

The Financial System is Breaking Down at an Unimaginable Pace - Simon Black - Now it’s $13 trillion. That’s the total amount of government bonds in the world that have negative yields, according to calculations published last week by Bank of America Merrill Lynch. Given that there were almost zero negative-yielding bonds just two years ago, the rise to $13 trillion is incredible. In February 2015, the total amount of negative-yielding debt in the world was ‘only’ $3.6 trillion. A year later in February 2016 it had nearly doubled to $7 trillion. Now, just five months later, it has nearly doubled again to $13 trillion, up from $11.7 trillion just over two weeks ago. Think about that: the total sum of negative-yielding debt in the world has increased in the last sixteen days alone by an amount that’s larger than the entire GDP of Russia. Just like subprime mortgage bonds from ten years ago, these bonds are also toxic securities, since many of are issued by bankrupt governments (like Japan). Instead of paying subprime home buyers to borrow money, investors are now paying subprime governments. And just like the build-up to the 2008 subprime crisis, investors are snapping up today’s subprime bonds with frightening enthusiasm. We’ll probably see $15 trillion, then $20 trillion, worth of negative-yielding subprime government debt within the next few months. So this trend will continue to grow for now, until, just like in 2008, the bubble bursts in cataclysmic fashion. It took several years for the first subprime bubble to pop. This one may take even longer. But even still, we can already see the consequences today.

A Bank Too Big to Jail -  Gretchen Morgenson - Have you ever wondered why the crippling 2008 financial crisis generated almost no criminal prosecutions of large banks and their top executives?Then take a moment to read the congressional report issued on July 11 titled “Too Big to Jail.” Citing internal documents that the United States Treasury took three years to produce, the report shows how regulators and prosecutors turned a potential criminal prosecution of a large global bank — HSBC — into a watered-down settlement that insulated its executives and failed to take into account the full scope of the bank’s violations.The report, prepared by the Republican staff of the House Financial Services Committee, does not examine a matter related to the mortgage crisis. Rather, it looks at the Department of Justice’s 2012 settlement with HSBC, the British banking behemoth, after accusations that it laundered nearly $900 million for drug traffickers and processed transactions on behalf of Cuba, Iran, Libya, Sudan and Myanmar, or Burma, when those countries were subject to United States sanctions.HSBC and its American subsidiary, HSBC Bank USA, agreed to pay almost $2 billion under the settlement, striking a deferred prosecution arrangement that remains in place. Under such deals, the government agrees to delay or forgo prosecution of a company if it promises to change its behavior.In spite of the settlement’s size, it did not represent a body blow to the bank. Announced in late 2012, the HSBC agreement was almost a footnote to the earlier fallout from the mortgage crisis. Still, the facts outlined by prosecutors were damning enough to raise questions about why the bank had not been subject to harsher treatment, fueling the view that large financial institutions are not only too big to be allowed to fail but also are too significant to be prosecuted criminally.

FBI arrests senior HSBC banker accused of rigging multibillion-dollar deal -- A senior HSBC banker has been arrested by the FBI as he attempted to board a transatlantic flight and charged him with fraudulently rigging a multibillion-dollar currency exchange deal. Mark Johnson, a British citizen and HSBC’s global head of foreign exchange trading, and a colleague are accused of “defrauding clients” and alleged to have “corruptly manipulated the foreign exchange market to benefit themselves and their bank”. He was arrested on Tuesday night shortly before he was due to fly to London from New York’s JFK airport, and was due to be formally charged by a judge at Brooklyn federal court later on Wednesday. He was later released on bail. A second Briton, Stuart Scott, who was HSBC’s European head of foreign exchange trading in London until December 2014, is accused of the same crimes. A warrant was issued for Scott’s arrest. They are the first people to be charged in connection with the US government’s long-running investigation into bankers’ alleged rigging of the $5.3tn (£4tn) per day forex market.  “The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said the US assistant attorney general Leslie Caldwell. “This case demonstrates the [US Department of Justice’s] criminal division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”

Justice department 'uses aged computer system to frustrate Foia requests' - A new lawsuit alleges that the US Department of Justice (DoJ) intentionally conducts inadequate searches of its records using a decades-old computer system when queried by citizens looking for records that should be available to the public. Freedom of Information Act (Foia) researcher Ryan Shapiro alleges “failure by design” in the DoJ’s protocols for responding to public requests. The Foia law states that agencies must “make reasonable efforts to search for the records in electronic form or format”. In an effort to demonstrate that the DoJ does not comply with this provision, Shapiro requested records of his own requests and ran up against the same roadblocks that stymied his progress in previous inquiries. A judge ruled in January that the FBI had acted in a manner “fundamentally at odds with the statute”. Now, armed with that ruling, Shapiro hopes to change policy across the entire department. Shapiro filed his suit on the 50th anniversary of Foia’s passage this month. Foia requests to the FBI are processed by searching the Automated Case Support system (ACS), a software program that celebrates its 21st birthday this year. Not only are the records indexed by ACS allegedly inadequate, Shapiro told the Guardian, but the FBI refuses to search the full text of those records as a matter of policy. When few or no records are returned, Shapiro said, the FBI effectively responds “sorry, we tried” without making use of the much more sophisticated search tools at the disposal of internal requestors.

COBOL and Legacy Code as a Systemic Risk  - Yves Smith - As we’ve discussed previously, the creaky code base in large banks is a systemic risk. Major banks run their transactions on mainframes, and significant portions of the software is both ancient and customized. Since at least the mid 1990s, these banks have had major projects to migrate off their legacy code. Although it is hard to prove a negative, I am highly confident no one has succeeded. Why? It would be such a spectacular accomplishment (and would still be very costly) that any bank that had succeeded would have broadcast its accomplishment.  A recent article in Medium, Interviewing my mother, a mainframe COBOL programmer, gives a sense of why the problem is so intractable. I’ve excerpted key sections and encourage you to read it in full (the other parts of the article have detail on database sizes and organization which experts will find informative). The mother works at a bank now known as Nordea, which has about $700 billion in assets. Contrast that with JP Morgan, which has roughly $2.4 trillion in assets, and massive derivatives clearing operation on top of that. From the article: This position is the most important one in the bank, at least from a technical standpoint. If, let’s say, my mother and everyone on her team would quit their job, the bank would go under within a matter of weeks if they’re lucky. They have a rotation of people on her team being available 24/7. I remember when I was younger and she had to take a taxi to work in the middle of the night on a Sunday to fix a dead-lock problem. COBOL…is not a fancy programming language like your functional Haskell or concurrent Golang— it’s an imperative, procedural language and since 2002, object-oriented. There’s nothing wrong with the language itself, the problem is that barely anyone knows it — at least not in the context of mainframe programming. My mother is the next youngest person on her team, and she’s born 1964, and the youngest person being 2 years younger. Since almost all of the largest banks in the world runs on IBM Mainframe with COBOL as the primary programming language, this is a global issue. The smaller banks however are better off which usually runs something like Java without mainframes….

Attempt to 'Simplify' Basel May Add More Complexity | Bank Think: It now appears the regulators are trying to rein in the monster that is the pages and pages of international capital rules. But the problem is their effort to simplify years of Basel Committee standards and separate regulations by domestic rulemaking agencies may just make matters worse.  And the goals of this effort – as fragmented as it is – are laudable. Regulatory capital standards before and after the crisis have been impossibly complex. The international Basel Committee created Basel I, II and III, and U.S. regulators have multiplied the capital measures on their own. The largest banks are required to monitor over a dozen regulatory capital dials. Added to this are less well defined but more demanding regulatory capital expectations with annual stress tests, such as the Comprehensive Capital Analysis and Review. The U.S. regulators have also created more stringent versions of Basel standards, such as the "capital conservation buffer" and a capital surcharge for "global systemically important banks." Community banks are not subject to this full array of capital standards, but their capital requirements are also far more complex than is necessary.  Although the Basel Committee has recognized the need to rein in the complexity of so many different capital rules, the proposed solution is just more rules. Over the past two years, the committee has issued more than a dozen new regulatory capital proposals in a bid to simplify. The proposals have been released in a piecemeal fashion, with each new proposal seemingly unrelated to the previous one. If the process were more streamlined, it would be easier for banks to comment publicly on the effort, including how the various different rules might be interconnected. It has been difficult for even the largest and most sophisticated banking organization to provide informed comment on the proposals. For community banks, which could potentially be impacted by some of the proposals, it is downright impossible.

Rep. Jeb Hensarling: Time to End Dodd-Frank Stranglehold: After five years on the books, the Dodd-Frank law has been a failure, destroying small banks, reducing access to credit, and creating conditions for financial instability, said Rep. Jeb Hensarling. In an  opinion piece for The Wall Street Journal, the Texas Republican and chairman of the House Financial Services Committee, said the law was based on a faulty premise that deregulation caused the financial crisis. Instead, he contends, it was "dumb regulation," something that the measure did not address. "Tuesday will mark five years since President [Barack] Obama's signing of the Dodd-Frank law, the most sweeping rewrite of the country's financial laws since the New Deal. Mr. Obama told the country that the legislation would 'lift our economy.' The statute itself declared that it would 'end too big to fail' and 'promote financial stability," he wrote. "None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums." Hensarling said that while Dodd-Frank was meant to target Wall Street, it hit Main Street hard. He said that community financial institutions, which make the vast majority of small business loans, have been overwhelmed by the complexity of the law and it has lead to small bank closures. Since the law was passed, the number of banks offering free checking has decreased dramatically while banking fees have increased. Instead of making the financial system more secure, he said, many of the threats to financial stability that were identified in the latest report of Dodd-Frank's Financial Stability Oversight Council are the result of the law itself and other government policies.

Are Wall Street Banks in Trouble? You’d Never Know from the Headlines. - Pam Martens - On July 14, when America’s biggest bank by assets reported its second quarter earnings, this headline ran at the New York Times: “JPMorgan Chase Has Strong Quarter as Earnings Top Estimates.” CNBC, a unit of NBCUniversal, used the same criteria in its headlines to report the earnings of Citigroup, Bank of America and Morgan Stanley — putting a positive spin in the headline because the earnings had topped what analysts were expecting – rather than the far more meaningful, and traditional, measure of whether earnings had beaten the same quarter a year earlier. CNBC’s headlines read:

This is hubris of the highest order. Publicly traded companies simply guide research analysts toward lowered expectations on their upcoming quarterly earnings so that the companies can surprise on the upside and get these kinds of misleading headlines in the all-to-willing New York media – which has a vested interest in making everything appear rosy in the Big Apple. (New York media is dependent on fat Wall Street profits to boost the price of their own publicly traded shares since ad revenue in New York is linked to the health of Wall Street.) One would never know by these headlines that big bank earnings were actually down year over year – and in some cases, down dramatically. JPMorgan Chase earned $6.2 billion in the second quarter of 2016 versus $6.29 billion in the second quarter of 2015.The news was far worse at Citigroup, despite the rosy headline at CNBC. Citigroup’s second quarter profit fell 17.5 percent year over year, to $4 billion from $4.85 billion in the second quarter of 2015. Its revenues were the lowest in 14 years according to S&P Capital IQ. At Bank of America, profit fell to $4.23 billion from $5.3 billion in the second quarter of 2015, a sharp decline of 20 percent.

Why Standards Would Aid Blockchain's Adoption -- When bank executives talk about blockchain, they tend to make broad, sweeping statements about the technology's potential to transform the industry. Technical details are scarce. Value propositions are opaque. But if the financial services industry hopes to truly use blockchain technology to change their business without spending years and vast amounts of money aimlessly testing prototypes, the industry is going to have to be more forthright and collaborative. Financial institutions are naturally guarded about their use of emerging technology for competitive advantages. And currently, every little feature within the blockchain space could be used as a competitive edge since no clear winning setup has been decided upon. "There's a maturation happening in the blockchain industry; we're getting to the point that we need to work together even if we're competitors," said Christopher Allen, principal architect at Blockstream and a member of various blockchain standards bodies. "There are some things that aren't worth fighting over." Standards would be a good starting point to get the industry on the same page. Not only do standards promote an equal competitive playing field but they also reduce new technologies' time to market. The industry seems to be taking that to heart. Many projects are focusing on the standardization of data flows and the language used to communicate with blockchains rather than a technology platform.

How Big Should Bitcoin Blocks Be? Depends on Your Values -- Two recent essays have made the argument for retaining the one-megabyte limit on the size of bitcoin blocks, which limits the number of transactions the network can process. These contributions help reveal something that the technically oriented bitcoin community doesn’t focus on very much: the block size debate is about human values. The debate will be less acrimonious if bitcoin community leaders surface and compare these values. In a July 3 opinion piece on CoinDesk, Ariel Deschapell wrote frankly about the constraint that a one-megabyte block size may put on adoption. “A consumer using bitcoin for the first time and running into a severe confirmation delay for a retail transaction might very well get turned off,” he wrote. That very thing recently happened to New York Times reporter Nathaniel Popper, who shared his experience widely. But to Deschapell, the daily spending use case is “largely a dream.” Today’s use case, he wrote, is investment. Everyday spending of bitcoins will wait at least until investment growth brings bitcoin’s still-significant volatility under control, he argued. In a similar commentary on the blog of the Foundation for Economic Education, Vivek Rajasekhar echoed Deschapell on the minimal use case for payments with reference to fees, which have risen under the transaction-throughput limit.

THE BLOCKCHAIN REPORT: Why the technology behind Bitcoin is seeing widespread investment and early application across the finance industry - Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander. That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping. As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. In BI Intelligence’s Blockchain Report, we explain how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years. Here are some key takeaways from the report.

They Might Be Smart, But These Contracts Need to Be More Secure -- American Banker -- The DAO was supposed to be the first major smart contract project. It cratered after someone exploited a flaw in the code controlling the funds. Investors were partially bailed out Wednesday by a hard fork, or reversal of transactions, on the Ethereum blockchain. How could this disaster have been prevented? One possible method of avoiding mistakes by smart contract developers in the future may be a certification process. It can provide participants in various smart contracts with greater assurances that they won't lose their money. However, the security of a smart contract becomes much clearer once it's been released into the wild. This issue may affect distributed models more than so-called "permissioned blockchains" as it's easier to place safeguards in the permissioned model. The security question has come to the fore at a time when financial institutions are cautiously investigating the potential of smart contracts, along with other applications of blockchain technology. To proceed, they will need some reason to be confident that the DAO-saster won't be repeated.  For the uninitiated, a smart contract is a way to automate the execution of an agreement, usually financial in nature when in reference to blockchains. (As a simple example, bitcoin can be time-locked in a way that it is not spendable until a certain point in the future, and the terms are enforced by the blockchain.)  Banking and financial institutions have become excited about the prospects for smart contracts over the past few years for the purposes of cutting costs internally and for their customers. Ethereum is a decentralized blockchain, much like bitcoin, except that it was conceived specifically for advanced applications such as smart contracts, far beyond the scope of bitcoin's digital cash proposition. Intended to be a sort of decentralized venture capital firm controlled by those who bought into the concept, The DAO instead set off a crisis in the Ethereum community, where the basic idea of how that blockchain operates was put up for debate.

Sens. Brown, Merkley Want More Info From Regulators About Fintech Oversight -- Sens. Sherrod Brown and Jeff Merkley called on financial regulators to provide more information about their oversight of fintech companies, while raising concerns that a murky framework could be harmful to consumers and small businesses. Brown, the ranking member of the Senate Banking Committee, and Merkley, the top Democrat on the panel’s subcommittee on financial institutions and consumer protection, made their request in a letter addressed to the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Consumer Financial Protection Bureau. The senators said they want to know how the regulators have studied various forms of fintech, the agencies’ respective roles in overseeing the industry and their views on how the firms impact the institutions they regulate. “If a fintech company is neither directly regulated by your agencies nor a third party service provider, there are concerns that applicable federal consumer laws may not extend to consumers engaging with fintech companies, and that consumers or small business owners may not understand that protections provided by federal financial institutions do not apply to the products and services offered by these companies,” Brown (Ohio) and Merkley (Ore.) wrote. “These companies are changing financial services, and it is vital that the regulators and Congress understand all the impacts and take actions as appropriate.” The rise of fintech firms is posing challenges to regulators, lawmakers and industry leaders as agencies try to determine its place in the financial regulatory structure. The OCC is considering a limited-purpose banking charter for fintech firms, which some Republican lawmakers said could provide “regulatory clarity.” Brown and Merkley highlighted technologies such as blockchain, marketplace lending and virtual currencies in their letter, noting variations in fintech firms’ functions and their relationships to banks.

70 senators sign NAFCU-supported CFPB exemption letter - NAFCU: A bipartisan group of 70 senators signed a NAFCU-supported letter delivered to CFPB Director Richard Cordray Monday urging him to use the bureau’s Dodd-Frank Act authority to exempt credit unions from certain rulemakings. The letter, spearheaded by Sens. Joe Donnelly, D-Ind., and Ben Sasse, R-Neb., urges CFPB to grant credit unions relief through its authority under Section 1022(b)(3)(a) in the Dodd-Frank Act to grant exemptions on a rule-by-rule basis to “any class” of entity from its regulatory requirements. NAFCU has repeatedly pressed the bureau to use that authority more effectively. “We thank Senators Donnelly and Sasse for their leadership on this issue, and all of the senators who signed the letter, for their recognition of the overwhelming regulatory burden facing today’s credit unions,” said NAFCU Vice President of Legislative Affairs Brad Thaler. “Given that 329 House members sent Director Cordray a similar letter earlier this year, it is clear that Congress intends for CFPB to use its Dodd-Frank Act exemption authority to better tailor its rules to credit unions.” The Donnelly/Sasse letter emphasizes the negative impact of the regulatory burden experienced by community institutions since the enactment of the Dodd-Frank Act. NAFCU was the only credit union trade association to oppose subjecting credit unions to CFPB authority under Dodd-Frank. The association maintains that CFPB should be exercising its authority to exempt credit unions from regulations aimed at bad actors.

CFPB Small-Dollar Plan: Some Good Ideas, But Not Enough -  Prior to the Consumer Financial Protection Bureau's proposal last month on payday, title and high-cost installment loans, I was both hopeful and concerned about the upcoming rules. In crafting the proposal, the CFPB had the potential actually to help tens of millions of Americans who rely on these forms of credit. Ultimately, the CFPB plan could eliminate regulatory uncertainty, which might have helped spawn innovation and improved lending options. However, I was also concerned that the CFPB might overreach and the rules could have negative, unintended consequences. I support the mission of the CFPB and believe that CFPB Director Richard Cordray is a thoughtful and intelligent public servant with a tough job to do. That said, the proposed rules appear to contain both things I hoped for and feared. The main problem with the proposal is the likely impact on the lenders and customers who rely on single-payment payday lending. While far from perfect, payday loans are the only real-world source of short-term credit for lower-income American in many states. In the 35 states that allow single-payment payday loans, the proposed rules will eliminate access to credit for millions of working Americans, negatively impacting on people who rely on payday loans for unexpected expenses such as auto repair and healthcare. I don't believe the proposed rules regarding short-term (single-payment) lending are fully justified under Dodd-Frank. Defining the origination of multiple single-payment loans as an "abusive" practice strains credulity. In some states, higher-risk credit provided nonbank lenders is limited to short-term loans, which would be effectively eliminated under the proposal, causing severe financial hardships for many. An obvious response is for states to allow longer-term loans, but many states might not be able to do so in a timely manner, and many of the most needy borrowers might be rejected for longer-term loans.

Payday loan rules need fixing, Senate Democrats tell consumer bureau | Washington Examiner: The proposed sweeping new rules on payday loans need to be strengthened before going into effect, Senate Democrats told the Consumer Financial Protection Bureau Wednesday. The regulations, proposed in June, would require lenders to determine that borrowers have the ability to repay short-term, small loans, along with other measures meant to prevent hard-up customers from falling into a "debt trap" of successive expensive loans. But lenders could offer short-term loans without establishing the ability to repay if they met certain specifications, such as that the amount stay under $500 and they are not made to people already deeply in debt. Democrats want that exception taken out of the rule when it is finalized. In a letter sent to the bureau, the senators asked it to "ensure the strongest possible defense against the predatory lending models that trap consumers in unaffordable and escalating cycles of debt." Twenty-eight Senate Democrats, led by Sherrod Brown of Ohio, the top Democrat on the banking committee, signed the letter. They also asked the bureau to increase the length of the "cooling off" period that forces borrowers to wait before taking out new loans, another provision meant to stop families from relying on long strings of payday loans. The proposed version of the rule placed the cooling-off period at 30 days, and the Democrats want it extended to 60 days.

Richard Cordray: Blacks Are Trapped in a System of Financial Barricades: Richard Cordray and the Federal agency he heads, the Consumer Financial Protection Bureau (CFPB), have been in the cross hairs of right wing Republicans and the corporations they front for since the agency opened its doors in 2011 to confront the abuses exposed in the financial crisis of 2008. The agency’s work to level the playing field for all Americans and stop the vicious wealth transfer system that the deregulation era of the 90s has unleashed on the financially unsophisticated has fueled unprecedented backlash. (See our detailed report here.)The CFPB presents multiple threats to the financial looters. The CFPB has made it easy for consumers to file complaints; for whistleblowers to come forward; for the public to share their experiences so that the agency can get an early warning on new financial frauds gathering momentum; and it provides financial education materials to the public covering a broad spectrum. It has also levied hefty fines against wrongdoers and exposed the sordid details of their schemes.Despite the serial backlash Cordray has faced and the ongoing efforts to strip his agency of its independence, he isn’t backing down. Yesterday, Cordray became something of a whistleblower himself, delivering a speech to the NAACP’s annual convention in Cincinnati and exposing the myriad ways that African Americans are targeted by the institutionalized wealth stripping apparatus that has its entrenched tentacles spread across America. Cordray was describing to his audience the financial barricades still faced by African Americans in their quest to find that elusive American dream. Cordray provided the following devastating statistics:

CFPB Sets July 28 Debt Collection Event as Industry Awaits Rule | Bloomberg BNA: — The Consumer Financial Protection Bureau (CFPB) may unveil a long-awaited proposal to regulate debt collection practices at a July 28 field hearing in Sacramento, Calif., industry watchers say. The CFPB announced the field hearing July 15, with planned remarks from CFPB Director Richard Cordray on debt collection, followed by a panel discussion with consumer advocates and industry representatives. The CFPB regularly holds such events around the U.S. as a vehicle to unveil regulatory proposals and gather feedback from stakeholders. “The CFPB's history suggests that it will be releasing a SBREFA outline in conjunction with this event which will be the public kickoff to a multi-year rulemaking,” Isaac Boltansky, an analyst at Compass Point Trading & Research in Washington, told Bloomberg BNA in an e-mail. Before it can issue formal proposed rules, the bureau is required to submit its plans to a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel required by the Dodd-Frank Act. The panel will vet the CFPB's regulatory outline for potential negative impacts on small entities — such as debt collection firms or community banks — that would have to comply with the potential new regulation. David Anthony, a partner at Troutman Sanders in Richmond, Va., said consumer advocates and industry groups will be active participants in the July 28 field hearing, and the public will be given the opportunity to ask questions. “I would imagine there will be a robust debate on where regulation should be, how far it should go, what the problems are, what the solutions are,” Anthony said in a phone interview with Bloomberg BNA.

Bankers Ask for Crackdown on CFPB Overdraft Data Collection | American Banker: Bankers are taking the unusual step of asking the government for additional regulations — ones that can be used to block the Consumer Financial Protection Bureau from seeking more data from financial institutions.

CFPB's Updates to TRID Could Improve Warehouse Lending Liquidity: Mortgage lenders are hoping that expected clarifications to borrower disclosure rules will alleviate delays that affect their warehouse lines of credit. Uncertainty about what constitutes a TRID compliance error, and how to cure them, has had a direct impact on independent mortgage bankers who sell loans to aggregators. But some warehouse lenders that provide those originators with interim funding have also been affected by the liquidity concern, taking on increased risk exposure. The Consumer Financial Protection Bureau is expected to issue clarifications to the Truth in Lending Act and Real Estate Settlement Procedures Act integrated disclosures, also known as TRID, by the end of July. Turn times — the time between when warehouse funds are advanced and then repaid after a loan is sold — increased significantly when TRID first went into effect in October because aggregators who typically buy the loans were taking more time to review files,  Originators face monetary penalties from warehouse lenders, known as curtailments, if they exceed certain timeframes that differ by warehouse lender, "Very few of those [curtailments] have happened, but there are some investors that have been buying loans at a very slow rate, and that has been cause for concern,"

CFPB Unfairly Controls Debate with Midnight Embargoes | Bank Think -- A good political campaign is very effective at orchestrating the perfect event. This might include a press briefing the day before, a leak of the principal's prepared remarks, handpicking speakers for a minute-by-minute staged town hall, coordinating with activists and politicians in Washington, and a midnight embargo to the press to maximize command and control of the message. Despite what many of you might be thinking, I am not referring to any national politician's election bid, but rather the frequent behavior of the independent financial regulator, the Consumer Financial Protection Bureau. Despite repeated requests from industry that the agency operate more openly, fairly and impartially, the CFPB continues to ignore basic good governance principles when it comes to issuing rules. The CFPB — created with the mission "to make markets for consumer financial products and services work for Americans" — has rulemaking, supervisory and enforcement authority over the $3 trillion consumer financial services industry. In short, the bureau has authority over more entities than all other federal bank supervisors combined, totaling 15,000 institutions altogether. With its fifth anniversary in sight, this year we urge the bureau finally to put an end to its use of the midnight embargo. This is how a midnight embargo works: The agency shares the proposal or the rule with the media the day before it is to be released, with a restriction — or embargo — on its public availability until midnight. The following day, everyone else is treated to the news stories with only the agency's views, since nobody else had a chance to look at the release. The result: Total control of the message. Over the last five years,  the CFPB has focused on protecting consumers and reducing discriminatory and predatory lending. However, every time the bureau issues a major rule in the middle of the night, it undermines these efforts. Robust debate with multiple viewpoints is the best way to inform and strengthen consumer choice. Openness in the deliberation process will lead to a clearer understanding of what is expected of industry for consumers.

CFPB's Impact, Five Years On | American Banker - The Consumer Financial Protection Bureau is taking a victory lap this week as it celebrates its fifth anniversary, noting its accomplishments during the past five years, including collecting $11.7 billion in restitution for 27 million consumers.Yet the milestone also marks an important shift for the agency. Up until recently the CFPB has been largely focused on fulfilling the many responsibilities given to it by the Dodd-Frank Act, which created the agency. But with rulemakings governing qualified mortgages, mortgage disclosures, remittances and arbitration mostly behind it, the CFPB will begin wading further into uncharted waters where it has more flexibility over what to pursue.Those include finalizing rules governing payday lending and targeting additional areas like prepaid cards, overdraft fees and auto lending — areas where action is not required by Dodd-Frank."You could call the impact of the CFPB monumental — it's huge," said Alan Kaplinsky, who leads Ballard Spahr's Consumer Financial Services Group. "They've done a lot in five years, but I'm not sure they should be popping the cork on the champagne bottles yet." Despite that freedom, however, the agency faces challenges ahead, both politically and legally. A federal appeals court is expected to rule soon on a case challenging the constitutionality of the CFPB and its single-director structure.Meanwhile, Republican lawmakers continue to gun for the CFPB. More than 50 bills pending in Congress have sought to defund, change or somehow restrict the agency.CFPB Director Richard Cordray and Sen. Elizabeth Warren, D-Mass., highlighted the agency's accomplishments in a video and blog released to mark the agency's anniversary on July 21.

Hillary Clinton's Top VP Pick Lets Big Banks Know He's In Their Corner --Sounding another alarm for progressives wary of the Democratic establishment's support for Wall Street, the man said to be leading the pack of potential Hillary Clinton running mates - Virginia Sen. Tim Kaine - has just this week sent a clear message to big banks: He's in their corner.  Kaine, who is reportedly Bill Clinton's favorite for the vice presidential slot, signed onto two letters on Monday pushing for financial deregulation - letters that show the Clinton camp "how Kaine could be an asset with banking interests on the fundraising trail,"according to David Dayen at The Intercept on Wednesday.  "Let's be really clear: It should be disqualifying for any potential Democratic vice presidential candidate to be part of a lobbyist-driven effort to help banks dodge consumer protection standards and regulations designed to prevent banks from destroying our economy."   The news should "disqualify" Kaine from the ticket, one prominent progressive groupdeclared Thursday.The first missive, signed by 16 Democrats and every Republican senator, calls on the Consumer Financial Protection Bureau (CFPB) to exempt community banks and credit unions from certain regulations.As Dayen explains: While this seems benign, tailoring rules that exempt large classes of financial institutions leaves consumers vulnerable to deceptive practices. A rule of this type could allow community banks and credit unions to sell high-risk mortgages or personal loans without the disclosure and ability to pay rules in place across the industry. The second letter (pdf) deals with even bigger regional institutions, as it is aimed at helping "major firms including Capital One, PNC Bank and U.S. Bank, all of which control hundreds of billions of dollars in assets," according to the Huffington Post.

Where Low Rates Can Help Small Banks: Mortgage momentum might be the lone bright spot for many small banks reporting quarterly earnings. Community banks have faced difficulties boosting revenue, especially noninterest income, in recent years, given heightened regulatory scrutiny, competition and changing consumer demands. But mortgages, and specifically fees from selling originations, have been a mainstay for smaller institutions. Cyclicality is always a concern. While the second quarter is typically a strong period for originations, due to the spring home purchases, low rates seem to be providing a lift to refinancing activity. Though bad for other loan categories, it could provide some relief to banks that have sizeable mortgage operations. The research team at Keefe, Bruyette & Woods forecast in a recent note that second-quarter profit at the community banks it covers should, on average, increase by 5% from a year earlier, which should nominally improve returns. Mortgage banking activity played a big role in the team's predictions. A key consideration for investors should be bankers' projections for mortgage-related revenue in coming quarters, though some industry observers believe that low rates could provide an ongoing lift through the rest of this year. "We expect to see a bounce in mortgage[s] in second quarter and maybe even thereafter,"

HUD’s Castro Found to Violate Law Against Campaign Activity -  Housing and Urban Development Secretary Julian Castro, said to be a contender for Hillary Clinton’s running mate, was found by the U.S. Office of Special Counsel to have violated a law prohibiting federal employees from engaging in political activity while working in their official capacity. Castro committed the violation of what’s known as the Hatch Act during a Yahoo News interview with Katie Couric, during which he praised Clinton’s experience and said he believed Republican presidential candidate Donald Trump was unfit for office, the OSC said on Monday. While Castro preceded his comments with the disclaimer that “taking off my HUD hat for a second and just speaking individually,” the interview was taped at his department’s television studio and bracketed by a discussion of official departmental policies. “Despite his efforts to clarify that he was speaking only for himself and not as a HUD official when answering political questions, Secretary Castro’s statements impermissibly mixed his personal political views with official government agency business,” the independent federal agency said in its report on the incident. Castro said in a letter to the OSC that he “acknowledged” he had made an “inadvertent” error in the incident.

HUD to Investigate Down Payment Assistance Program Practices - The Department of Housing and Urban Development appears to be trying to resolve a feud between the agency and its inspector general over whether Federal Housing Administration lenders are ignoring guidelines on down payment assistance programs. The HUD IG claimed last year that under some downpayment assistance programs, FHA lenders are charging so-called premium pricing under which low- and moderate-income homebuyers pay a slightly higher interest rate. HUD initially responded by downplaying those findings, sparking a disagreement between it and the IG. But in a statement on July 18, Nani Coloretti, a deputy HUD secretary, said that the department is now conducting its own investigation into issues raised by the IG's auditors. "HUD will separately look into any inappropriate practices, some examples include: the extent to which government-sponsored down payment assistance programs fully informed borrowers of the loan terms, or imposed inappropriate fees or costs, or enabled steering or any other coercion of borrowers," Coloretti says in a note to FHA lenders.  "HUD reiterates that the department is supportive of government-sponsored DPA Programs. They enable access to credit that allows American families to purchase homes," she said in the note.

Risk Retention Rattles Commercial Mortgage Market: Upcoming risk retention requirements may be the proverbial straw that breaks the back of the commercial mortgage-backed securities market. Lenders already beset by several issues, including economic and political uncertainty and regulatory pressure to pull back from the commercial real estate market, will be required to retain at least 5% of the credit risk under new rules to take effect Dec. 24. "A lot of the industry feels the regulators have overshot," said Christina Zausner, vice president for industry and policy analysis at the Commercial Real Estate Finance Council. "The combined effects of the regulations have made the markets much thinner." Buyers of commercial properties can still get a loan from a bank, "but it is really hard for the investment banks to hold CMBS inventory for market-making reasons, even if it is a highly rated bond," Zausner added. "What that means is there is not a lot of liquidity, pricing or discovery. People feel less sure about the market." Industry representatives said they are concerned. The "final rule does have some problematic components, which I think could have a significant impact on the CMBS market," said Tom Kim, senior vice president at the Mortgage Bankers Association. "And it could go into effect at a time when there is a lot of volatility in the capital markets." Industry estimates commercial mortgage back securities issuance will total $50 billion to $60 billion this year — less than the $97 billion in issuance last year. Economists at Wells Fargo Securities recently reported that issuance in the market has fallen to the lowest levels since 2009.

High Refinancings and Loan Runoffs Raise Issues for FHA: — Federal Housing Administration borrowers have been refinancing faster than expected and the run off is creating a drag on efforts to build up the capital reserves of the agency's mortgage insurance fund. Borrowers appear to be responding to declining interest rates, but fewer are taking advantage of FHA's streamline refinancing program, instead choosing to refinance into other loan products. "FHA is not getting many of those loans back like they used to," . FHA used to have a loan retention rate around 55% before the agency implemented a life of loan policy in 2013 that requires borrowers to pay an 85-basis point annual premium for the entire term of the mortgage. Previously, the annual premium expired when the borrower's loan-to-value reached 78%. The result is that borrowers have increasingly chosen to refinance away from FHA products to avoid the life of loan premium. From June 2013 through April of this year, 2.4 million borrowers prepaid their FHA loans and only 650,000 refinanced back into an FHA-insured loan. The retention rate has fallen to 28%, according to FHA data. "FHA has lost several billions of revenue because of the excessive run-off," Chappelle said. "All it is doing is encouraging prepayments and discouraging retention. The real troubling thing is the loans that prepay are the best loans and they don't come back."

Private Flood Insurance Bill Has Fannie, Freddie on Edge: — A private flood insurance bill passed by the House is making Fannie Mae and Freddie Mac uneasy because they fear it could lead to greater losses, according to a recent report by the Government Accountability Office. The Flood Insurance Market Parity and Modernization Act, which would open the door for the government-sponsored enterprises to accept private flood insurance on single family-mortgage, was approved by a 419-0 vote in April. Currently, the GSEs rely solely on flood insurance policies backed by the Federal Emergency Management Agency. Fannie officials told GAO auditors the bill would "weaken its risk-management practices to the extent that it would impair Fannie Mae from maintaining or taking prudent actions to protect homeowners and collateral." Freddie officials, meanwhile, agreed that the creation of a viable private flood insurance market is important, but warned that the proposed "legislation could shift the risk of flood loss to Freddie Mac," according to the GAO. The bill would allow homeowners insured by the National Flood Insurance Program to switch to a private flood policy and retain the right to get their NFIP policy back again if they are dissatisfied with private insurance. The legislation would essentially grandfather a homeowner's federal flood insurance rate provided there is no lapse in insurance coverage. The flood insurance bill would also clarify that state insurance regulators have the same authority and discretion to regulate private flood insurance as they have to regulate other insurance products and markets.

Republican Platform Softens Stance on Winding Down Fannie, Freddie: The official platform of the Republican Party has softened language calling for the end of Fannie Mae and Freddie Mac, while continuing to demand reform. The platform that party officials approved at this week's Republican National Convention in Cleveland states that, "The utility of both agencies should be reconsidered." That contrasts with the 2012 version of the platform, which stated, "Both Fannie Mae and Freddie Mac should be wound down in size and scope." It's unclear what the significance of the change is or why it was made. Top Republican leaders, including House Financial Services Committee Chairman Jeb Hensarling, have repeatedly called for the end of the government-sponsored enterprises. There is no sign that they have eased up on that view. Additionally, Indiana Gov. Mike Pence, the Republican vice presidential nominee, is a close ally to Hensarling and has previously endorsed privatizing Fannie and Freddie. Still, because Republican presidential nominee Donald Trump has not weighed in on the issue, the change in the platform has opened the door to speculation. "I think they wanted to set a marker out that there are some things that need to be changed [with the GSEs] but they're not necessarily shutting them down," said Brian Montgomery, a former Federal Housing Administration commissioner during the George W. Bush administration and the current vice chairman of Washington, D.C., consulting firm The Collingwood Group. "I'm just thinking or speculating that they realize that it's much easier said than done."

In turnaround, FHA will insure mortgages with PACE assessments | Reuters: The Federal Housing Administration on Tuesday said it would approve mortgages on properties with energy-related home improvements financed through special tax assessments, marking a turnaround for the agency. Property Assessed Clean Energy (PACE) obligations allow homeowners to finance energy-efficient upgrades and renewable energy systems and repay the cost through extra charges on their property tax bills. But banks dislike PACE loans because they take precedence over mortgage debt in the event of a default, upending a basic tenet of the market. Lenders argue that a big attraction of PACE financing is that it is attached to the property, allowing homeowners to pass it on to subsequent owners. On Tuesday, FHA said it would insure mortgages with PACE assessments that are subordinated to the mortgage lien. However, PACE loans will retain a first-lien position on foreclosed properties or for delinquent PACE obligations. The FHA announcement was part of a broader government effort the White House unveiled on Tuesday to expand renewable energy and efficiency options to low- and middle-income communities.

Senate Passes Bipartisan FHA Condo Reform Bill: The Senate approved a bill Thursday by unanimous consent that includes major reforms to the Federal Housing Administration condominium loan program and the Rural Housing Service loan program. The bill, which has already cleared the House, would streamline the FHA's certification requirements for condo projects, allow more commercial space in agency-approved condo buildings and relax current owner-occupancy requirements. The "Housing Opportunity Through Modernization," originally sponsored by Reps. Blaine Luetkemeyer, R-Mo., and Emanuel Cleaver, D-Mo., would also authorize the Agriculture Department to use direct endorsement lenders to approve RHS-guaranteed loans. Currently, RHS lenders send loan documents to Washington for approval. The bill now goes to the President Obama's desk for his signature.

FHLB Jumbo Loan Limits Raised to $2.5M -- The Mortgage Partnership Finance Direct program will now accept larger jumbo mortgages and a wider variety of products including hybrid adjustable-rate mortgages, the Federal Home Loan Bank of Chicago and Redwood Trust said Monday. The partners said that the program would accept jumbos of up to $2.5 million, a boost from the previous $1.5 million limit. "By raising the loan limit and amending eligibility to include hybrid ARMs, the MPF Direct product will provide additional flexibility to members of the Federal Home Loan Bank System who wish to sell loans into the secondary market," said Redwood Trust President Christopher Abate in a press release. The MPF Direct program allows members of six participating Home Loan Banks to deliver jumbo mortgages through the MPF platform to a subsidiary of Redwood Trust. "We continue to broaden opportunities for FHLBank members to realize benefits from the MPF Direct product with the intention to help them — community lenders — remain competitive," said John Stocchetti, executive vice president and group head of the MPF program. Currently, 177 financial institutions have signed up to participate in the program, including 37 in the first quarter of this year. So far only 42 members have actually sold jumbos to Redwood through MPF Direct.

Number of Loan Modifications Continues to Decline: Hope Now: There was a decline in loan modification activity in May both for year-over-year and month-to-month comparisons, according to data from the Hope Now alliance. Overall, total nonforeclosure solutions, which includes loan modifications, short sales, deeds in lieu and workout plans, in May exceeded 105,000, compared to 117,000 the month prior. There were roughly 29,000 permanent loan modifications during the month, down from 31,000 in April and 37,000 in May 2015. The vast majority — 22,000 — of these modifications were made via proprietary programs, while more than 7,000 were completed through the Home Affordable Mortgage Program. Foreclosure sales fell 4% from April and 7% from May 2015 to 27,000. Hope Now reported Monday that the number of foreclosure starts rose 2% month-over-month to 51,000 in May. Year-over-year, May's foreclosure starts figure represented a 15% drop.

Opinions About Roadblocks to Homeownership Vary by Ethnicity: While all prospective homebuyers may face challenges to buying a home, the perception of what those obstacles are can take different forms based one's race or ethnicity, according to the results of a survey by the Futures Company in partnership with the California Association of Realtors Center for California Real Estate. The obstacle cited most among all respondents was saving enough for a down payment at 29%. Next was housing supply constraints at 27%, followed by access to credit and financing at 22% and personal debt at 19%. And among African-Americans and Asians a similar trend played out. The highest share of respondents in these two groups cited a lack of down payment or savings as the main barrier to homeownership, with 33% of African-Americans and 32% of Asians. But among Hispanics, a third of respondents chose access to credit and financing as the biggest obstacle. And 31% of non-Hispanic whites, meanwhile, selected constrained housing supply as the most challenging barrier. "With record high rents and only about a third of the state's households able to afford to buy a median-priced home, the dream of owning a home in California is evaporating," CAR President Pat Zicarelli said in a news release Thursday. "It's even more discouraging for prospective ethnic homebuyers who must face greater obstacles to scrape together a down payment or obtain credit and financing." But there was some stronger agreement across racial and ethnic lines on other issues. For example, 70% of poll respondents looking to buy a home said that they want the current presidential candidates to address housing affordability during their campaigns.

How Approval Delays Can Trickle Down to Inhibit Growth in Housing - As many U.S. and Canadian cities grapple with rapidly rising housing costs, new research offers a point of focus: regulatory delays. In a study using newly gathered data on land-use regulations, economists at Vancouver’s Fraser Institute have begun to identify which aspects of regulation most stifle housing growth. They found that “long and uncertain project-approval timelines are particularly detrimental” to construction in high-demand areas. A previous study of residential land-use regulations surveyed U.S. town and city planners, asking them to evaluate various rules, fees, and delays in their jurisdictions. The Fraser Institute researchers shifted the perspective, querying developers and builders about their experiences in various Canadian jurisdictions. Having gathered the data, Fraser’s researchers measured the effects of regulations on local growth in Canadian cities and suburbs. They found evidence of slowed growth or diminished local responsiveness to housing demand in the five regulatory dimensions considered:

  • * Approval timeline duration
  • * Approval timeline uncertainty
  • * Costs and fees associated with development
  • * Pro- or anti-development sentiment of local councils and communities
  • * Share of projects requiring a zoning variance

MBA: "Mortgage Applications Decrease in Latest Weekly Survey" -- From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 15, 2016. The prior week’s results included an adjustment for the July 4th holiday... The Refinance Index decreased 1 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index increased 23 percent compared with the previous week and was 16 percent higher than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.65 percent from 3.60 percent, with points unchanged at 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. Refinance activity has increased this year since rates have declined. If refinance mortgage rates fell a little further, we might see a significant pickup in refinance activity. The second graph shows the MBA mortgage purchase index. The purchase index is "16 percent higher than the same week one year ago".

FHFA House Price Index July 21, 2016: Home sales have been on the rise and price concessions are likely part of the reason. The FHFA house price index rose only 0.2 percent in May for the weakest performance since August last year and one of the weakest of the whole recovery. The year-on-year rate is likewise sagging at recovery lows, at plus 5.6 percent for a 3 tenths dip from April. New England is among the weakest regions, down 1.3 percent in the month with a year-on-year gain of only 3.9 percent. The Pacific and Mountain regions are the strongest, the former down slightly in the month but up 7.9 percent on the year with the latter up 1.2 percent in the month for an 8.5 percent year-on-year gain. But gains aren't the theme of the May FHFA report, one if followed by similar weakness in next week's Case-Shiller data could lower what had been a moderately positive outlook for home-price appreciation, where for household wealth strength is necessary to offset weakness in wage growth and low interest on savings.

FNC: Residential Property Values increased 4.9% year-over-year in May  -FNC released their May 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.7% from April to May (Composite 100 index, not seasonally adjusted).   The 10 city MSA increased 0.3% (NSA), the 20-MSA RPI increased 0.5%, and the 30-MSA RPI increased 0.6% in May. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  From FNC: FNC Index: May Home Prices Up 0.7% According to the latest FNC Residential Price Index™ (RPI), U.S. home prices rose at a less robust pace in May, up 0.7% at a seasonally unadjusted rate. On a year-over-year basis, home price appreciation continues to level off, ending in May with a seasonally unadjusted rate of 4.9%. Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The index is still down 11.6% from the peak in 2006 (not inflation adjusted).

Existing Home Sales July 21, 2016: The housing sector is showing traction as existing home sales extended May's gain, rising 1.1 percent to a 5.570 million annualized rate for June which is the best of the cycle, since February 2007. Single-family sales rose a very solid 0.8 percent in the month for a plus 3.1 percent year-on-year rate with condos up 3.2 percent for a plus 1.6 percent on-year rate. The total year-on-year rate is modest but constructive at plus 3.0 percent. The gain in June did not come at the expense of pricing as the median rose 3.7 percent to $247,700 for a year-on-year rate of plus 4.7 percent which is slightly ahead of the sales rate. A plus for pricing is lack of homes on the market which, however, is a major negative for sales growth. Supply fell 0.9 percent in the month to 2.12 million with supply relative to sales falling to 4.6 months from 4.7 months. Regional sales data are well balanced with the Northeast out in front at a year-on-year plus 5.6 percent and the West bringing up the rear but only at minus 0.8 percent. The Midwest and South, like the Northeast, are in the positive low single-digits. Sales rates all this year, including for new homes, have been trending slightly higher -- but the direction is definitely forward. And steady growth is the recipe for the housing sector which occasionally suffers from boom-and-bust.

Existing Home Sales increased in June to 5.57 million SAAR - From the NAR: Existing-Home Sales Ascend Again in June, First-time Buyers Provide Spark Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 1.1 percent to a seasonally adjusted annual rate of 5.57 million in June from a downwardly revised 5.51 million in May. After last month's gain, sales are now up 3.0 percent from June 2015 (5.41 million) and remain at their highest annual pace since February 2007 (5.79 million). ... Total housing inventory at the end of June dipped 0.9 percent to 2.12 million existing homes available for sale, and is now 5.8 percent lower than a year ago (2.25 million). Unsold inventory is at a 4.6-month supply at the current sales pace, which is down from 4.7 months in May.

Existing Home Prices Hit Record High As Sales Growth Slowest In 4 Months - Despite a better than expected 1.1% MoM rise in June (thanks to notable downward revisions),existing home sales growth is the slowest since February. Of course, NAR's Larry Yun gloated of "sustained job growth" driving an "impressive streak of sales gains," although he cautions " it's unclear if this current sales pace can further accelerate." Median home prices soared to new record highs driven by soaring demand for condo/co-ops (+3.2% vsjust 0.8% for single-family homes). At 5.57m SAAR, this is the highest existing home sales since Feb 2007... but growth is fading once again... The median existing-home price for all housing types in June was $247,700, up 4.8 percent from June 2015 ($236,300). June's price increase marks the 52nd consecutive month of year-over-year gains and surpasses May's peak median sales price of $238,900. Total housing inventory at the end of June dipped 0.9 percent to 2.12 million existing homes available for sale, and is now 5.8 percent lower than a year ago (2.25 million). Unsold inventory is at a 4.6-month supply at the current sales pace, which is down from 4.7 months in May. The share of first-time buyers was 33 percent in June, which is up from 30 percent in May and a year ago and is the highest since July 2012 (34 percent). Through the first six months of the year, first-time buyers have represented an average of 31 percent of buyers; they were 30 percent in all of 2015. All-cash sales were 22 percent of transactions in June, unchanged from both May and a year ago. Individual investors, who account for many cash sales, purchased 11 percent of homes in June (lowest since July 2009 at 9 percent), down from 13 percent in May and 12 percent a year ago. Sixty-four percent of investors paid cash in June. And the breakdown shows Rental Nation demands surging...  Single-family home sales increased 0.8 percent to a seasonally adjusted annual rate of 4.92 million in June from 4.88 million in May, and are now 3.1 percent higher than the 4.77 million pace a year ago. The median existing single-family home price was $249,800 in June, up 5.0 percent from June 2015.

A Few Comments on June Existing Home Sales -- Bill Mcbride - For existing homes, inventory is still key.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 5.8% year-over-year in June). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases. Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply. Of course low inventory keeps potential move-up buyers from selling too.  If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade. Also, the NAR reported total sales were up 3.0% from June 2015, however normal equity sales were up even more, and distressed sales down sharply.  A rough estimate: Sales in June 2015 were reported at 5.41 million SAAR with 8% distressed. That gives 430 thousand distressed (annual rate), and 4.98 million equity / non-distressed. In June 2016, sales were 5.57 million SAAR, with 6% distressed. That gives 330 thousand distressed - a decline of about 23% from June 2015 - and 5.24 million equity. Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 5%. The following graph shows existing home sales Not Seasonally Adjusted (NSA).

NMHC: Apartment Market Tightness Index remained negative in July Survey From the National Multifamily Housing Council (NMHC): Apartment Markets Remain Mixed According to the Latest NMHC Quarterly SurveyApartment markets continued to show mixed conditions in the July 2016 National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. For the third quarter in a row, the Market Tightness (43) and Equity Financing (44) Indexes remained below the breakeven level of 50. Conversely, the Debt Financing Index came in at 62 and the Sales Volume Index landed right at 50. “Apartment markets remain strong, but the surge of new apartment construction is starting to shift the supply-demand balance, particularly in the market for upscale apartments,” said Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist. “Given that most new supply is class A, we’re not seeing the same shift in class B and C apartments. In addition, some weakness in the Market Tightness Index may be just seasonality.” For the third quarter in a row, the Market Tightness Index, which was unchanged at 43, showed supply a bit stronger than demand. Almost one-third of respondents (31 percent) reported looser conditions than three months ago. At the other end, 18 percent noted tighter conditions, while over half (51 percent) reported no change.

Housing Starts July 19, 2016: The housing sector may be on a low trajectory but it is climbing. Starts rose 4.8 percent in June to a 1.189 million annualized rate with permits up 1.5 percent to a 1.153 rate. For single-family homes, starts rose 4.4 percent with permits up 1.0 percent, the latter gain however doing little more than keeping the trend for this reading flat. Multi-family homes, a much smaller group that had been soft earlier in the year, are also showing life, with starts up 5.4 percent and permits putting in a second straight strong showing, up 2.5 percent following May's 4.1 percent jump. For the second quarter as a whole, starts averaged 1.160 million for a 0.8 percent gain from the first quarter with permits averaging 1.140 for a fractional decline but showing building momentum through the quarter. Housing isn't on fire but it may be making the difference for the economy as a whole, helping it hold in the modest growth range.

Housing Starts increased to 1.189 Million Annual Rate in June --From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,189,000. This is 4.8 percent above the revised May estimate of 1,135,000, but is 2.0 percent below the June 2015 rate of 1,213,000. Single-family housing starts in June were at a rate of 778,000; this is 4.4 percent above the revised May figure of 745,000. The June rate for units in buildings with five units or more was 392,000.  Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,153,000. This is 1.5 percent above the revised May rate of 1,136,000, but is 13.6 percent below the June 2015 estimate of 1,334,000. Single-family authorizations in June were at a rate of 738,000; this is 1.0 percent above the revised May figure of 731,000. Authorizations of units in buildings with five units or more were at a rate of 384,000 in June. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in June compared to May. Multi-family starts are down 22% year-over-year. Single-family starts (blue) increased in June, and are up 13% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in June were above to expectations, however combined starts for April and May were revised down.

June 2016 Residential Building Growth Rate Continues to Decelerate: The rate of growth continues to decelerate - and building permits issued are contracting year-over-year, but there are still more building permits being issued than construction completions. Multi-family housing building permit growth rate is significantly contracting year-over-year. Be careful in analyzing this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry variations from month to month so the rolling averages are the best way to view this series - and the data remains in the range we have seen over the last 3 years (although permits is at the low end of the range). The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a -15.0 % this month. Construction completions are lower than permits this month for the 18th month in a row (when permits exceed completions - this sector should be expanding). Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is -7.6 % (permits) and +4.0 % (construction completions): Econintersect Analysis:

  • Building permits growth decelerated 11.9 % month-over-month, and is down 15.0 % year-over-year.
  • Single family building permits grew 4.8 % year-over-year.
  • Construction completions accelerated 16.9 % month-over-month, up 16.5 % year-over-year.

US Census Headlines:

  • building permits up 1.5 % month-over-month, down 13.6 % year-over-year
  • construction completions up 12.3 % month-over-month, up 18.7 % year-over-year.

Housing Starts Decline Year-Over-Year Amid Downward Revisions-- Thanks to generous downward revisions, June's Housing Starts 'jump' of 4.8% MoM suggests everything is awesome. However, year-over-year Starts dropped 0.2%, the second annual drop in 3 months. Both single- and multi-family starts rose MoM but rental unit starts fell notably YoY (-22% versus a 13% rise for single-family). Overall permits rose 1.5% MoM (slightly better than expected) but multi-family permits rose more than single-family permits (+2.5% MoM vs +1.0% MoM) as Rental Nation USA continues to gather pace. Both single- and multi-family Starts rose MoM...But, the growth in housing starts is slowing... As Permits bounce back with single-family nearing cycle highs... Rental Nation USA continues but one has to wonder if everything is so awesome, why are builders slowing their starts year-over-year? Especially amid constant whining about supply from the realtors?

June housing permits and starts: meh -- Housing is one of two recognized long leading indicators that are not financial (the other being corporate profits). It has been one of the relatively bright spots throughout the recent slowdown. So let's take an updated look. The first thing to bear in mind is that YoY comparisons are still very much affected by last year's NYC housing surge. But that only really affected multi-unit dwellings. So first, here is a look at single family permits (blue, left scale) vs. multi-unit permits (red, right scale): Single family permits did make a new high several months ago, but generally these have gone sideways. Multi-unit permits have only recently started to rebound, but are still below their artificial high one year ago. Since mortgage interest rates are one of the big drivers of housing, let's compare interest rates (inverted, red) with the YoY% change in housing permits (blue) and single family permits (green): While the overall YoY numbers are still affected by the NYC program last year, the single family numbers continue positive YoY as interest rates have generally declined over the last several years. Hopefully the recent further decline in interest rates will show up in further increases in permits. Finally, while they are much more volatile than permits, because actual economic activity is only reflected once the house is under constructed, here are housing starts: These have gone basically sideways for the last year. There may have been the beginning of a slight upward trend in the last few months. So, basically a "meh" report, with some hints that lower interest rates might offer a little boost in coming months.

Residential construction in U.S. solid but Alabama economist sees cause for concern | Fresh numbers are out today about residential construction across the U.S. The numbers show at first blush what looks to be solid news. Both housing starts and construction permits were greater than what the experts expected them to be in June. Total housing starts rose to an annualized rate of almost 1.2 million units. Total housing permits rose to an annualized rate of just over 1.1 million units, according to the U.S. Census Bureau and the Department of Housing and Urban Development which is out today with its joint report. In the area of single-family and multi-family construction, both areas were higher in both starts and in permits. The start of single-family homes in June showed an increase in all four Census Bureau regions across the country. But the data for multi-family starts was not as solid with starts of multi-family units falling in the Midwest and South but rising in the Northeast and West. While the numbers are considered solid, one leading economist in Birmingham is sounding a note of concern. Richard F. Moody is senior vice president and chief economist for Birmingham-based Regions Financial Corporation. Moody sent his economic update report out this morning taking a look at the latest housing data. Moody writes, "amidst a solid report on construction activity in June, there is cause for concern, at least to us." That concern as Moody sees it is what he calls a "yawning gap between (housing) starts and completions in the multi-family segment of the housing market..."

Comments on June Housing Starts --- Earlier: Housing Starts increased to 1.189 Million Annual Rate in June The housing starts report this morning was above consensus, however there were downward revisions to the prior two months.  Also starts were down 2.0% from June 2015.  Still a decent report. Once again the key take away from the Housing Starts report is that multi-family is slowing, and single family growth is ongoing year-over-year. This graph shows the month to month comparison between 2015 (blue) and 2016 (red). Year-to-date starts are up 7.1% compared to the same period in 2015. My guess was starts would increase 4% to 8% in 2016, and that still looks about right. Multi-family starts are down 3.9% year-to-date, and single-family starts are up 13.2% year-to-date. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will probably catch up to starts soon (completions lag starts by about 12 months). I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years.

AIA: Architecture Billings Index "remains on solid footing" in June :-  This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Architecture Billings Index remains on solid footing. Buoyed by increasing levels of demand across all project types, the Architecture Billings Index (ABI) was positive in June for the fifth consecutive month. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the June ABI score was 52.6, down from the mark of 53.1 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.6, down from a reading of 60.1 the previous month. “Demand for residential projects has surged this year, greatly exceeding the pace set in 2015. This suggests strong future growth for housing in the coming year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “While we expect to see momentum continue for the overall design and construction industry in the months ahead, the fact that the value of design contracts dipped into negative territory in June for the first time in more than two years is something of a concern.”
• Regional averages: South (55.5), West (54.1), Northeast (51.8), Midwest (48.2)
• Sector index breakdown: multi-family residential (57.9), institutional (52.7), mixed practice (51.0), commercial / industrial (50.3)

NAHB: Builder Confidence declines to 59 in July --The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 59 in July, down from 60 in June. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Holds Firm in July  Builder confidence in the market for newly built, single-family homes in July fell one point to 59 from a June reading of 60 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.  “For the past six months, builder confidence has remained in a relatively narrow positive range that is consistent with the ongoing gradual housing recovery that is underway,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “However, we are still hearing reports from our members of scattered softness in some markets, due largely to regulatory constraints and shortages of lots and labor.” All three HMI components edged lower in July. The components measuring current sales expectations and buyer traffic each fell one point to 63 and 45, respectively. The index measuring sales expectations in the next six months posted a three-point decline to 66. The three-month moving averages for regional HMI scores held remarkably steady. The Northeast, Midwest and South were unchanged at 39, 57 and 61, respectively. The West edged one point higher to 69.

U.S. Economic Confidence Stuck at Lower Level:  -- Americans' confidence in the economy remains weak, with Gallup's U.S. Economic Confidence Index at -17 last week, consistent with levels seen since mid-June. This is in contrast to the stronger confidence levels seen for most of the first half of the year, when the index averaged -12. During the slow recovery from the worst recession since the Great Depression, Americans' assessments of the economy became slightly more positive than negative from late December 2014 to mid-February 2015. However, those positive sentiments faded throughout the spring and summer of 2015. Confidence slowly inched up in late 2015 and early 2016 as gas prices plummeted nationally, but confidence dipped in mid-April and again in mid-June. U.S. economic confidence in the second half of 2016 is off to a slow start, with each weekly index score so far in July below the first-quarter and second-quarter averages of -11 and -14, respectively. Gallup's U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all Americans were to say the economy is doing poorly and getting worse. The current conditions score was -7 last week, similar to numbers since mid-April. This reflects 24% saying current economic conditions are excellent or good and 31% saying they are poor. The economic outlook score averaged -27 last week, similar to figures since late June but slightly lower than scores before mid-June. This reflects 34% of Americans saying the economy is getting better and 61% saying it is getting worse.

Americans’ Economic Gloom Festers as Stocks Hit New High: Gallup Stumped - Wolf Richter - Gallup’s weekly survey has been trying to determine to what extent American consumers would get hit by the Brexit vote and the financial volatility that came with it: the two-day dive, the central-bank agitations, the massive dip-buying, the big rally since. Throughout, the survey found that Brexit bypassed Americans. But something else hit them, and economic confidence has been falling despite the market highs. Gloomy comes to mind. In Gallup’s report today for the week ending July 17, the overall Economic Confidence Index dropped to -17, the lowest point so far this year, matching the prior lows in late June and in August 2015: In January 2015, the index reached +5. Americans weren’t exactly wallowing in exuberance at the time, given the index’s theoretical range of +100 to -100 (it hit -65 in November 2008), but it was the most positive level since the Financial Crisis. But for the past 18 months, the trend has been south. In the spring and summer 2015, that trend south was fairly pronounced, but then gas prices dropped through the winter. And that, according to Gallup, perked up consumers. Now, this honeymoon is over. The overall index is an average of two components: how Americans see current economic conditions; and how they see future economic conditions – whether the economy is going to get better for them, or worse. The Current Economic Conditions index has been stagnating in negative territory, with a downward trend. Today’s reading of negative -7 is the a result of 24% of Americans saying the current economy is “excellent” or “good,” and 31% saying it’s “poor.” This has been consistently the case during these recent “good times”: about one-third of Americans think the economy they live in as individuals is “poor.” We’ll get to that again in a moment.

If American households have so much stuff, why do Americans feel so stretched? -- When a book telling people to throw away almost everything they own becomes a best seller and the start of a spiritual movement, it’s a good indication we’re consuming too much. But it’s hard to reconcile this idea when so many families, even in some of the world’s most durable economies, feel like they are barely getting by. Households have never had so many material goods, yet we hear constant reports of economic anxiety and feelings of hopelessness. The problem is livings standards. Our expectations of what we should own have increased—but incomes, for many of us, haven’t kept up. The disconnect leaves households vulnerable and struggling. There is no doubt living standards are rising. People around the world, of all income levels, are living longer, finding more leisure time, and enjoying more luxuries than at any time in history. Remember, only 30 years ago, air-conditioning was a luxury. Now it’s practically seen as a necessity. It’s worth remembering that while many of these goods are also cheaper than they used to be, other, arguably more important, things are still relatively expensive, like education and healthcare. It isn’t just the poor and middle class who feel overwhelmed by the burdens of having, or paying for, all this stuff. A series of well-to-do people have been admitting to no savings and claiming they can’t afford their needs. The poor and middle class are having a harder time, though. Their wages have barely budged as most income gains in recent years went to high earners. What is remarkable is that even as income inequality widened, as has the gap in spending by rich people and poor people on non-durable goods like food, owning durable goods has become more common for everyone. The figures below show ownership rates for various goods by Americans in households at the poverty level, and in households earning the top 20% of income.

Hotels: Occupancy Rate Tracking just behind Record Year --Note: The large year-over-year decline in the occupancy rate last week was related to the timing of the July 4th weekend. From STR: US hotel results for week ending 9 July The U.S. hotel industry reported mixed year-over-year results in the three key performance metrics during the week of 3-9 July 2016, according to data from STR.  In comparison with a full 2015 week that did not include the Fourth of July, the industry’s occupancy decreased 6.4% to 67.4%. Average daily rate was up 1.3% to US$121.11. Revenue per available room fell 5.2% to US$81.59.  The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels. 2015 was the best year on record for hotels. So far 2016 is tracking just behind 2015, and well ahead of the median rate. The 4-week average occupancy rate should remain above 70% during the Summer travel period.

Hotels: Occupancy Rate on Track to be 2nd Best Year -- From STR: US hotel results for week ending 16 July The U.S. hotel industry reported mixed results in the three key performance metrics during the week of 10-16 July 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy decreased 1.4% to 77.5%. However, average daily rate was up 3.4% to US$128.12, and revenue per available room increased 1.9% to US$99.33.The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

This is What’s Cannibalizing the US Economy | Wolf Street: In the sluggish US economy, the goods-producing sector has been in decline since late 2014, but sales in its biggest sub-sector are booming: medicines. Drugs are a physically small part of the goods-producing economy. But in terms of dollars, they’re the elephant in the room: According to the wholesales report by the Commerce Department, total drug sales by manufacturers to pharmacies, hospitals, and others in the distribution chain jumped 11.3% from a year ago (not seasonally adjusted) to $54.3 billion. That was the largest of the wholesale categories in the report: larger than “Groceries” ($51.5 billion), “Electrical” ($45.0 billion),”Petroleum” ($43.4 billion), and Automotive ($36 billion). Drug sales accounted for 12.2% of total wholesales. For the last 12 months, it was 12.0%. In May a year ago, manufacturers sold $48.8 billion in drugs, or 11.3% of total wholesales. In May 2014, drugs accounted for 9.4% of total wholesales. In May 2013, it was 9.1%. In May 2012, it was 8.8%. You get the idea. Drug sales at the wholesale level account for an ever larger portion of total wholesales. Total wholesales rose 0.3% in May year over year. Without the $5.5 billion increase in sales of drugs, total wholesales would have fallen 0.9% year-over-year. Are Americans really consuming that much more in pharmaceutical products? Hardly: According to the Producer Price Index, prices charged by manufacturers of pharmaceutical products jumped 9.8% in May from a year ago. So the Wall Street Journal reviewed corporate filings and conference-call transcripts of the 20 largest members of Big Pharma in the US and found that over two-thirds had attributed their sales increases in the first quarter at least in part to jacking up prices. Among them:

Raw Data: The US Trade Deficit ex China ex Oil -- This is apropos of nothing in particular. I was just curious what our trade deficit looked like without China and without oil. Answer: it's pretty much zero. I don't know if this really means much, but if I was curious, I figured other people might be curious too.

LA area Port Traffic Mostly Unchanged in June --Special note: Now that the expansion to the Panama Canal has been completed, some of traffic that used the ports of Los Angeles and Long Beach will probably go through the canal. This could impact TEUs on the West Coast.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.. On a rolling 12 month basis, inbound traffic was unchanged compared to the rolling 12 months ending in May. Outbound traffic was down 0.1% compared to 12 months ending in May. The downturn in exports over the last year was probably due to the slowdown in China and the stronger dollar. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). In general exports are moving sideways and imports are gradually increasing.

June 2016 Import Sea Container Count Trends Are Conflicting: The rolling averages are now decelerating for exports but accelerating for imports. Under normal situations, this is signalling an improving USA economy with a slowing global economy. But the movement of the rolling averages is still being affected by the port strikes last year, and the year-to-date comparisions continue to slow versus last year. Slowing of year-to-date numbers are indicating a decelerating USA economy. This data set is based on the Ports of LA and Long Beach which account for much (approximately 40%) of the container movement into and out of the United States - and these two ports report their data significantly earlier than other USA ports. Most of the manufactured goods move between countries in sea containers (except larger rolling items such as automobiles). This pulse point is an early indicator of the health of the economy. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month:  As the data is very noisy - the best way to look at this data is the 3 month rolling averages. There is a direct linkage between imports and USA economic activity - and the change in growth in imports foretells real change in economic growth. Export growth is an indicator of competitiveness and global economic growth. There is reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts.

Rail Week Ending 16 July 2016: Still In Contraction But Short Term Trends Continue to Improve: Week 28 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The short term rolling averages' contraction continues to moderate. The contraction began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause of the acceleration. Still, rail is weak to very week compared to previous years.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 520,222 carloads and intermodal units, down 5.6 percent compared with the same week last year. Total carloads for the week ending Jul. 16 were 262,202 carloads, down 5.4 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 258,020 containers and trailers, down 5.8 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were grain, up 25.3 percent to 25,681 carloads; miscellaneous carloads, up 14 percent to 10,647 carloads; and chemicals, up 2.9 percent to 30,917 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 15.8 percent to 11,221 carloads; coal, down 15.5 percent to 84,272 carloads; and forest products, down 10.3 percent to 9,894 carloads. For the first 28 weeks of 2016, U.S. railroads reported cumulative volume of 6,784,480 carloads, down 12.2 percent from the same point last year; and 7,186,521 intermodal units, down 2.8 percent from last year. Total combined U.S. traffic for the first 28 weeks of 2016 was 13,971,001 carloads and intermodal units, a decrease of 7.6 percent compared to last year.

Another Bad Month for Truck Shipping -- Truck shipments were up in June from May. So were expenditures. That sounds pretty good, but it really isn’t. Shipments are normally up in June and the Cass Freight Index report from which I get numbers is not seasonally adjusted. The best way to compare June is to prior years, and that picture isn’t pretty.Truck shipments and expenditures are below the June level of 2015, 2014, and 2013. Cass notes “The June freight shipments index climbed 1.7 percent. This was 4.3 percent below last year and 7.6 percent lower than June 2014. Stores are already stocking school supplies, which accounts for some of the rise. … June’s shipments are in step with patterns that have been observed in the past few years, but are still well below the volume in the last two years. July usually sees a dip in the number of freight shipments, but the first part of July seems to be fairly robust.” “Total freight expenditures jumped 3.9 percent in June—the second largest increase this year. Most of this increase can be attributed to the growth in shipments. June 2016 is still 8.8 percent below June 2015.”

Trucking Tonnage Points To A Slowing Economy In June 2016: Truck shipments were reported down in June - even the BLS employment data was very weak. ATA Trucking The American Trucking Associations' (ATA) trucking index decreased 1.5 % in June, following a gain in May. From ATA Chief Economist Bob Costello: The seesaw pattern continued again in June with tonnage falling after a good rise in May. On a month-to-month basis, tonnage has been down in three of the last four months, totaling 4.7% since February. Looking ahead, I expect the freight environment will remain choppy. The good news for trucking is we are the most diverse mode of all freight transportation sectors between industrial and consumer freight. We are currently benefiting from the consumer side while being hurt on the industrial side. And of course we still have the inventory glut that is weighing down tonnage. Not all trucking companies are members of the ATA, and therefore it is unknown if this data is a representative sampling of the trucking industry. FTR's Trucking Conditions Index (TCI) for May fell to its lowest level since 2011 at a reading of 1.69, nearly five points lower than the previous month. Negatively affecting truckers are lower freight rates and capacity utilization that has dropped below 95%. Looking forward, trucking companies could benefit from a reinstatement of the hours-of-service 34-hour restart conditions that have been batted around in the halls of Congress this summer. If a version of the regulation does go into effect it would likely tighten capacity enough to move pricing. The TCI is currently forecasted to rise into the mid-single digits later in the year, reflecting weak economics up against expected regulatory drag combining to neutralize positive and negative factors affecting the trucking sector.

Vehicle Sales Forecast: Sales to be Over 17 Million SAAR in July -- The automakers will report July vehicle sales on Tuesday, Aug 2nd.  There were 26 selling days in July, the same as in July 2015. From WardsAuto: Forecast: July Sales to Return to 17 Million SAAR Trend A WardsAuto forecast calls for U.S. light-vehicle sales to reach a 17.6 million-unit seasonally adjusted annual rate in July, following June’s 16.6 million SAAR. July’s SAAR would be significantly higher than the 17.1 million recorded year-to-date through June, and would help bring 2016 sales in line with WardsAuto’s full-year forecast of 17.3 million units.  Looks like a strong month for vehicle sales.

Here They Go Again—-Subprime Delinquencies Rising In Autoland by David Stockman - Yesterday’s WSJ article on rising auto loan delinquencies had a familiar ring. It focused on sub-prime borrowers who were missing payments within a few months of the vehicle purchase. Needless to say, that’s exactly the manner in which early signs of the subprime mortgage crisis appeared in late 2006 and early 2007.  More than 8.4% of borrowers with weak credit scores who took out loans in the first quarter of 2014 had missed payments by November, according to the Moody’s analysis of Equifax credit-reporting data. That was the highest level since 2008, when early delinquencies for subprime borrowers rose above 9%. To be sure, subprime auto will never have the sweeping impact that came from the mortgage crisis. The entire auto loan market is less than $1 trillion compared to a mortgage market of more than $10 trillion at the time of the crisis. Yet the salient point is the same.The apparent macro-economic recovery and prosperity of 2004-2008 rested on the illusion of an unsustainable debt fueled housing boom; this time its the auto sector.  Indeed, delete the auto sector from the phony 5% GDP  SAAR of Q3 2014 and you get an economy inching forward on its own capitalist hind legs. Q3 real GDP less motor vehicles was up just 2.3% from the prior year (LTM); and that’s the same LTM rate as recorded in Q3 2013, and slightly lower than the 2.4% growth rate posted in Q3 2012. Aside from autos, there has been no acceleration, no escape velocity. Furthermore, the 2%+/- growth in the 94% balance of the economy after the 2008-09 plunge has nothing to do with the Fed’s maniacal money printing stimulus and the booster shot from cheap credit that is supposed to provide.

Longer Auto Loans Lead to Increased Delinquency Risk: Study -- A recent study TransUnion paints a worrying picture for certain sectors of the auto lending industry. The research by the credit information giant found that increased loan terms coincide with more risk and delinquency. In the study, Chicago-based TransUnion found that subprime auto loans in the 84-month term category have a delinquency rate of 30.7%. While this is not an area normally captured by the CU industry, the numbers are still growing for the longer-term loans in the prime and super prime risk categories. "Some people have talked about possibility of a bubble in the auto arena," said Mike Schenk, vice president of economics and statistics at CUNA, "[It] may be true in the broad marketplace, the loans we see CUs originating are high quality loans and are being paid off in a timely manner." The delinquency rate for 60-month super prime loans is 0.4%, according to TransUnion, and this number more than doubles to 0.9% when the loan term is increased one year to 72 months; when the loan term is increased to 84 months the delinquency rate doubles to 1.8%. The compounding is not as dramatic for prime loans though the trend is still present. Delinquency rates were 3.4% for 60-month terms, 5.0% for 72-month terms, and 7.1% for 84-month terms, according to the study. Jason Laky, SVP of automotive & consumer lending at TransUnion, said that 70% of new auto loans involved terms greater than 60 months, while only five years earlier, 50% of loans had terms longer than 60 months. Industry experts agree, telling Credit Union Journal they have also seen loan term averages increase around a month every year.

Soccer Moms, Car-Based SUVs, Truck-Based SUVs, And CAFE Standards -- July 19, 2016 -- John Kemp posted this graphic today. Idle comments regarding the graphic above:

  • minivans are falling out of favor; gradually disappearing; folks who like minivans are probably transitioning to car-based SUVS
  • car-based SUVs are increasing in sales whereas minivans are decreasing; the number of truck-based SUVs seems to have plateaued over the past five or six years
  • pickups -- interestingly enough -- have actually been decreasing in sales in the past five years compared to the late 1990s / early 2000s
  • if the US "manufacturing economy," housing, general economy picks up, we might see an increase in the sales of pickups, but it certainly looks like the soccer moms are calling the shots -- having moved to car-based SUVs over the past ten years

CAFE Standards: Now, some thoughts on car-based SUVs, truck-based SUVs, and CAFE standards and how the federal government influences manufacturing patterns (and buying patterns).  Note that "car-based SUVs" and "truck-based SUVs" are differentiated. Hold that thought.

The surprising reason more cars broke down in 2015 than ever before -  According to the American Automobile Association (AAA), more cars broke down on the side of the road in 2015 than in any other year. In fact, AAA says dead batteries, flat tires and key problems contributed to 32 million drivers needing to pull over and call for assistance. You might think your high-tech car is better than that old-school Honda sitting in your neighbor’s driveway, but a new AAA study reveals technology in newer cars is one of the main reasons why so many people are left stranded. The AAA reports that cars five years old and younger experience more key-related issues compared to older cars. The problem is that keyless entry remotes (also known as fobs), continue to transmit signals to the receiver when left in the car. Over time, this can drain your battery, leaving you out of luck the next time you try to start your car. In addition, despite the advances in technology, AAA said they responded to four million calls in 2015 from drivers locked out of their vehicles. Another huge issue centers around spare tires. If you have a newer car, you might’ve noticed that it didn’t come with a spare tire. In recent years, standard car features have changed, and many manufactures have nixed the extra tire to reduce vehicle weight and boost fuel economy. Instead, the AAA reports, about 36% of 2015 models came with a run-flat tire or a tire-inflation kit. These kits can mend flats, but they don’t fix the tire if there is damage to the sidewall or a full blowout. With no spare, these situations will require the driver to call a tow truck — which in some cases could cost you more than just buying a spare tire.

Farmers Are Still Fighting For The Right To Fix Their Own Tractors - An article in Modern Farmer yesterday reminded me of the plight of farmers to keep the right to fix their own machinery. Gearheads managed to get this right protected last year, but, right now, farmers are still under John Deere’s big green and yellow thumb. In case you’ve blocked it from your memory, there was a struggle last year between people who wanted to work, modify, or tinker with the cars they own, and the Alliance of Automobile Manufacturers—a lobbying group that represents numerous carmakers including BMW, For, General Motors and more. The Alliance spoke out against an exemption in the Digital Millennium Copyright Act that would allow owners to work on their own cars. The argument was, essentially, that modern cars run computer code that the owner doesn’t really own, and so that means owners shouldn’t be allowed to work on their cars. As the Alliance said: “vehicles are so intertwined that they shouldn’t (for security and safety and environmental reasons) be allowed to be tinkered with.”Of course, this is bullshit, and happily the exemption was upheld, but not, it seems for farm equipment. John Deere gets special mention there because they’re the worst offenders in this fight, redefining tractor ownership in a letter to the Copyright Office as:“... the vehicle owner receives an implied license for the life of the vehicle, subject to any warranty limitations, disclaimers, or contractual limitations...”That doesn’t exactly sound like “ownership” to me. Also, John Deere also made this insane justification for laws to keep tractor owners from working on their own machines: John Deere even argued that letting people modify car computer systems will result in them pirating music through the on-board entertainment system ...

Philadelphia Fed Business Outlook Survey July 21, 2016: The Philly Fed is a widely read report for leading indications on the manufacturing sector but maybe they should consider offering a composite headline index as well as the general business conditions index. The latter, based not on a composite of components but the answer to a single subjective question, came in at minus 2.9 for July in contrast, for a second month in a row, to readings in the body of the report. New orders jumped to 11.8 from two months of prior contraction in improvement confirmed by backlog orders which surged from minus 12.6 to plus 1.9 for the first positive reading in a year. Strength in orders is the key and it points to higher shipments and employment ahead. And shipments this month are already active, at plus 6.3 for the first positive reading since March. Employment, however, remains weak, at minus 1.6 with the workweek also still soft, at minus 3.6 which however is an improvement from recent readings. Price data are soft with inputs showing less pressure and selling prices dead flat. The headline in this report has given two straight head fakes, showing strength in June that was not supported by the details and now weakness in what looks to be a very strong July. Taken all together, this report is offering hints of life for a factory sector that, held back by weak exports and trouble in the energy sector, has been no better than flat this year.

Philly Fed Manufacturing Survey showed Contraction in July --From the Philly Fed: July 2016 Manufacturing Business Outlook Survey Manufacturing activity in the region fell slightly in July, according to firms responding to this month’s Manufacturing Business Outlook Survey. Although the indicator for current general activity turned negative, indicators for new orders and shipments were positive. Employment was flat at the reporting firms this month.... The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from 4.7 in June to -2.9 this month. For nine of the past 11 months, this diffusion index has been negative ...The survey’s broad indicator of future growth moved slightly higher this month: The diffusion index for future general activity increased 4 points to 33.7, which is close to its average of 35.9 during the past five years. This was below the consensus forecast of a reading of 5.0 for July. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The yellow line is an average of the NY Fed (Empire State) and Philly Fed surveys through July. The ISM and total Fed surveys are through June. The average of the Empire State and Philly Fed surveys was slightly negative in July (yellow).  This suggests the ISM survey will probably indicate slower expansion this month.

July 2016 Philly Fed Manufacturing Survey Now Slightly In Contraction. However, Key Elements Significantly Improved.: The Philly Fed Business Outlook Survey fell into contraction. Key elements significantly improved and returned to expansion. The only other manufacturing survey released so far for this month was in expansion. This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently. The index declined from +4.7 to -2.9. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) 0.0 to 9.0 (consensus +5.0). Manufacturing activity in the region fell slightly in July, according to firms responding to this month's Manufacturing Business Outlook Survey. Although the indicator for current general activity turned negative, indicators for new orders and shipments were positive. Employment was flat at the reporting firms this month. Firms reported higher prices paid for materials and other inputs in July, but prices received for manufactured goods were relatively steady. The survey's index of future activity improved slightly, and firms expect growth in new orders and shipments over the next six months. The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, fell from 4.7 in June to -2.9 this month. For nine of the past 11 months, this diffusion index has been negative (see Chart 1). Twenty-two percent of the firms reported an increase in activity, 3 points lower than last month, and the percent of firms that reported decreases rose from 20 to 25. Fifty-one percent of the firms reported steady activity this month, similar to the share that reported steady activity last month.

Philly Fed Slumps To 6-Month Lows As National Activity Index Jumps To 6-Month Highs - In the first wave of macro data today, initial claims beat expectations, dropping to 253k near record lows (but remains wildly divergent from tumbling consumer confidence). Following June's rebound in Philly Fed, July missed expectations tumbling to six-month lows, back to a contractionary -2.9 (against expectations of a flat print of +4.5). Finally, Chicago Fed's National Activity Index surged unexpectedly to six-month highs (+0.16 vs -0.20 exp) but the smoother 3-month avg remains in contraction for its 17th straight month. If the jobs market is so awesome, judging by initial claims near historic lows, then why is US consumer's economic confidence collapsing? Philly Fed's bounce into the green in June is over with July printing back to its lowest since Jan 2016... Which is odd given that almost all the subindices improved... And finally The Chicago Fed's National Activity Index surged back into positive territory (the highest since January) but the 3-month average remains in negative territory for 17 months...

PMI Manufacturing Index Flash July 22, 2016: Highlights New orders were the strength of yesterday's Philly Fed report and are also the strength of the manufacturing PMI where the July flash is 1 point over expectations, at 52.9 and the best showing in 9 months, since October last year. The rise in orders is also the strongest in 9 months and came despite only marginal strength in export orders. Gains in output and employment are also positives this month for the PMI. But inventory management remains defensive with stocks of both inputs and finished goods both falling. Respondents also reported negatives, citing weakness in the energy sector and uncertainty tied to the presidential election. Input prices are showing welcome pressure, reflecting rising steel prices and salaries, but selling prices remain flat. The rise in orders is a key positive in this report, pointing to the domestic resilience of the nation's consumer-based economy and hinting perhaps at second-half acceleration for a factory sector that has been no better than flat.

Weekly Initial Unemployment Claims declined to 253,000 -- The DOL reportedIn the week ending July 16, the advance figure for seasonally adjusted initial claims was 253,000, a decrease of 1,000 from the previous week's unrevised level of 254,000. The 4-week moving average was 257,750, a decrease of 1,250 from the previous week's unrevised average of 259,000. There were no special factors impacting this week's initial claims. This marks 72 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.

Teen Employment Surges In June: Highest Gains Since 2013: The number of teenagers finding summer jobs surged in June, as employment among 16- to 19-year-olds increased by 691,000. It was the biggest June job gain for teens since 2014. The 691,000 employment gains recorded last month represents a 13 percent improvement over June 2015, when 609,000 teenagers found employment. The Challenger analysis is based on the latest non-seasonally adjusted data released earlier this month by the U.S. Bureau of Labor Statistics.The June surge came on the heels of weak hiring among teens in May, which saw the fewest employment gains for 16- to 19-year-olds (156,000) since 2011. However, summer hiring is now outpacing 2015. Through the first two months of the three-month summer hiring period, employers have hired 847,000 teenagers, a 7.1 percent increase from a year ago, when teen job gains in May and June totaled 791,000. Overall teen employment reached a non-seasonally adjusted 5,548,000 in June. That is up 4.0 percent from a year ago and represents the highest June employment level for this age group since 2009, when 5,608,000 teenagers were employed. "Teenagers may be benefitting from a resurgence in the fast food industry. Unlike traditional retailers, which appear to be closing locations as more people shop online, food establishments are expanding. The Sonic drive-in chain added 16 new locations in the quarter that ended May 31. Moreover, there has been an explosion of new restaurants offering healthier alternatives to traditional fast food fare,"

What are young men doing? -- Right now, I’m gathering facts about the possible mechanisms at play, beginning with a hard look at time-use by young men with less than a four-year degree. In the 2000s, employment rates for this group dropped sharply – more than in any other group. We have determined that, in general, they are not going back to school or switching careers, so what are they doing with their time? The hours that they are not working have been replaced almost one for one with leisure time. Seventy-five percent of this new leisure time falls into one category: video games. The average low-skilled, unemployed man in this group plays video games an average of 12, and sometimes upwards of 30 hours per week. This change marks a relatively major shift that makes me question its effect on their attachment to the labor market. To answer that question, I researched what fraction of these unemployed gamers from 2000 were also idle the previous year. A staggering 22% – almost one quarter – of unemployed young men did not work the previous year either. These individuals are living with parents or relatives, and happiness surveys actually indicate that they quite content compared to their peers, making it hard to argue that some sort of constraint, like they are miserable because they can’t find a job, is causing them to play video games.

What if There Just Aren’t Enough Jobs to Go Around? -- Despite steady job growth over the past six years, the U.S. labor market—by some accounts—has become a stagnant place where fewer people switch jobs and workers linger in the same roles for longer. Recent research exploring the causes of this declining labor-market dynamism has focused on supply restrictions, such as state-based occupational licensing regimes, which make it harder for licensed workers to relocate across state borders, or prohibitively high rents in job-rich cities, which impede mobility. A drop in labor-market fluidity reduces overall employment rates, affecting younger and less-educated workers most of all, research by economists shows. White House economist Jason Furman has also cited occupational licensing as a barrier to job fluidity.A new paper says the problem is not supply. It’s that firms just don’t have enough demand for labor.That’s the key finding from “Declining Entrepreneurship, Labor Mobility and Business Dynamism: A Demand-Side Approach,” by economist Marshall Steinbaum and Mike Konczal, both of the left-leaning Roosevelt Institute. The authors arrive at that conclusion by looking at the correlation between earnings growth and changes in mobility for 741 metropolitan areas between 2000 and 2015. If factors like housing restrictions—picture a San Francisco one-bedroom now going for $4,000 a month—were responsible for declining mobility, we would expect San Franciscans to have seen their mobility plummet, and earnings rise in response to scarcity. Instead, San Francisco’s healthy job market has kept mobility and earnings high, thanks to strong demand for workers.  Other areas with high demand for workers—think fracking hubs like Williston, N.D.—also had high mobility and high earnings growth over the period studied.

BLS: Unemployment Rates stable in 43 states in June - From the BLS: Regional and State Employment and Unemployment Summary Unemployment rates were significantly higher in June in 6 states, lower in 1 state, and stable in 43 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today.... South Dakota and New Hampshire had the lowest jobless rates in June, 2.7 percent and 2.8 percent, respectively. Alaska had the highest unemployment rate, 6.7 percent. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska, at 6.7%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only seven states and D.C are at or above 6% (dark blue). The states at or above 6% are Alaska, Nevada, Illinois, Louisiana, New Mexico, Alabama and West Virginia.

Unemployment is Low in Key Swing States -- Republican presidential nominee Donald Trump has premised his campaign on the idea that the American economy is broken and jobs are hard to find. That could be a tough sell in key swing states where the unemployment rate is noticeably lower now than the national average. In Colorado and Virginia, the unemployment rate was 3.7% in June, well below the national average of 4.9%, the Labor Department said Friday. In Florida, another important swing state, it’s at 4.7%, down from 5.3% a year ago. New Hampshire, another state that can go either way in presidential election years, clocked the second-lowest rate in the country last month, at 2.8%. North Carolina, another important swing state, has an unemployment rate on par with the national average. But it’s seen one of the largest drops in joblessness in the country over the past year, with its unemployment rate falling 0.9 percentage point from 5.8% in June 2015. The robust or rapidly improving economies in these important swing states could be contributing to the lead that presumptive Democratic nominee Hillary Clinton holds over Trump in those four states, according to Wall Street Journal/NBC News/Marist polls from earlier this month. To be sure, these four states also have large populations of Hispanic or African-American voters, who typically vote Democratic. But the polls also show Mr. Trump faring worse in Florida and Virginia among his core group of supporters, whites without four-year college degrees, than his 2012 predecessor, Mitt Romney. Mr. Trump’s message of economic grievance may be better received in formerly industrial states like Pennsylvania, where unemployment climbed to 5.6% in June, up from 5.1% in June 2015. He may also find more takers in states feeling the brunt of low energy prices, like Wyoming, where the unemployment rate rose to 5.7% in June from 4.2% in June 2015.

June state employment numbers are generally positive, but policymakers still have work to do --The Regional and State Employment and Unemployment Report, released today by the Bureau of Labor Statistics, was generally positive—a nice reversal from the more negative tenor of the last few state jobs reports that suggests the slowdown in job growth in April and May might have only been temporary. Over the past 3 months, a majority of states have added jobs, and state unemployment rates have mostly held steady or declined. Most states where the unemployment rate rose substantially also saw growth in their labor force, giving hope that at least some of the increase in unemployment could be from discouraged job-seekers restarting their search.  From March to June, 35 states and the District of Columbia added jobs, with Florida (+0.9 percent), California (+0.8 percent), Delaware (+0.7 percent), Massachusetts (+0.7 percent), and South Dakota (+0.7 percent) posting the largest percentage gains. The regional diversity of these states is instructive: job growth was fairly widespread throughout the country with every Census region showing gains, except in the East South Central region (Kentucky, Tennessee, Alabama, and Mississippi) where the job total declined slightly. Of the 15 states where job numbers did decline since March, only Wyoming (-1.4 percent), Mississippi (-0.9 percent), North Dakota (-0.4 percent), and Rhode Island (-0.4 percent) had sizable reductions.From March to June, unemployment fell in 24 states and the District of Columbia. Kentucky (-0.6 percentage points), North Carolina (-0.6 percentage points), West Virginia (-0.5 percentage points), and the District of Columbia had the largest reductions in unemployment. The unemployment rate rose in 21 states, with the biggest jumps occurring in Colorado (+0.8 percentage points), New Jersey (+0.7 percentage points), Pennsylvania (+0.7 percentage points), and Nevada (+0.6 percentage points). Of these four, the labor force expanded in all but New Jersey.

Bill That Lets Bosses Fire Single Women For Getting Pregnant Gains Steam: -- In wake of the U.S. Supreme Court decision in favor of same-sex marriage, Republicans are pushing legislation that aims to protect Americans who oppose these unions on religious grounds. But critics say the language is so broad, the bill creates a license to discriminate that would let employers fire women for getting pregnant outside of wedlock. The First Amendment Defense Act prohibits the federal government from taking discriminatory action against a person -- which is defined to include for-profit corporations -- acting in accordance with a religious belief that favors so-called traditional marriage. This means the feds can't revoke a nonprofit's tax-exempt status or end a company's federal contract over this issue. The bill specifically protects those who believe that marriage is between "one man and one woman" or that "sexual relations are properly reserved to such a marriage." Ian Thompson, a legislative representative at the American Civil Liberties Union, said that in addition to targeting lesbian, gay, bisexual and transgender people, the bill "clearly encompasses discrimination against single mothers" and would hobble the ability of the Equal Employment Opportunity Commission (EEOC), the federal body that protects women from sex-based discrimination, to act. This scenario isn't merely hypothetical. There are a number of recent cases where religious schools have fired unwed teachers for becoming pregnant. A Montana Catholic school teacher who was fired for having a baby out of wedlock, for example, filed a discrimination charge last year with the EEOC. While the U.S. Supreme Court has recognized a ministerial exception to employment discrimination laws, that exception is somewhat limited, not necessarily covering educators employed by Catholic schools who teach about exclusively secular subjects.

“Women’s work” and the gender pay gap: How discrimination, societal norms, and other forces affect women’s occupational choices—and their pay - Summary:

  • What this report finds: Women are paid 79 cents for every dollar paid to men—despite the fact that over the last several decades millions more women have joined the workforce and made huge gains in their educational attainment. Too often it is assumed that this pay gap is not evidence of discrimination, but is instead a statistical artifact of failing to adjust for factors that could drive earnings differences between men and women. However, these factors—particularly occupational differences between women and men—are themselves often affected by gender bias. For example, by the time a woman earns her first dollar, her occupational choice is the culmination of years of education, guidance by mentors, expectations set by those who raised her, hiring practices of firms, and widespread norms and expectations about work–family balance held by employers, co-workers, and society. In other words, even though women disproportionately enter lower-paid, female-dominated occupations, this decision is shaped by discrimination, societal norms, and other forces beyond women’s control.
  • Why it matters, and how to fix it: The gender wage gap is real—and hurts women across the board by suppressing their earnings and making it harder to balance work and family. Serious attempts to understand the gender wage gap should not include shifting the blame to women for not earning more. Rather, these attempts should examine where our economy provides unequal opportunities for women at every point of their education, training, and career choices.

Occupational Licensing Doesn’t Seem to Restrict Nurses’ Mobility -- For nurses, teachers, barbers, and others licensed professions, a license can be both a blessing and a curse. Licensing has been shown to raise some workers’ pay by restricting new entrants, but it can also limit mobility, since some licenses don’t transfer automatically from one state to another.For economists studying the phenomenon, though, the (bipartisan) consensus of late is that licensing is a major labor-market buzzkill. Standard economic theory and a growing body of research says it hinders mobility, compared with unlicensed professions. That has outsize effects on groups such as military spouses, who move frequently and somewhat involuntarily.That’s why the White House and the Heritage Foundation are championing deregulation of currently licensed professions, since the share of workers holding a license grew to roughly 25% in 2015 from around 5% in the 1950s, according to new figures from the Labor Department. But when economists Christina DePasquale and Kevin Stange studied the effect of a multi-state compact allowing nurses to work across state borders, they found “no effect…on a variety of labor market outcomes of nurses such as labor force participation, employment levels, hours worked, earnings, and likelihood of working across state lines,” according to their recently released paper. In other words, even with the licensing hassle out of the way, nurses weren’t moving to high-demand states, working across borders, putting in longer hours or commanding higher wages.

 In Advanced Economies, Two-Thirds of Population Have Seen Incomes Stagnate, Study Shows - WSJ: Across 25 of the world’s advanced economies, about two-thirds of the population—more than half a billion people—earn the same as or less than their peers did a decade ago. Between 540 million and 580 million people in 2014 had lower or stagnant incomes than similarly situated people in 2005, according to a new study from the McKinsey Global Institute, the research arm of the global consulting firm McKinsey & Co. The finding presents a break from the trend in advanced economies during the post-World War II era when, throughout twists and turns, most families ended up improving on the standard of living of their predecessors. “Prior to the financial crisis, all but 2% of people in the Western world ended up better off than people like them 10 years ago,” said Richard Dobbs, a McKinsey senior partner and one of the report’s authors. “But the world changes when you get a cohort of people who are no longer advancing.” The study highlights the extent of the fallout from the financial bubble and global crisis it left behind. Incomes a decade ago were boosted by that unsustainable bubble, and the ensuing financial crisis plunged the global economy into a recession from which it has yet to fully recover. The damage helps explain why many voters are rejecting the established political order, as seen in the U.K.’s vote to exit the European Union, in the embrace of nationalist political parties, or the hunger for candidates removed from the political establishment as seen in the Republican and Democratic presidential races in the U.S. McKinsey surveyed households in the U.K., France and the U.S. In these countries, 30% to 40% of people said their incomes hadn’t advanced, indicating that even if transfers and taxes have allowed some families to improve statistically, many still yearn for higher incomes. These households expressed sharply negative views about trade and immigration.

Exclusive: U.S. and Chinese labor groups collaborated before China Wal-Mart strikes | Reuters: OUR Walmart, the American worker group, has taken the unusual step of collaborating with a group of Chinese Wal-Mart workers trying to fight work schedule changes and low wages. OUR Walmart and the Wal-Mart Chinese Workers Association (WCWA) discussed strategy for recent strikes in China on a Skype call last month using a translator, both groups told Reuters. "They asked for our support," said Cantare Davunt, OUR Wal-Mart's leader from Minnesota, who participated in the Skype call. The U.S. organization is keen to maintain the relationship with the WCWA and believes such partnerships can boost the clout of the retailer’s global workforce. "We can use this to collectively press Wal-Mart on issues," said Dan Schlademan, co-director of OUR Walmart. Wal-Mart declined to comment on the collaboration among worker groups in both countries, though the company did address the scheduling dispute in China. OUR Wal-Mart - which last year split from the United Food & Commercial Workers International Union (UFCW) over strategic direction - says it has the support of more than 100,000 Wal-Mart workers. The retailer employs 1.5 million workers in the U.S. and 2.3 million worldwide. The U.S. and China groups are discussing joint strategies to address challenges that workers in both countries face, including work schedule changes, Schlademan said.

The Myth of Upward Mobility in America | Alternet: Soaring inequality in America has been accompanied by a plummet in upward mobility since the early 1980s, with those who earn modest incomes in their first jobs likely to remain trapped in low-wage work for decades, a troubling paper concludes.. Published in May by economists Michael D. Carr and Emily E. Wiemers, who hail from the University of Massachusetts in Boston, the study is based on data from the Census Bureau’s Survey of Income and Program Participation and examines the years 1981 to 2008. “Though increasing through much of the 20th century, we show that intragenerational mobility has been declining since the early 1980s across a variety of rank-based measures,” the scholars write. “Mobility has declined for both men and women and among workers of all levels of education, with the largest declines among college-educated workers. In the presence of increasing inequality, falling mobility implies that as the rungs of the ladder have moved father apart, moving between them has become more difficult.” The paper, published by the Washington Center for Economic Growth, concludes that this decline is particularly pronounced for the so-called middle class. “One striking feature is the decline in upward mobility among middle-class workers, even those with a college degree," the scholars write. “Across the distribution of educational attainment, the likelihood of moving to the top deciles of the earnings distribution for workers who start their career in the middle of the earnings distribution has declined by approximately 20 percent since the early 1980s.”

An expert on fighting poverty makes the case against a universal basic income - Vox: There are plenty of people in Washington, DC, advocating on behalf of corporate industries, or well-endowed universities, or the idiosyncratic interests of wealthy donors. A much smaller number spent their days monomaniacally focused on addressing the needs of the poor. But among the latter is Robert Greenstein, president and founder of the Center on Budget and Policy Priorities. Since 1981, Greenstein and his team have been at the center of countless debates over food stamps, welfare reform, housing assistance, the earned income tax credit, Medicaid, and more. Most recently, they helped convince Congress to make permanent expansions of refundable tax credits for the poor last year. So it was somewhat jarring when Greenstein came out against the idea of a universal basic income — an idea that many commentators, myself included, have suggested could end poverty altogether. In an essay posted on the CBPP website, Greenstein argued that adding a basic income on top of the existing safety net would require tax increases that are simply not politically viable. He also argued that using basic income to replace the safety net would actually increase poverty, because the spending wouldn’t be as well-targeted. It’s a thoughtful, important argument that UBI fans ought to take seriously. I recently called Greenstein to hear about his concerns with UBI, why means-tested programs don’t necessarily do worse than universal ones, and whether Americans will ever take action to help poor people who can't find work. A transcript, lightly edited for clarity and length, follows.

How Americans view the Black Lives Matter movement - Pew - The Black Lives Matter movement, which came to national prominence in the wake of the 2014 police shooting of an unarmed black 18-year-old in Ferguson, Missouri, continues to gain attention following other incidents involving the deaths of black Americans during encounters with the police. A recent Pew Research Center survey conducted Feb. 29-May 8, 2016, found that general awareness of Black Lives Matter is widespread among black and white U.S. adults, but attitudes about the movement vary considerably between groups. Here are some key findings about Americans’ views of the Black Lives Matter movement:

  • Roughly four-in-ten Americans support the Black Lives Matter movement. All told, 43% support the movement, including 18% who strongly support it. About one-in-five Americans (22%) oppose the movement, and a sizable share (30%) said they have not heard anything about the Black Lives Matter movement or did not offer an opinion.
  • Among whites, Democrats and those younger than 30 are particularly supportive of Black Lives Matter. White Democrats are about as likely as blacks to express at least some support for the Black Lives Matter movement – about two-thirds (64%) do, compared with 42% of white independents and 20% of white Republicans.
  • About a third of Americans familiar with Black Lives Matter say they don’t understand the goals of the movement. Roughly two-thirds (64%) of those who have heard at least a little about Black Lives Matter say they understand the movement’s goals very or fairly well.
  • Blacks are more likely than whites to say the Black Lives Matter movement will be effective in the long run. About six-in-ten blacks (59%) believe that Black Lives Matter will ultimately be effective in bringing about racial equality. Whites are about evenly divided

Racism is the Status Quo: Relinquishing the Reigns of White Power -   Three days after the murder of Alton Sterling, two days after the murder of Philando Castile, one day after the sniper attacks on police in Dallas, four hundred plus years after the start of the trans-continental slave trade, we come together, in the highest state of white privilege--a white male college student and his white female former teacher--at a coffee shop in Portland, Oregon, computer screens ablaze, to discuss how we might respond to the current political moment in a unified response that will help other whites to own, understand, and relinquish our white power in favor of a revolutionized society. Perhaps due to privilege, perhaps due to never being pulled over and harassed for a busted tail-light, never being followed in a store (even when I, the teacher, really was stealing at the age of 12), never being questioned and certainly never being beaten or detained for crimes we did not commit--perhaps due to these factors, or perhaps due to the tendency of our European ancestors to dream of utopian visions that we never fulfill, we have the audacity or the pretense to believe that this other society is still possible.

How California Targets Poor People of Color for Profit -- Not everyone who goes through traffic court is there for drunk driving or other dangerous behavior. Many are there for simply being too poor. Before a Minnesota police officer fatally shot him, 32-year-old Black man Philando Castile was pulled over 31 times and slapped with 63 traffic charges. Several municipalities, like Ferguson, Missouri, have debtors’ prisons that target and keep working-class people of color in a perpetual cycle of debt to finance their courts. California cities are no exception. A report by the civil legal aid group Lawyer’s Committee for Civil Rights of the San Francisco Bay Area (LCCR) shows that rates of driver’s license suspensions due to unpaid traffic fines are significantly higher for Blacks and Latinos, particularly those in lower-income neighborhoods.  If someone fails to appear (“FTA”) in court for a traffic violation or fails to pay (“FTP”) an infraction ticket or drives with a suspended license, they are committing a misdemeanor in California. This can occur even if the license suspension results from inability to pay a fine. California law allows police to “arrest, book, and jail people for traffic court warrants or the criminal misdemeanor offense of driving with a suspended license” when those people cannot afford to pay a ticket fine.  Conviction can lead to six months in jail, several years of probation, and exorbitant fees. Once those infractions are in traffic court, huge fees are tacked on. The fees include state penalty assessment, conviction assessment, and others. These fees can increase a US$100 fine to US$490 or, if the first payment deadline is missed, as high as US$815. In looking at zip code and county data, the LCCR report reveals significant correlations between household income, race, and rates of license suspensions.

45-Second Drill: Illinois budget deficit swells to nearly $8 billion - When Gov. Bruce Rauner took office, he inherited an Illinois budget deficit of $1.6 billion that had been signed into law by his predecessor, Pat Quinn. No sooner had Rauner worked out a deal with the Democrats in the General Assembly to fill that hole than arguing began over how to fill a much bigger shortfall in a Fiscal Year 2016 budget. In May 2015, Democrats passed a budget that Rauner said was $4 billion out of balance. Rauner vetoed almost all of it and said he wouldn’t negotiate until parts of his reform agenda became law. Thus Illinois entered what would become its first-ever budget year without a budget. Eight months after rejecting the Democrats’ budget as unbalanced, Rauner proposed a 2017 budget that was $3.5 billion out of balance. In May, he vowed to veto a budget passed by the Illinois House that was $7 billion out of balance. And on June 30, Rauner put his signature on a stopgap spending plan that, we have now learned, is unbalanced by nearly $8 billion. Yet our social service network continues to deteriorate and public universities have no sense of what their futures hold. Perhaps in December, with the six-month stopgap plan about to expire, we’ll get to boost the video above to a full minute with the next step in this absurd stretch of non-governance in Illinois.

Preliminary budget for Cook County indicates possible tax hikes ahead – Cook County has released the preliminary forecast for its 2017 fiscal year budget, signaling that tough times and tax hikes may lie ahead for the county. Toni Preckwinkle, Cook County board president, announced the preliminary budget, which was scheduled to be discussed at a July 19 public hearing. In the announcement, Preckwinkle said there is a projected operating shortfall for the 2017 fiscal year of $174.3 million, which can be attributed to the stall in Illinois state budget, legacy debts and increased technology spending for old and outdated systems. The 2016 fiscal year budget will have a shortfall of $48 million, which the county plans to close through spending reductions. Part of the deficit is coming from about $53.1 million owed by the state to the county, with an additional $57.4 million owed to the Cook County Health and Hospitals System from fiscal year 2016. While Preckwinkle didn’t indicate how Cook County plans to recover the necessary funding, a tax increase could be on the way for the county. “Good government requires revenues and spending to be equal,” . “When there is a deficit, the appropriate responses are to raise revenue - usually taxes - or cut spending, or a combination of both. And, we’ve seen both in Cook County. Recently, Preckwinkle did a lot of cutting early on, and she’s also raised the sales tax rate.” Raising taxes in Cook County could be detrimental, as there have been high increases in some areas that could keep businesses away.

Public Higher Ed: State Support Down, Tuition Up: State and local financial support for higher education is falling, and the share of costs covered by student tuition is rising. Perhaps not coincidentally the number of students enrolled in US public higher education is has fallen in the last few years. That's the evidence from the State Higher Education Executive Officers Association in it annual report, State Higher Education Finance 2015, released in April  The report notes: "In 2015, states invested $81.8 billion in higher education ... Local governments invested $9.1 billion from property tax revenue in 2015 primarily for local district community colleges." Here are some estimates over the last quarter-century, from 1990 to 2015, about the contributions of state and local spending on a per-student basis. The dollar figures are adjusted for inflation, so back in the early 1990s state and local spending on higher education was about $8,500 per student, but from 2011-2015 (despite a bump up in the last few years) it has been under $7,000 per student. Meanwhile, average tuition paid per student has more than doubled, from less than $3,000 back in the early 1990s to over $6,000 in 2015.Putting those two trends together, it's no surprise that the share of public higher spending covered by tuition is rising. Indeed, this figure shows that the share has nearly doubled, from 25% back in 1990 to approaching 50% at present.

How could a research university systematically improve undergraduate instruction? — Regular readers know that I have a bit of a bee in my bonnet about improving the quality of teaching and learning in universities like mine. I believe that instruction in research institutions is suboptimal. What I mean by suboptimal is something like “quite a bit less good than it could be without large investments of time energy and attention”. Why do I believe that it is suboptimal, given that we have neither the measures of learning nor an agreed benchmark against which to make judgments about optimality? Simply because i) I think teaching (by which I mean making students learn) is really pretty difficult and requires a complex set of skills that need to be learned and practiced; and ii) teachers in higher education receive little or no training, engage in little or no professional development specifically devoted to improving their skills as teachers, and are not hired for their skills as teachers. I also believe that we operate in a highly imperfect market that does not press us to become optimal, because one of the main revenue sources – state legislators – do not really understand our business so even when well-willed they are not very good trustees of the public interest, and the other – payers of tuition – are as much interested in prestige as they are in learning. I don’t mean any disrespect to plumbers in saying this, but I think that teaching is at least as difficult as plumbing, and in general it would be surprising if someone with no training in plumbing, and no professional development relating to plumbing, and who had not been hired for their skills as a plumber, turned out to be an optimally good plumber. I don’t see why teaching should be any different.

Scientific Education as a Cause of Political Stupidity - Archdruid Report - John Michael Greer - It so happens, for example, that engineers have contributed rather more to crackpot literature than most other professions. Hollow-earth theories, ancient-astronaut speculations, treatises arguing that the lost continent of Atlantis is located nearly anywhere on Earth except where Plato said it was—well, I could go on; engineers have written a really impressive share of the gaudier works in such fields. In my misspent youth, I used to collect such books as a source of imaginative entertainment, and when the jacket claimed the author was some kind of engineer, I knew I was in for a treat. I treated that as an interesting coincidence until I spent a couple of years working for a microfilming company in Seattle that was owned by a retired Boeing engineer. He was also a devout fundamentalist Christian and a young-Earth creationist; he’d written quite a bit of creationist literature, though I never heard that any of it was published except as densely typed photocopied handouts—and all of it displayed a very specific logic: given that the Earth was created by God on October 23, 4004 BCE, at 9:00 in the morning, how can we explain the things we find on Earth today? That is to say, he approached it as an engineering problem. Engineers are trained to figure out what works. Give them a problem, and they’ll beaver away until they find a solution—that’s their job, and the engineering profession has been around long enough, and had enough opportunities to refine its methods of education, that a training in engineering does a fine job of teaching you how to work from a problem to a solution. What it doesn’t teach you is how to question the problem. That’s why, to turn to another example, you get entire books that start from the assumption that the book of Ezekiel was about a UFO sighting and proceed to work out, in impressive detail, exactly what the UFO must have looked like, how it was powered, and so on. “But how do we know it was a UFO sighting in the first place?” is the one question that never really gets addressed.

Amazon To Issue Student Loans To New "Prime" Shoppers –- On the off chance the US didn't already have a big enough problem thanks to a staggering $1.3 trillion in student loans which contrary to White House' claims, are crushing an entire generation under their interest expense weight, earlier today none other than billionaire Jeff Bezos announced he was entering the student loan business, when Amazon unveiled a partnership with Wells Fargo in which the bank’s student-lending arm would offer interest-rate discounts to select Amazon shoppers. In Amazon's latest attempt to entice shoppers into its premium Prime program, Wells Fargo will cut half a percentage point from its interest rate on student loans to Amazon customers who pay for a "Prime Student" subscription, which provides the traditional Prime benefits such as free two-day shipping and access to movies, television shows and photo storage. The subscription-based service will cost $49 a year, half the regular Amazon Prime fee. Wells Fargo, Buffet's favorite US bank, will benefit by expanding the size of its student loan portfolio. The third largest U.S. bank by assets and the second-largest private student lender by origination volume, is interested in "meeting our customers where they are – and increasingly that is in the digital space," John Rasmussen, head of Wells Fargo's Personal Lending Group, said in a news release. The bank had $12.2 billion in student loans outstanding at the end of 2015, compared with $11.9 billion at the end of 2014. WSJ adds that Wells Fargo and Amazon have been in discussions for more than a year about the partnership, which is set to be announced and made available Thursday. As the WSJ muses, "the discount could be used to encourage more students to sign up for the Prime service." Incidentally, this is precisely what the offer is all about: to get a sticky annuity in the form of student borrowers who have to pay not only the student loan interest, but also an annual fee to Amazon.

Student Debt Helps, Not Harms, the U.S. Economy, White House Says - The White House just released a big report on student debt that contains all the familiar horrors about for-profit schools, indebted dropouts and students defaulting on their loans. But it has an interesting conclusion: That growing stack of $1.3 trillion in student debt is helping, not hurting, the U.S. economy. That conclusion is sure to rankle the many student advocates and special-interest groups—from real-estate agents to employers seeking new tax breaks for their young workers—that argue student debt is a big “drag” on the economy. (Hillary Clinton and Donald Trump have each decried the rise in student debt.) But the 77-page report from the White House Council of Economic Advisers backs up its claim with numerous charts and studies from economists and academics. The surge in student debt occurred largely on President Barack Obama’s watch, though it began several years earlier. Since early 2009, when Mr. Obama took office, student debt has nearly doubled, to about $1.3 trillion today, according to the New York Federal Reserve. The uptick owed much to the sorry state of the economy: During high unemployment, enrollment in college and graduate school typically rises, the White House notes. That’s because for workers, the so-called opportunity cost of going to school–the wages they lose from not working—is lower.  The White House report, as with other studies, largely divides student borrowers into two groups: Graduates and dropouts. The first group, the majority, are doing just fine, even though tend to carry the heaviest student-debt balances. They are among society’s highest earners, thanks in large part to the degrees that the debt financed. They’re well-positioned to buy homes, and they’re helping improve the nation’s productivity because they learned skills that employers need.The dropouts—a sizeable minority—are hardly doing fine. They’re making very little, they’re not buying homes and they’re damaging their credit. But because they are a contained group—there are about 7 million people in default on their federal student loans, out of a nation of more than 321 million—they don’t represent a systemic threat to the economy.

Should student loans operate like Fannie and Freddie? - AEI | Education Blog » AEIdeas: Republican presidential platforms have been of two minds when it comes to massive government loan programs. Regarding housing policy, the GOP has railed against loan programs that back private mortgages with taxpayer money because they distort markets. They also say these programs enrich private companies while exposing taxpayers to risk. The 2016 platform says Fannie Mae and Freddie Mac, which issue government guarantees on home mortgages, let “shareholders and executives reap huge profits while the taxpayers cover all losses.” Fair enough. So what does the platform say about the federal student loan program? That it should operate just like Fannie Mae and Freddie Mac. “The federal government should not be in the business of originating student loans… [and] private sector participation in student financing should be restored,” declares the platform. By “restored” they mean how the program used to operate, where private lenders made loans and the government guaranteed them. The platform is careful to say the government should not “originate” loans because it’s just fine if it guarantees them, like it does for mortgages through Fannie Mae and Freddie Mac. The 2012 platform spelled that part out more clearly: The federal government should not be in the business of originating student loans; however, it should serve as an insurance guarantor for the private sector as they offer loans to students. Proposing that the federal loan program would be better if it made loan guarantees like Fannie Mae and Freddie Mac in the same document that says Fannie Mae and Freddie Mac are a “corrupt business model” is not a winning agenda.

Government on Track to Forgive Up to $131,000 Each in Student Debt for Thousands of Doctors -  Many highly paid doctors are poised to get a very large windfall from the federal government. A program designed to ease the student-debt burden of teachers, public defenders and other modestly paid workers in the public sector is also set to help thousands of physicians, many of whom work for nonprofit hospitals. On average, recent medical-school graduates who enroll in the program will have roughly $131,000 in their student debt forgiven. That’s the finding of a study published in June by the Journal of General Internal Medicine. The peer-reviewed paper shows how new physicians are increasingly enrolling in a program known as Public Service Loan Forgiveness. The Wall Street Journal reported on the so-called “doctor’s loophole” last year.File this under “unintended consequences of congressional legislation.” When Congress created the program in 2007, the intent was to encourage young workers to seek government and nonprofit jobs that pay far less than what they’d get in the private sector. Think public defenders, teachers, librarians and, yes, a small share of primary-care physicians who forgo lucrative salaries to work in underserved areas. (Members of Congress are excluded, before you ask.) Payments are kept low under the program. Workers make 120 monthly payments—or 10 years’ worth, though the payments don’t have to be consecutive—toward their student loans. The payments are capped at 10% of discretionary income, defined as a borrower’s adjusted gross income minus 150% the federal poverty level. Any balance remaining after the 120 payments is forgiven, tax-free.

Calstrs Investments Gain 1.4% as Pension Fund Misses Goal - Calstrs seeks to earn 7.5 percent on average over time to avoid falling further behind in its obligations to 896,000 current and retired teachers and their families. The fund, which had $188.7 billion in assets as of June 30, averaged returns of 7.8 percent over the last three years, 7.7 percent over five years, 5.6 percent over 10 years and 7 percent over 20 years. “The Calstrs portfolio is designed for the long haul,” Chief Investment Officer Christopher Ailman said Tuesday in a statement. “We look at performance in terms of decades, not years. The decade of the 2010s has so far been a good performer, averaging 10.3 percent net.” U.S. pension funds have struggled to meet investing goals amid stock volatility, shrinking bond returns and slowing emerging-market growth at a time when retirees are living longer and health-care costs are rising. Long-term unfunded liabilities may ultimately need to be closed by higher employee withholding rates, reduced benefits or bigger taxpayer contributions. The California Public Employees’ Retirement System, the nation’s largest pension fund with $302 billion in assets, earned 0.6 percent for the latest fiscal year, according to figures released Monday. Calpers trails its assumed annualized 7.5 percent rate of return for the past three-, five-, 10-, 15- and 20-year periods. Calstrs and Calpers are bellwethers for public pension funds because of their size and investment approach. Both have pressured money managers to reduce fees while also using their influence as shareholders to lobby for environmental, social and corporate-governance reforms. Calstrs returned 4.8 percent in the previous fiscal year after gaining 19 percent in 2014. Over the last decade, the teacher system’s returns ranged from a 23 percent gain in 2011 to a 25 percent loss in 2009.

CalPERS Announces Preliminary Returns of 0.6% When Target is 7.5%  --Yves Smith - We posted last week on an OC Register story that anticipated, using CalPERS’ daily transaction reports, that the giant pension fund would show a loss for its fiscal year ended June 30.  Although we noted that the OC Register is a long-standing critic of CalPERS (and often on thin grounds), we were remiss in not recognizing that the daily transaction report included inflows and outflows from sources and uses other than investment activity, as in pay-ins from various participants and payouts to beneficiaries. So even though the preliminary report for the fiscal year just ended is still bad, it’s not as horrific as the OC Register expected. From CalPERS’ press release: The California Public Employees’ Retirement System (CalPERS) today reported a preliminary 0.61 percent net return on investments for the 12-month period that ended June 30, 2016. CalPERS assets at the end of the fiscal year stood at more than $295 billion and today stands at $302 billion. Mind you, this is relative to a return target of 7.5% and is footdragging about lowering it despite investment returns falling all over the world as a result of central bank polcies. As we noted earlier: CalPERS, like virtually all of its peers, is in deep denial about its fix. It still maintains a return target of 7.5% even though Governor Jerry Brown pressed for the pension system to lower it to a less unrealistic 6.5%. CalPERS’ response was to invent a Rube Goldberg process by which it would lower its targets in those years it beats its 7.5% return target over the next 20 years till it gets to 6.5%. That is an oversimplification but directionally correct.  And how did private equity do? Well, it returned 1.70%…which was better than public equities at a 3.38% loss. But the private equity and real estate values aren’t comparable to the public market values.

CalPERS Reported That It Made Less in Private Equity Than Its General Partners Did -- Yves Smith - CalPERS is a prototypical example of the Wall Street cliche, “Where are the customers’ yachts?,” except in the case of private equity, that saying needed to be updated to “megayachts”. As we mentioned earlier this week, CalPERS reported preliminary investment results for its fiscal year ended June, 30, 2016 of 0.6%.. Its press release stated that its private equity returns were 1.7% based on data through March 31.   While CalPERS is likely to report somewhat better final results from private equity, given that US stock indices were higher at the end of June than the end of March, it’s a given that the private equity firms did better than they did. Just consider management fees alone. Even though these are stated at the prototypical 2% of the “2 and 20” formula, most observers fail to understand that that 2% is not 2% of assets under management. For the first 5 years of the fund, it is 2% of the commitment amount. Remember that the general partner is in the process of buying companies and calls the capital from investors like CalPERS only when it needs it. After the investment period, the management fee level typically steps down. Most often it to a percentage of invested capital. The net result is that the management fees as a percent of assets under management are much higher than 2%. Oxford Professor Ludovic Phaillpou has estimated them at 4%, based on typical patterns of capital calls and distributions. And don’t forget that the management fees are paid in full whether they are paid directly by the limited partners or shifted onto the portfolio companies via management fee offsets.

Kansas raid on pensions only worsens problem - Forbes called it “fiscal snake oil.” The New York Times editorial board: “ruinous.” Late night talk show host Seth Meyers weighed in saying: “Even when you buy couch cleaner, they tell you to try it on a small patch of fabric first and that’s what happened here. Kansas was the small patch of fabric, and not only did the cleaner not work, the couch exploded.” Kansas is falling into deeper debt. State agencies are underfunded. Important early childhood education programs are under siege. And now, Kansas is borrowing from its pension fund to pay bills because the state refuses to change course on Gov. Sam Brownback’s disastrous 2012 tax policy. Brownback slashed taxes for the wealthy and business, saying it would be a “shot of adrenaline” to the heart of the economy.  That shot never came. What did were enormous budget deficits, deep cuts to services that residents of Kansas rely on, and negative job growth. What’s worse? Instead of admitting failure, the state’s elected officials continue to pile one bad financial decision on top of another. Since 2012, Kansas has seen its bond rating downgraded twice. By the end of the 2014 fiscal year, Kansas ran up a deficit of about $300 million and revenue collections fell short of expectations, triggering additional spending cuts.Brownback took millions from transportation, public health and youth education programs; increased taxes on cigarettes and liquor; and continued funneling highway and pension funds to temporarily fill budget holes. Brownback and the GOP-controlled Legislature are still chipping away at the state’s budget and infrastructure, as they desperately look for any possible way to salvage what is clearly a failed policy.  In the last general session of the Legislature, in a mockery of fiscal conservatism and responsibility, the House and Senate sent a bill to Gov. Brownback that allowed him to skip up to $100 million in payments to the Kansas Public Employee Retirement System (KPERS) to help balance the budget.

Social Security: If It Ain't Broke ... and It Ain't, and It Never Will Be -- Back in 2005, Paul Ryan asked then-Fed Chairman Alan Greenspan if there was a way to ensure the solvency of Social Security through the use of personal retirement accounts.  Greenspan's response was eye-opening. He told Ryan, "There's nothing to prevent the federal government from creating as much money as it wants and paying it to someone." He goes on to add that the real question is whether there is a system in place to ensure that the real assets are there for the benefits (money) to purchase. You can watch the exchange here in this short YouTube clip.  Watch Ryan's face when Greenspan is explaining and you will see that the whole explanation goes right over his head and, I'm sure, right over most people's heads. Yet what Greenspan said is not only the truth, but the real crux of the entire Social Security debate. (Or, false debate, I should say.) As Greenspan correctly states, there is no inability for the government to create the money ("it can create as much as it wants"), the only thing that we need to be focused on is whether or not we have sufficient quantities of the food, shelter, clothing, hospitals, medicine, medical care, maybe leisure activities, etc., that all people will need and consume in their retirement. Greenspan correctly explains that it's not about the money. "It's nice to have the money," he says, "but you need the assets."  The sad truth about Social Security is that the issue is constantly being falsely framed as one in which one day the government is going to run out of money. That's totally bogus.

California ObamaCare rates to rise 13% by 2017, more than 3 times the increase of last 2 years. -- Premiums for Californians’ Obamacare health coverage will rise by an average of 13.2% next year — more than three times the increase of the last two years and a jump that is bound to raise debate in an election year. The big hikes come after two years in which California officials had bragged that the program had helped insure hundreds of thousands people in the state while keeping costs moderately in check. Premiums in the insurance program called Covered California rose just 4% in 2016, after rising 4.2% in 2015 – the first year that exchange officials negotiated with insurers. On Tuesday, officials blamed next year’s premium hikes in the program that insures 1.4 million Californians on rising costs of medical care, including specialty drugs, and the end of a mechanism that held down rates for the first three years of Obamacare. Rates are expected to jump in other states, too, although complete details won’t be available until later this year. The federal exchange provides insurance under the Affordable Care Act in 38 states. California and a few other states operate their own exchanges An analysis of 14 metro areas that have already announced their 2017 premiums found an average jump of 11%. The changes ranged from a decrease of 14% in Providence, R.I., to an increase of 26% in Portland, Ore., according to the analysis by the nonpartisan Kaiser Family Foundation.The health law's next enrollment period begins a week before election day. Democratic presidential candidate Hillary Clinton wants to build on President Obama’s program, while Republican Donald Trump wants to repeal it.

Uncovered California: Why Millions Have Fallen Into Health Care Gaps -- Five years after the Affordable Care Act became law, and more than three years after California began moving aggressively to implement its provisions, upwards of three million Californians remain without health care coverage; and millions more, like Jacqueline, have basic coverage but continue to be grievously under-insured.This is the story of how so many Californians continue to fall through the ACA’s cracks.  Because her earnings left her well below 400 percent of the federal poverty line – the upper limit for insurance assistance under ACA — Jacqueline qualified for subsidies. These subsidies are calculated on a sliding scale according to a recipient’s income, so that people pay anywhere from two to 9.5 percent of their income. But, Jacqueline discovered, buying into a gold or silver plan would still cost more than she could afford. And so, despite the fact that she suffered from diabetes, high cholesterol, neuropathy and other ailments that required frequent doctors visits and a steady array of medications, she bought into a bronze plan. Such plans essentially shift the financial burden from now, when the monthly payment is due, to later – when the bills come in from doctors; prescriptions have to be paid for out of pocket. They cap out-of-pocket expenses at $6,850 for an individual and $13,700 for a family – which, for the working poor, represents a prohibitive outlay of cash. (A Cost Sharing Reduction Subsidies program can significantly reduce out-of-pocket maximums.) Take, for example, the story of Maria Can de Tec, a laundry worker at an Orange County convalescent hospital, who managed to buy subsidized Anthem-Blue Cross insurance for $151 per month but, following an emergency room visit for internal pains and bleeding, ended up with nearly a thousand dollars in bills that she is now having to pay off in $76.92 monthly installments.

UnitedHealth sees further losses for Obamacare insurance | Reuters: UnitedHealth Group Inc is still losing money on the individual insurance business created under U.S. President Barack Obama's national healthcare reform law due to customers' high medical costs, the company said on Tuesday. The largest U.S. health insurer said that it was booking $200 million in losses in the second quarter to cover higher-than-anticipated use of medical services by customers this year. UnitedHealth and other insurers have blamed those costs for their losses from the exchange business. The company said it expected the program, often called Obamacare, to reduce 2016 earnings by about $850 million, up from $475 million in 2015. Next year, it will exit most of the two dozen states where it sells individual insurance on the exchanges but still has plans to sell in Nevada, New York and Virginia. "We do not expect any meaningful financial exposure on 2017 business from the three or fewer exchange markets where we currently plan to remain," Chief Executive Officer Stephen Hemsley said on a conference call with analysts to discuss second-quarter financial results. Individual exchange customers this year have more severe chronic conditions, such as diabetes, chronic obstructive pulmonary disease and HIV, and attrition has been lower than expected, UnitedHealth said. It expects to end 2016 with 750,000 exchange members. The company said its other businesses, including pharmacy benefit management and the technology and consulting divisions, were strong, and it reported higher-than-expected earnings and revenue for the second quarter.

Big Cost Bump Ahead for Federal Long-Term Care Enrollees | Bloomberg BNA: — Enrollees in the optional Federal Long Term Care Insurance Program will face an 83 percent average increase in their premiums under a new contract between the Office of Personnel Management and John Hancock Life and Health Insurance Co., according to a group that represents federal employees and retirees. Richard G. Thissen, president of the National Active and Retired Federal Employees Association, said in a July 18 statement the increase “will come as a shock to the more than 274,000 federal employees and annuitants and their spouses” enrolled in the FLTCIP. “They are now faced with difficult choices—pay substantially higher premiums; reduce coverage substantially; or, in the worst case scenario, drop the coverage some have paid into for more than 14 years,” he said. Enrollees in the program face an average increase of $111 per month in long-term care premium costs, assuming they stay in the same plan, Thissen said. The situation “signals the need for change in the structure of the FLTCIP to prevent federal employees and retirees from ever facing such huge, unexpected increases again,” he said. About 10,000 of the 274,000 enrollees in FLTCIP won't face a premium increase, NARFE said. These enrollees are those:

  • who applied for coverage on or after new application rates were raised on Aug. 1, 2015;
  • whose age at purchase was 80 years or older;
  • currently enrolled in the FLTCIP’s Alternative Insurance Program; and
  • currently eligible for benefits or awaiting a decision pending a claim

Affordable Care Act premiums are lower than you think | Brookings Institution: Since the Affordable Care Act’s (ACA) health insurance marketplaces first took effect in 2014, news story after story has focused on premium increases for certain plans, in certain cities, or for certain individuals. Based on preliminary reports, premiums now appear set to rise by a substantial amount in 2017. What these individual data points miss, however, is that average premiums in the individual market actually dropped significantly upon implementation of the ACA, according to our new analysis, even while consumers got better coverage. In other words, people are getting more for less under the ACA. Covered California, that state’s marketplace, just announced premium increases averaging 13.2 percent. But even if premiums increase by the 10 or 15 percent overall that some are predicting for 2017, they will still be far lower than premiums otherwise would have been in the absence of the law. Moreover, this analysis does not include the effects of premium and cost-sharing subsidies that serve to make ACA marketplace plans more affordable for many people. While many stories of pronounced increases are simply the natural result of a law that works differently in every region and for people of different health statuses, it appears to be conventional wisdom that the ACA increased premiums in the individual, non-group insurance market, if only because it increased the quality and robustness of coverage. Indeed, many of the ACA’s new rules do have the anticipated effect of increasing premiums,  such as:

  • mandated guaranteed issue regardless of health status;
  • restrictions on the ability to charge different premiums based on anything besides age and smoking habits;
  • requirements for plans to offer certain benefits deemed “essential;”
  • limits on out-of-pocket costs an enrollee can pay for covered services in a given year; and
  • the elimination of any lifetime limits on coverage.

First look at the Republican platform on health care -- The Republican platform seems to have taken its cue from Speaker Paul Ryan’s A Better Way, at least when it comes to health policy. Not surprisingly, health care did not get top billing in the 66 page document. The economy, jobs, and taxes led off, with the Affordable Care Act (ACA), Medicare, and Medicaid relegated to later chapters.  Although there is not much text, those words are important.  Significantly, the platform takes up Medicare and Medicaid in the chapter on government reform. The document points out that Medicare’s long-term debt is in the trillions, and does not shrink from recommending actions that could set the program on a fiscally sound path.  That requires change that will not be welcomed by everyone, so the platform pushes off that change for a decade in the hope of not alienating the senior vote.  Nonetheless, the Republican Party has now officially endorsed Ryan’s premium support plan that can promote competition and more efficient health care.  Medicaid would be funded through a block grant to the states, who would have more control over how their health programs for the poor are run.  What the platform committee left out is a better idea for Medicaid advanced by Ryan’s plan: a per capita allotment, which would fine-tune the federal grant to states to better reflect the needs of their Medicaid populations.

CDC Official Exits Agency After Coca-Cola Connections Come to Light: A veteran leader within the Centers for Disease Control and Prevention announced her immediate departure from the agency on Thursday, two days after it came to light that she had been offering guidance to a leading Coca-Cola advocate who was seeking to influence world health authorities on sugar and beverage policy matters. In her role at CDC, Dr. Barbara Bowman, director of CDC's Division for Heart Disease and Stroke Prevention, has been involved in a range of health policy initiatives for the division charged with providing "public health leadership." She began her career at the CDC in 1992. Bowman's boss, Ursula Bauer, Director, National Center for Chronic Disease Prevention and Health Promotion, sent an email to staff members after my June 28 story in this blog revealed the Coca-Cola connections. In that email, she confirmed the accuracy of the report, and while she defended Bowman's actions, she said the "perception that some readers may take from the article is not ideal." She also warned employees to avoid similar actions, saying the situation "serves as an important reminder of the old adage that if we don't want to see it on the front page of the newspaper then we shouldn't do it." Bowman's exit was announced through internal emails. Bowman told colleagues in a CDC email sent Thursday that she had decided to retire "late last month." She made no reference to the revelations about her connections with Coca-Cola or any other concerns.

An Update on Costs of End-of-Life Care - For those interested in the health care costs in end-of-life care, Medicare data are the obvious place to look.Of the 2.6 million people who died in the U.S. in 2014,  2.1 million, or eight out of 10, were people on Medicare, making Medicare the largest insurer of medical care provided at the end of life. Spending on Medicare beneficiaries in their last year of life accounts for about 25% of total Medicare spending on beneficiaries age 65 or older." Economists make this point at the start of their short "data note" entitled "Medicare Spending at the End of Life: A Snapshot of Beneficiaries Who Died in 2014 and the Cost of Their Care" (July 2016, published by the Kaiser Family Foundation). " Average health care spending for Medicare recipients who died in 2014 was $34,529, nearly four times as high as the average Medicare spending of $9,121 for those who didn't die. This general pattern isn't surprising: after all, those who die often tend to have health issues beforehand.  The detailed data shows that the biggest part of this cost difference is driven by higher spending for in-patient care in hospitals for those who died in 2014. What's interesting to me is that the share of Medicare spending going to those who die in that year seems to be diminishing. What explains this shift? The report lists these causes: "In addition, we find that total spending on people who die in a given year accounts for a relatively small and declining share of traditional Medicare spending. This reduction is likely due to a combination of factors, including: growth in the number of traditional Medicare beneficiaries overall as the baby boom generation ages on to Medicare, which means a younger, healthier beneficiary population, on average; gains in life expectancy, which means beneficiaries are living longer and dying at older ages; lower average per capita spending on older decedents compared to younger decedents; slower growth in the rate of annual per capita spending for decedents than survivors, and a slight decline between 2000 and 2014 in the share of beneficiaries in traditional Medicare who died at some point in each year."

A 'slow catastrophe' unfolds as the golden age of antibiotics comes to an end -- On May 18, a team working at the Walter Reed Army Institute of Research here had its first look at a sample of the bacterium Escherichia coli, taken from a 49-year-old woman in Pennsylvania. She had a urinary tract infection with a disconcerting knack for surviving the assaults of antibiotic medications. Her sample was one of six from across the country delivered to the lab of microbiologist Patrick McGann. Within hours, a preliminary analysis deepened concern at the lab. Over the next several days, more sophisticated genetic sleuthing confirmed McGann’s worst fears. There, in the bacterium’s DNA, was a gene dubbed mcr-1. Its presence made the pathogen impervious to the venerable antibiotic colistin. More ominously, the gene’s presence on a plasmid — a tiny mobile loop of DNA that can be readily snapped off and attached to other bacteria — suggested that it could readily jump to other E. coli bacteria, or to entirely different forms of disease-causing organisms. That would make them impervious to colistin as well. It was a milestone public health officials have been anticipating for years. In a steady march, disease-causing microbes have evolved ways to evade the bulwark of medications used to treat bacterial infections. For a variety of those illnesses, only colistin continued to work every time. Now this last line of defense had been breached as well. A second U.S. case of E. coli with the mcr-1 resistance gene was reported this week in the journal Antimicrobial Agents and Chemotherapy. Researchers are still working to determine whether it, or any of 18 other samples from around the world, contained the gene on an easy-to-spread plasmid.

Mass Incarceration Is Making Infectious Diseases Worse - The Atlantic: Some countries do make condoms available to prisoners, while others cite security issues, or blanket prohibitions of sex. Only last year, California became the second state to require that condoms be available to all prisoners. Even in places where condoms are available, guards sometimes limit distribution as a form of control. In the medical journal The Lancet this week, researchers at Johns Hopkins cite this as one factor in the spread of infectious diseases in prisons. The researchers argue that this spread amounts to a human-rights abuse and a violation of international law—a cruel and inhuman failure to ensure humane prison conditions.The penal system remains a source of diseases that spread among prisoners at rates far exceeding those in the communities from which they came. Of more than 10 million incarcerated people in the U.S. alone, 4 percent have HIV, 15 percent have hepatitis C, and 3 percent have active tuberculosis. These diseases are part of our criminal justice system, then, metered out and sanctioned implicitly by the state. The penal system is also a primary reason that these diseases can’t be eliminated globally, and the problem goes well beyond condoms, according to Chris Beyrer, who edited the Lancet research series.  In his findings, the spread of disease within prisons is a small factor compared to the effects of releasing inmates into the community with no access to treatment. Even in prison systems where people have antiviral medications, the primary problem is really the lack of care once they go back into the community. When a person with HIV, for example, has an interruption in their treatment regimen, the virus comes roaring back. Those people are infectious again, and often highly so. That creates a serious risk for their sexual partners, and anyone with whom they may share needles.

Tourists returning from India import multidrug-resistant superbugs: Many tourists returning from India were found colonized with multidrug-resistant «superbugs». Microbiologists at the Institute for Infectious Diseases of the University of Bern, Switzerland, also isolated a strain possessing a gene which can make these life-threatening bacteria resistant to the last active antibiotic option. The spread of multidrug-resistant Gram-negative bacteria represents a serious issue for the healthcare system worldwide because our antibiotic armamentarium is becoming too limited. These «superbugs» may cause serious infections with high morbility and mortality rates - there are already 700'000 estimated deaths per year worldwide because common antimicrobial therapies have become ineffective. In this scenario, colistin has represented the last active antibiotic option able to cure many infected people. Unfortunately, in November 2015 a new mechanism of resistance against colistin was found with a high prevalence in Escherichia coli and Klebsiella pneumoniae strains detected in China among humans, food animals, and chicken meat; more recently, it has also been found in other countries. This mechanism is encoded by a gene (named mcr-1) that is plasmid-mediated, thus assuring its great ability to mobilize and spread between different enterobacteria, including those normally present in the human and animal intestinal tracts. In humans, E. coli can cause urinary tract infections, sepsis and other infections. K. pneumoniae mainly causes urinary and respiratory tract infections. Microbiologists at the Institute for Infectious Diseases of the University of Bern now analyzed for the first time the bacterial population of the intestinal tract of travelers from Switzerland to India and found out that 76% of the tourists returning from India were colonized with superbugs.

A Bizarre New Zika Infection in Utah -- Scientists are bewildered by a new and disturbing development involving the Zika virus in Utah, where a patient who contracted the virus recently died. Officials announced on Monday they’re investigating how a person who cared for the patient who died also became infected.  “Based on what is known now, the person has not recently traveled to an area with Zika and has not had sex with someone who is infected with Zika or who has traveled to an area with Zika,” the Utah Department of Health wrote in a statement on Monday. “In addition, there is no evidence at this time that mosquitoes that commonly spread Zika virus are in Utah.”  The department described the deceased as someone who had “a uniquely high amount of virus in the blood.” The death marked the first known Zika fatality in the United States.  “Our knowledge of this virus continues to evolve and our investigation is expected to help us better understand how this individual became infected,” said Angela Dunn, the deputy state epidemiologist at the Utah Department of Health. “Based on what we know so far about this case, there is no evidence that there is any risk of Zika virus transmission among the general public in Utah.”

First Baby Is Born in New York City With Birth Defects From Zika Virus --For the first time, a baby has been born at a New York City hospital with birth defects from a Zika-virus infection transmitted by the baby’s mother, city health officials said Friday. The mother was infected with the Zika virus, commonly spread by a particular species of mosquito, while in a country where the virus was being actively transmitted, according to the New York City Department of Health and Mental Hygiene. These areas include nearly all countries in South and Central America and the Caribbean. There are no known cases of Zika infection acquired from mosquitoes in New York City, officials said. none The baby was diagnosed with severe microcephaly, or a smaller-than-normal head size and other brain problems, the health department said. Tests confirmed the baby had the Zika virus. Officials said the baby was born some time in July, but diagnosis was only confirmed on Thursday. Officials disclosed the case as part of a campaign to highlight the risks of birth defects for pregnant woman exposed to the disease. To protect the family’s privacy, the officials said, they withheld most details, including the sex of the baby and when and where the baby was born. They urged women who are pregnant or thinking of getting pregnant to avoid travel to Zika-transmission areas. They urged men who travel to such areas to use safe sex practices for at least eight weeks after their return. Since January, city doctors have requested Zika testing for more than 2,000 pregnant women who have traveled to active Zika-transmission areas. Of these, 41 tested positive for the virus, according to the health department. Birth defects occur in 1% to 30% of pregnancies of women infected with Zika, city officials said, citing federal estimates. Mary T. Bassett, the city health commissioner, said the emergence of the case was “not surprising given the travel trends of our global city.” “As we see today, the consequences for the child can be devastating,” Dr. Bassett said. “This is not a theoretical risk.”

Rio’s Olympic Hospitals Unable to Take New Patients, Report Says - Bloomberg: Current conditions “don’t allow for accommodation of new patients,” the state’s medical council, known by its acronym Cremerj, said in a report that was vehemently rejected by Rio’s health secretariat. “There are a lot of patients admitted in improvised ways, in hallways, on gurneys and chairs, due to the lack of hospital beds and inadequate structure.” Health has been a concern for Olympic tourists due to the Zika virus borne by mosquitoes, which are less prevalent in Brazil’s winter months of mid-June through mid-September. Hospitals’ low capacity to handle emergencies may be of greater concern. With its finances in tatters, the state of Rio de Janeiro has delayed salaries to hospital personnel, and there has been a shortage of basic medical supplies. Its fiscal crisis was so acute that the city of Rio, which enjoys more financial stability, took control of two state-run hospitals this year.  Cremerj is seeking political gain by denigrating the image the public hospitals that have been preparing for the games for four years, according to an e-mailed statement from the city’s health secretariat. The units underwent renovations and received new equipment, the secretariat added. Brazil’s federal health ministry has made more resources available to ensure Olympic tourists can be attended, according to the local organizing committee.

Zika outbreak expected to end in 2 to 3 years - The Zika outbreak rampaging through Latin America will likely burn itself out in the next two to three years, based on the fact that people develop immunity to the virus after an initial infection, British scientists said on Thursday. The researchers, whose work is published in the journal Science, estimated that infections from the mosquito-borne virus will become so widespread in affected countries that populations will develop what is called "herd immunity." This occurs when a high percentage of a population has become immune to an infection either through developing natural immunity or through vaccination, making a wider outbreak less likely. That would prevent further transmission of the Zika virus for at least a decade, with only smaller, intermittent outbreaks, they said. "Because the virus is unable to infect the same person twice — thanks to the immune system generating antibodies to kill it — the epidemic reaches a stage where there are too few people left to infect for transmission to be sustained," study author Neil Ferguson of the School of Public Health at Imperial College London said in a statement. There is no vaccine or specific treatment for Zika. The study was based on mathematical models of the virus, which has been shown to cause microcephaly, a birth defect marked by small head size that can lead to severe developmental problems in babies.

Activists delay planned release of GM mosquitoes -- A group of local activists in West Bay who are opposed to the planned release of genetically modified mosquitoes in the district have managed to delay the start of the project which was due to get underway Thursday. The group aimed to highlight concerns about the failure to properly consult the public and the questions raised by the research into GM mosquitoes. Dwene Ebanks, one of the leaders of the campaign, has confirmed that their application for a judicial review led to the courts putting a temporary stop on today’s release until the legal challenge can be heard next week. The Mosquito Research and Control Unit has been working in partnership with the British-based bio-technology company, Oxitec, which created the genetically modified Aedes aegypti that are promoted as an environmentally friendly alternative to expensive and increasingly ineffective insecticides. The company has engineered mosquitoes that are sterile. By releasing significant numbers of the male mosquitoes to breed with the wild females, scientists believe they can almost eradicate the disease-spreading invasive species. The public health officials are increasingly concerned about the Aedes aegypti because the mosquito not only acts as a vector for diseases such as chikungunya, dengue and yellow fever, it also spreads the Zika virus, which as a result of mutations has become a worldwide concern.

We’re Not Ready for the Next Wave of Genetic Engineering | Global Justice Ecology Project: Mini pet pigs. Non-browning apples. Engineered mosquitoes. These are just a few products in the pipeline of biotechnology companies. As the cliché goes: when you have a hammer, everything looks like a nail. Genetic engineering is being pushed as the solution to all of our problems, real or imagined. Disturbingly, these products of the future are largely regulated by laws passed before genetic engineering even existed. Our outdated, ineffective regulatory regime cannot protect us from risks associated with genetic engineering, because it isn’t designed to even identify all of the possible risks. In the United States, GMOs are regulated according to the Coordinated Framework for the Regulation of Biotechnology, which outlines the roles of federal agencies in overseeing the production and sale of GMOs. Generally speaking, the United States Department of Agriculture (USDA) ensures that GMO crops are safe to grow, the Environmental Protection Agency (EPA) ensures that they will not harm the environment, and the Food and Drug Administration (FDA) ensures GMOs are safe to eat. However, the agencies essentially use the same regulatory processes that they use for conventional (non-GMO) products, which miss many of the novel risks of genetic engineering.

New trade deals legalise corporate theft, make farmers’ seeds illegal -- Since 2001, GRAIN has been tracking how so-called free trade agreements (FTAs), negotiated largely in secret, outside the World Trade Organisation (WTO) are being used to go beyond existing international standards on the patenting of life forms. In this report, we provide an update on the FTAs that are legalising corporate theft and threatening farmers’ ability to save, produce and exchange seeds around the world. Signed in 1994, the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was the first treaty to impose global standards on intellectual property or legal ownership of plants, animals and microorganisms, bolstered by an enforcement mechanism. Representatives of the US seed and biotech industry brought the issue into the trade talks. Their goal? To ensure that companies like Monsanto, Dow and Pioneer, which spend money on plant breeding to bring new seeds to market, can recoup their investment and make a profit by preventing farmers from re-using those seeds—obligating them to purchase seeds from corporations year after year.  The patenting of life has been hotly contested for decades. For farmers, it makes seeds and livestock more expensive and takes away their right to freely reproduce them. It also reduces life and culture to a commodity that corporations can own and control. While the WTO agreement allowed countries to exclude plants and animals other than microorganisms from their patent laws, it required that they provide some form of intellectual property protection over plant varieties—the seeds that farmers sow—without specifying how to do that. According to industry representatives who helped draft the text, the US corporations got 95 per cent of what they wanted from TRIPS.[1]

The global farmland grab in 2016: how big, how bad? -- In October 2008, GRAIN published a report called “Seized: the 2008 land grab for food and financial security”. It exposed how a new wave of land grabbing was sweeping the planet in the name of addressing the global food and financial crises. “On one hand”, we wrote, “‘food insecure’ governments that rely on imports to feed their people are snatching up vast areas of farmland abroad for their own offshore food production. On the other hand, food corporations and private investors, hungry for profits in the midst of the deepening financial crisis, see investment in foreign farmland as an important new source of revenue.”[1] In the annex to the 2008 report, we documented more than one hundred cases of these new and emerging land deals that, until then, had been buried in the business sections of newspapers like the Vientiane Times and the Sudan Tribune. Eight years later, we went back to look at the data—the myriad reports of land grabbing for food production that we have been following and assessing. Over the past several years, GRAIN staff and allies in different regions have been tracking media and other information sources on a daily basis and posting reports on land grab developments to the open-publishing platform We used this website as the basis for constructing this dataset, which holds 491 land deals covering over 30 million hectares spanning 78 countries.[2] This new research shows that, while some deals have fallen by the wayside, the global farmland grab is far from over. Rather, it is in many ways deepening, expanding to new frontiers and intensifying conflict around the world. We hope this updated dataset will be useful tool for movements, communities, researchers and activists fighting against land grabbing and defending community-based food systems.

We need to eat less meat. Should the government step in? Meat consumption in the United States — and across much of the Western world — has reached a level that is unsustainable, both for our planet and for our health. We owe it to ourselves to make a change. Our politicians owe it to us to enable that change. The average American eats three times as much meat as experts deem healthy, the average European around twice as much. And the emerging economies are quickly catching up: by 2050, global consumption isexpected to rise a further 76 percent. Excessive meat-eating is partly responsible for an epidemic of obesity — now one of the most costly social burdens, according to the consultancy McKinsey. Over-consumption of red and processed meat iscontributing to the rising incidence of non-communicable diseases such as heart disease, type-2 diabetes and certain cancers. What’s more, this pattern of excess is a key driver of environmental damage and a serious drain on water and land. The livestock sector accounts for 14.5 percent of global greenhouse gas emissions, roughly the same share as every car, truck, plane, train and ship put together. Unless we significantly reduce our meat consumption — by about half across the West, by up to two-thirds across much of the United States — it will be virtually impossible to keep global temperature rise below the danger threshold of 2 degrees.  Does this mean we all need to become vegetarian? No. Does it mean we need to forgo a burger — or 10 — every month? Undoubtedly.

Humans are greening the planet, but the implications are complicated: The Earth’s climate is changing – in fact, it always changes. But in the current context of human influence, scientists try to decipher how much of the change is natural compared to human-induced. One clear way humans influence the Earth is through the biosystem. For instance, farming changes the biosystem. By removing natural growth and planting annual crops that are harvested, we change the system in a way that could in turn affect other parts of the Earth system. In addition, the use of nitrogen based fertilizers can increase growth rate and lead to a greening of areas that are subject to fertilization. Another more indirect potential for humans to alter plant growth is through fertilization involving carbon dioxide. We know that humans have increased the amount of carbon dioxide in the atmosphere by approximately 40%. We also know that airborne carbon dioxide is a fertilizer for plants. So the obvious question is, “do our carbon emissions affect plant growth?”. A new study,  just out in Nature Climate Change, helps answer that question. This study focused on land areas in the northern hemisphere that were outside the tropical region. They obtained information from satellites to measure the greening of these lands areas to determine whether there was any significant change. The find that yes, in fact there is. Over approximately 30-year durations, this area has indeed gotten greener.

Arctic birds face disappearing breeding grounds as climate warms -  Next month, the cruise ship Crystal Serenity will embark on a controversial voyage, becoming the first cruise liner ever to sail Canada’s Northwest Passage – a formerly icebound route that only became navigable in 2007. It’s a dramatic symbol of the change that is currently taking place in the Arctic, which is warming more rapidly than anywhere else on Earth. This warming is already affecting polar bears, greening the tundra, and physically shrinking red knots. Now, in a new study, we show that it could contract the breeding habitat of millions of migratory birds that travel to the High Arctic. Countries worldwide could see declines in the numbers of migratory birds reaching their shores, and the Canadian and Russian Arctic islands may be the last refuges these species have.We studied migratory shorebirds, superstars of global migration that cover tens of thousands of kilometres a year, and sometimes travel more than 10,000km in a single flight. These amazing birds breed in the Arctic and then fly south, stopping at known refuelling points en route to their non-breeding grounds, some of them in the Southern Hemisphere. Protecting these ultra-mobile species that cross international borders is a particularly difficult conservation challenge. Shorebirds are embattled by habitat loss and hunting along their migratory routes. Nowhere is this more apparent than the route used by species that migrate to Australia: the East Asian/Australasian Flyway. Most species that travel between Australia and the Arctic stop off at mudflats in the Yellow Sea off China. But coastal habitat there is being rapidly destroyed and population numbers are already crashing. The question is, how will climate change amplify the stress that these populations, and shorebirds globally, are already experiencing?

Magpies, kookaburras and willie wagtails among common Australian birds 'starting to disappear', report suggests -  Sightings of magpies, laughing kookaburras and willie wagtails are on the decline in some regions, a report tracking the health of Australia's bird populations has found. The State of Australia's Birds Report, published by Birdlife Australia, analysed data collected in more than 400,000 surveys across the country, the majority done by bird-loving volunteers. Editor of Australian Birdlife Sean Dooley said the decline of common birds in parts of Australia was a surprise to researchers. He said while predators including cats, habitat loss and even changes in climate might be to blame, more research was needed before certain species became endangered. "The stuff that Birdlife Australia has come out with is showing is that a lot of birds that we assumed were really common and sailing along quite fine are showing significant declines," he told 774 ABC Melbourne. "While they're still not endangered, it's basically the first step to them becoming endangered, so we really need to use this as a wake-up call and start looking at what we're doing across landscapes to try and figure out what's going on."

Sections of Great Barrier Reef suffering from 'complete ecosystem collapse' -- “Complete ecosystem collapse” is being seen on parts of the Great Barrier Reef, as fish numbers tumble and surviving corals continue to bleach into winter, according to a scientist returning from one of the worst-hit areas. “The lack of fish was the most shocking thing,” said Justin Marshall, of the University of Queensland and the chief investigator of citizen science program Coral Watch. “In broad terms, I was seeing a lot less than 50% of what was there [before the bleaching]. Some species I wasn’t seeing at all.” Marshall spent a week this month conducting surveys on the reefs around Lizard Island.Marshall said many of the fish species that were commonly seen around branching coral had completely disappeared from the area, including the black-and-white striped humbug damselfish. He said in his time there he saw only one school of green chromis, which were previously seen all over the area. Marshall said the lack of fish was an indication that there was “complete ecosystem collapse”. Without enough surviving corals, the fish didn’t have the shelter and food sources they needed and had died or moved elsewhere. Without many of those fish, Marshall said the coral would face a harder time recovering, since the entire ecosystem had been degraded. He said he was also surprised to see that some of the surviving corals continued to bleach, despite the southern hemisphere winter bringing cooler waters to the Great Barrier Reef.“There are still corals bleaching,” Marshall said. He said many of them were probably not bleaching for the first time now but rather have remained bleached since it began. “They’re just holding on by the fingernails,” he said.

The diversity of life across much of Earth has plunged below ‘safe’ levels - In an ambitious study that represents the latest merger between big data approaches and the quest to conserve the planet, scientists have found that across a majority of the Earth’s land surface — including some of its most important types of terrain and its most populous regions — the abundance or overall number of animals and plants of different species has fallen below a “safe” level identified by biologists.   The reason is not exactly a surprise — from grasslands to tropical forests, humans are using more and more land for agriculture, to live on, to build roads and infrastructure upon. When we take over, we clear the land or otherwise convert it for our purposes. This doesn’t always cause extinctions, but it does reduce the abundance of species and what researchers call the “intactness” of ecosystems — and when biodiversity levels fall too low, it can mean that larger ecosystems lose their resilience or even, at the extreme, cease to function.  “Exploitation of terrestrial systems has been vital for human development throughout history, but the cost to biosphere integrity has been high,” notes the study published Thursday in Science, The researchers compiled 1.8 million separate measurements of the abundance of species (39,123 of them) at 18,659 locations across the globe — a volume of data that an accompanying essay in Science, by ecologist Tom Oliver of the University of Reading, calls the “most comprehensive quantification of global biodiversity change to date.”   The research is based on a “planetary boundaries” concept that “attempts to set some sort of safe limit to the amount of biodiversity we can lose, while biodiversity still supports important ecosystem functions,” said Newbold, the study’s lead author. And it is important to note that in the context of this analysis, safety actually means safe for humans, in significant part.

Ocean acidification is eating into mussels -- Ocean acidification is bad for mussels. You may think you’ve heard this story before (cf. clams, oysters, scallops) but wait! This time it’s a little different. It turns out that acidifying seawater prevents the tasty mollusks from attaching to rocks and other surfaces, scientists from the University of Washington found in a new study. And while mussels are famously good at sticking to things, it turns out they’re pretty useless at everything else. If they can’t cling to rocky surfaces near the surf line, they sink, and become easy targets for predators.“A strong attachment is literally a mussel’s lifeline,” said lead author Emily Carrington. This is especially concerning for mussels farms, where weak attachments are already responsible for loss of as much as 20 percent of mussels. Ocean acidification already threatens coral, crabs, and other shelled organisms that may not survive as their environment grows more acidic. The oceans are already over 30 percent more acidic than they were 200 years ago; by the end of the century, they could be 150 percent more acidic. Beyond lost biodiversity, the effect on aquaculture could threaten both global food security and the seafood economy as a whole, which employees an estimated 10 to 12 percent of the world’s population.

Warming Could Mean More Algae Blooms Like Florida’s - Nearly 240 square miles of Lake Okeechobee, the largest freshwater lake in Florida, are covered in a scum of blue-green algae that has also traveled down nearby waterways and out to the coastline. The stinking sludge has impacted local ecosystems and the tourism industry and caused Gov. Rick Scott to declare a state of emergency in the affected counties. The algae bloom is the result of a combination of factors, including the abundant nutrients washed in from surrounding agricultural lands, heavy winter rains and hot, calm summer weather. In the future, such blooms could become more common as Earth’s rising temperature heats up lakes and oceans, providing a more favorable home for algae and other potentially toxic microorganisms in the water. The Okeechobee bloom began in May, when it was only about 33 square miles in area. Nutrients that the algae need to flourish are plentiful in the lake, primarily coming from fertilizers used in agricultural land. But those nutrients are not enough on their own to fuel a bloom; normally the lake is too turbid, with sediment in the water blocking the light that the algae need to drive photosynthesis. But in May, calm weather led to stiller water that let light through its upper layers, allowing the algae (a type called Microcystis) to go wild. “All it takes is the right weather,”

Trees Can Limit Climate Change—Unless It Kills Them First - Bloomberg: Scientists have considered forests a potential barrier to climate change, since plants on land take up about 25 percent of our carbon dioxide emissions. As trees in colder areas are exposed to warmer temperatures and more CO2 emissions, they will grow faster and absorb more emissions, helping to mitigate the effects of a primary greenhouse gas, the theory goes.   But, in an alarming twist, global warming is likelier to limit forests' capacity for absorbing emissions in many parts of the continent, a study released today in the journal Ecology Letters finds. After combining climate projections with the tree records, researchers found no evidence for the boreal greening hypothesis. In fact, they found a risk of a negative feedback loop, as trees in their model reacted poorly to warmer temperatures due to drought and other disturbances.  That means as trees die faster than they can take up CO2 emissions, releasing trapped carbon, forests could become a net source of carbon, accelerating climate change. The study found that we could reach such a tipping point as early as 2050.  “It’s one more piece of evidence that this is a serious problem and it’s going to take a real serious global coordination to stop it,” said Noah Charney, the study's first author and a postdoctoral research associate in the University of Arizona’s Department of Ecology and Evolutionary Biology. “There isn’t necessarily going to be some balance that’s going to keep us in check.”

Drought 'shuts down Amazon carbon sink' - BBC News: A recent drought shut down the Amazon Basin's carbon sink by killing trees and slowing trees' growth rates, a study has shown. The term carbon sink refers to the ability of a natural zone to absorb CO2 from the atmosphere. In the first basin-wide study of the impacts of the 2010 drought, data showed trees' mortality rate went up while growth rates declined. The findings have been published by the Global Biogeochemical Cycles journal. The Amazon Basin is a key player in the Earth's carbon cycle, holding 17% of the terrestrial vegetation carbon stock. An international team of scientists studied the effects of two drought events, in 2005 and 2010, that affected large swathes of forest across the region, using data from the long-running Rainfor network that gathers data from almost 100 locations across the Amazon Basin. Co-author Ted Feldpausch from the University of Exeter, UK, said the study was the first large-scale, direct demonstration of tropical drought slowing tree growth, describing the findings as "extremely important".  He told BBC News that the droughts had effectively shut down Amazonia's function as a carbon sink.

Russian wildfires put key climate change resource at risk  - Japan Times: Russia’s practice of leaving massive wildfires to burn out of control in sprawling stretches of Siberia puts at risk a key global resource for absorbing climate-warming emissions: its trees. The blazes are consuming millions of hectares of pristine Boreal forests in Russia, which are second only to the world’s tropical jungles in capturing planet-warming carbon emissions. At the same time, the drier and harsher conditions associated with a warmer climate — June was the hottest ever recorded — are contributing to the fires becoming ever bigger and more common. The World Meteorological Organization said Thursday that not only is the Earth on track for its hottest year on record, it is warming at a faster rate than expected. Temperatures for the first six months of the year, coupled with an early and fast Arctic sea ice melt and “new highs” in heat-trapping carbon dioxide levels, point to quickening climate change, it said. Russia’s forests annually absorb a net 500 million tons of carbon from the atmosphere.  That figure is the equivalent to the emissions put off over a year by 534 coal-burning power plants.

June sets another global temperature record, extending a blazingly hot year - This June has joined every other month of this year so far in setting an all-time monthly record for global temperatures, according to two separate federal science agencies — though the globe was not as extremely warm last month as it was earlier in the year. “Warmer to much-warmer-than-average conditions dominated across much of the globe’s surface, resulting in the highest temperature departure for June since global temperature records began in 1880,” according to the National Oceanic and Atmospheric Administration. Globally averaged temperatures in June were 0.9 degrees Celsius (1.62 degrees Fahrenheit) warmer than the average across the 20th century, according to NOAA. That slightly surpassed temperatures measured in the prior record June of last year. Data from NASA, also released Tuesday, broadly agreed with that analysis, despite a somewhat different way of slicing the information. According to the agency, globally averaged temperatures in June of 2016 were 0.79 degrees Celsius (1.42 degrees Fahrenheit) above the average for the years 1951 through 1980. That barely edged out the global temperature in June of 2015, when the departure from average was 0.78 degrees Celsius in the agency’s dataset.

June was Earth's 14th straight record warm month: Gerald Ford was president and the nation was celebrating its bicentennial the last time the Earth had a cooler-than-average June, and this past June was the Earth's hottest since weather records began in 1880, a report made public Tuesday by the National Oceanic and Atmospheric Administration (NOAA) found. A separate climate report from NASA, also released Tuesday, confirmed the NOAA data. June marked the 14th straight month of record-setting heat, the planet's longest such streak in NOAA's 137 years of record keeping. Data from both NOAA and NASA indicate the Earth is well on its way to its warmest year on record. Man-made climate change is the underlying cause of the record warmth, but the El Niño climate pattern in the tropical Pacific also boosted global temperatures beginning in October, NASA's Gavin Schmidt, a climate scientist, said in a statement. Even without El Niño, temperatures in first six months of 2016 would have hit records, Schmidt said.Parts of the southwestern U.S., southern Mexico, northeastern Brazil, northeastern and southwestern Africa, the Middle East, northern Australia, and Indonesia felt the record warmth. Only central and southern South America experienced cooler-than-average conditions during June 2016. The sheet of ice that covers the Arctic shrunk to its smallest size ever for June since records began in 1979, NOAA and NASA said. The extent of Arctic sea ice at the peak of the summer melt season now typically covers 40% less area than it did in the late 1970s and early 1980s, NASA reported. Sea ice is frozen ocean water that melts each summer and refreezes each winter. It typically shrinks to its smallest size in September and then grows back to its peak March each year. The area of Antarctic sea ice was also below average in June, according to NOAA, and was the the smallest since 2011.

June Does It Again: Global Temperature Sets 14th Consecutive Record  -- Even with the intense 2015 - 2016 El Niño event out of the picture, June 2016 was still the planet's warmest June since record keeping began in 1880, said NOAA's National Centers for Environmental Information (NCEI) on Tuesday. In the NOAA database, June 2016 came in 0.90°C (1.62°F) warmer than the 20th-century average for June, beating the previous record for June, set in 2015, by 0.02°C. This ties with May 2016 for the smallest margin the monthly global temperature has broken a record by since August 2015. NASA also reported the warmest June in its database--though just barely--as did the Japan Meteorological Agency. June 2016 marked the 14th consecutive month that the global monthly temperature record was broken, which is the longest such streak since global temperature records began in 1880. The record-warm June extended to both global ocean and global land temperatures in the NOAA database. For the lowest 8 km of the atmosphere, global satellite-measured temperatures in June 2016 were the 2nd warmest for any June in the 38-year record, according to the University of Alabama in Huntsville (UAH). The impressive global warmth in recent months is due to the steady build-up of heat-trapping greenhouse gases due to human activities, plus a spike due to a large amount of heat being released from waters in the Eastern Pacific due to the powerful 2015-16 El Niño event. This event peaked in December, and NOAA’s global surface temperature for the year so far (January-June 2016) is a remarkable 0.20°C (0.38°F) warmer than the previous record, set in 2015 (see Figure 1). The departure of El Niño and the likely arrival of La Niña should allow temperatures to drop slightly, perhaps breaking our string of record-warm months sometime in the near future, but temperatures would have to plummet between now and December in order to keep 2016 from becoming the warmest year in global record keeping. In May, NASA/GISS director Gavin Schmidt laid 99% odds on 2016 setting a new global temperature record, which would make it Earth's third consecutive warmest year on record.

Global Temperatures Are on Course for Another Record This Year - The world is on pace to set another high temperature benchmark, with 2016 becoming the third year in a row of record heat.NASA scientists announced on Tuesday that global temperatures so far this year were much higher than in the first half of 2015.Gavin Schmidt, the director of NASA’s Goddard Institute of Space Studies, said that while the first six months of 2015 made it the hottest half-year ever recorded, “2016 really has blown that out of the water.”He said calculations showed there was a 99 percent probability that the full year would be hotter than 2015. Dr. Schmidt said the world was now “dancing” with the temperature targets set last year in the Paris climate treaty for nations to limit climate change.He attributed part of the rise in temperatures this year to El Niño, in which warming waters in the equatorial Pacific Ocean pump a lot of heat into the atmosphere.Average temperatures for the first six months of this year were about 1.3 degrees Celsius, or 2.3 degrees Fahrenheit, above the average in 1880, when global record-keeping began, and “quite close” to 1.5 degrees Celsius above preindustrial levels, Dr. Schmidt said in a conference call with other NASA scientists. The warming in the first half of this year extended across all parts of the planet except for most of Antarctica, Dr. Schmidt said. Warming was especially strong in the Arctic, where it had an effect on sea ice coverage.

Earth on track for hottest year ever as warming speeds up | Reuters - The earth is on track for its hottest year on record and warming at a faster rate than expected, the World Meteorological Organization (WMO) said on Thursday. Temperatures recorded mainly in the northern hemisphere in the first six months of the year, coupled with an early and fast Arctic sea ice melt and "new highs" in heat-trapping carbon dioxide levels, point to quickening climate change, it said.June marked the 14th straight month of record heat, the United Nations agency said. It called for speedy implementation of a global pact reached in Paris last December to limit climate change by shifting from fossil fuels to green energy by 2100. "What we’ve seen so far for the first six months of 2016 is really quite alarming," David Carlson, director of the WMO’s Climate Research Program, told a news briefing. "This year suggests that the planet can warm up faster than we expected in a much shorter time... We don’t have as much time as we thought." The average temperature in the first six months of 2016 was 1.3° Celsius (2.4° Fahrenheit) warmer than the pre-industrial era of the late 19th Century, according to space agency NASA. Under the Paris Agreement, nearly 200 governments agreed to limit global warming to well below 2°C (3.6°F) above pre-industrial levels, while "pursuing efforts" for a ceiling of 1.5°C - a lower limit already close to being reached.

Midwest mugginess linked to crops working up a 'corn sweat'  (AP) — The Midwest’s first dangerous bout of heat and humidity this summer is partly to blame on the moisture piped out of the ground and into the atmosphere by the increasing acreage of corn crops reaching peak maturity, meteorologists and atmospheric researchers say.  That muggy mist, jokingly called “corn sweat,” gets blown around the country, even enveloping more distant urban areas, like Chicago and Minneapolis.  Evapotranspiration, the technical term for “corn sweat.” The American Meteorological Society defines it as “the combined processes through which water is transferred to the atmosphere from open water and ice surfaces, bare soil and vegetation that make up the earth’s surface.”  Basically, when corn crops mature in late July, they act like billions of straws drawing up soil moisture. It beads up on vast leafy canopies and is carried off by warmer air. Much of the humidity enveloping the region this week is siphoned off the Gulf of Mexico, but a measurable contribution comes from corn and soybean crops, say researchers like Ken Kunkel, a professor of atmospheric sciences at N.C. State University. Once that added moisture from the corn belt is picked up in the air, it spreads fast to places like Chicago.Kunkel took part in a modeling study that found crop moisture most likely increased humidity levels during to a 1995 heat wave blamed for hundreds of deaths there. “Chicago is affected by it as much as if you’re in the middle of a corn field in central Illinois,” he said.

Eastern Hemisphere's All-Time Temperature Record: Kuwait Fries in 54 °C (129.2 °F) Heat -- Jeff Masters -  It was a historic day in the annals of meteorology on Thursday, July 21, 2016, in the Middle East, where the temperature in Mitribah, Kuwait, soared to an astonishing 54 °C (129.2 °F). If verified, this would be Earth's hottest temperature ever reliably measured outside of Death Valley, California, according to wunderground's weather historian Christopher C. Burt and world weather extremes expert Maximiliano Herrera. The temperature is likely to be verified, since Thursday's incredible heat also extended into Iraq, which set their all-time heat record: 128 °F (53.4 °C) at Basrah. According to Burt and Herrera, Thursday's Basrah reading ranks as the fourth highest temperature ever reliably measured outside of Death Valley; the only higher non-Death Valley temperatures were today's 54 °C (129.2 °F) at Mitribah, Kuwait, a 53.6 °C reading at Sulaibya, Kuwait, in 2011, and a 53.5 °C reading at Mohenjodaro, Pakistan, on May 26, 2010. Note that there is one other competitor for hottest non-Death Valley temperature ever measured: the official all-time high temperature in Israel is a 54 °C (129.2 °F) reading from Tirat Tsvi, Israel, on June 22, 1942. The Israeli Met Office pursued an investigation of the record in 2012, prompted by an inquiry from the World Meteorological Organization (WMO) and convincing evidence from wunderground's weather historian Christopher C. Burt and weather extremes expert Howard Rainford that the actual high temperature was a full degree lower. The Israeli Met Office concluded that the record was valid, but refused to make public the details leading to their conclusions. Until they do so, the record remains suspect.

Soaring Temperatures Will Make It Too Hot to Work, UN Warns - Bloomberg: Searing temperatures caused by climate change may cost global economies more than $2 trillion by 2030, restricting working hours in some of the poorest parts of the world, according to United Nations research. QuickTake Climate Change As many as 43 countries, especially those in Asia, including China, Indonesia, and Malaysia, will experience declines in their economies because of heat stress, says Tord Kjellstrom, a director at the Health and Environment International Trust, based in Nelson, New Zealand. As a result, China’s gross domestic product would be reduced 1 percent and Indonesia’s by 6 percent by 2030.Extreme heat in Southeast Asia already curbs annual working hours by 15 to 20 percent, and that figure could double by 2050 as climate change progresses, according to the paper published in Asia-Pacific Journal of Public Health on Tuesday. The study was one of six papers published by the UN university in Kuala Lumpur detailing the impact of climate change on human health. From 1980 to 2012, it said about 2.1 million people worldwide died as a direct result of almost 21,000 natural catastrophes such as floods, mudslides, extreme heat, drought, high winds or fires. The cost of those disasters exceeded $4 trillion, a sum comparable to the current GDP of Germany. “With heat stress, you cannot keep up the same intensity of work, and we’ll see reduced speed of work and more rest in labor-intensive industries,” Kjellstrom said. “Rich countries have the financial resources to adapt to climate change.” In 2030, in both India and China, the GDP losses could total $450 billion, Kjellstrom said. The impact could be reduced by making major shift in working hours and changing how new factories are built to require less power to cool.

The Girl Child Arrives -- Sea surface temperatures in the central Pacific fell another 0.2 degrees in the last week. This drop was sufficient to achieve La Nina conditions:  It was just seven months ago that the strongest El Nino in recorded history was set. The weatherfolks and their computers were anticipating that the Pacific Ocean would revert to a neutral status (+/- 0.5 degrees Fahrenheit). Now it looks like a full bore La Nina is in the immediate future. There are a dozen or so computers that track the hourly buoy data from the Pacific. These computers are run by government weather gurus as well as some Universities. The goal is to accurately forecast the El Nino/La Nina cycles. It would be worth billions if they could do it. The rapid fall in ocean temps has had the computers working overtime. The most recent update has all of the models in either neutral or La Nina in the coming months: Does it mean anything if we are to get a strong La Nina later this summer and into the fall?Based on recent history it does. In January of 1998 there was a record La Nina. By the summer of 98' the water temperatures had fallen rapidly and a strong La Nina developed. 2016 is shaping up to be a perfect repeat. This is how NOAA described the 1998 hurricane season:

Ships worsen air pollution over China, killing thousands  (Reuters) - A boom in shipping is aggravating air pollution in China and other nations in East Asia, causing thousands of deaths a year in a region with eight of the world's 10 biggest container ports, scientists said on Monday. Often overlooked compared to cars and factories that are far bigger causes of smog, ship traffic has more than doubled off East Asia since 2005 and some pollution from the fuel oil of ships wafts inland, they said. The Chinese-led study estimated that sulphur dioxide, which generates acid rain, and other pollution from ships caused an estimated 24,000 premature deaths a year in East Asia, mainly from heart and lung diseases and cancer. About three-quarters of deaths were in China, and others mainly in Japan, Taiwan, Hong Kong, Macau and South Korea, according to the study published in the Journal Nature Climate Change based on satellite data tracking almost 19,000 vessels. The death toll is a tiny though rising share of an estimated one million deaths caused annually by air pollution in East Asia, the study found. Given many uncertainties, the number of deaths could be as low as 14,500 or as high as 37,500, it said. "A few years ago in East Asia the levels of shipping just weren't that large. Now they're huge," Drew Shindell, one of the authors at Duke University in the United States, told Reuters of reasons for the study. China, where Shanghai is the world's busiest container port, will start demanding cleaner fuels for ships in coastal regions from 2019. China has thousands of protests every year sparked by concerns about environmental degradation. North America and parts of Europe already require that ships operating close to land use more costly, less polluting fuel with a sulphur content below 0.1 percent. The U.S. Environmental Protection Agency expects the North American controls will prevent 14,000 premature deaths a year by 2020.

Up to 37,500 East Asians dying prematurely a year from ship pollution - Splash 247: Expect other nations in East Asia to follow China’s lead in creating emission control areas (ECAs) following the release of shocking new statistics that link shipping pollution in the area with up to 37,500 premature deaths a year. A team of Chinese and American scientists used records of more than 18,000 vessels observed in the region in 2013 to calculate emissions and their likely effect. They noted that shipping emissions in the area had doubled since 2005 and now had the the world’s fastest-growing rate of particle and carbon dioxide (CO2) pollution from shipping emissions. “Increased emissions lead to large adverse health impacts with 14,500-37,500 premature deaths per year,” the scientists wrote in the journal Nature Climate Change. “As a large fraction of vessels are registered elsewhere, joint efforts are necessary to reduce emissions and mitigate the climate and health impacts of shipping in the region,” the researchers suggested. China, spurred on by pioneering efforts in Hong Kong, is pushing ahead with a number of pilot ECAs as well as installing shore power at seven ports. South Korea, Taiwan and Japan are all believed to be looking at creating ECAs too.

‘Unchecked population growth eating away all resources’ - The Hindu: Serious concerns were expressed over population explosion coming in the way of development of the country by speakers at a function organised to observe World Population Day in Ballari and Koppal. Jathas were taken out to create awareness among the people about the need to check further growth of population. At a function in Ballari, T. Vishwanath, motivational trainer and graphologist, said that unchecked growth of population is eating away all resources leaving no scope for the country to emerge as a developed nation. Stating that controlling population was the responsibility of all, he exhorted the people to realise their responsibilities to initiate steps to prevent its rise further and save the country from unemployment, food shortage, illiteracy, poverty, ecological imbalance and also from heading towards the brink of disaster. Bharathi Reddy, Ballari Zilla Panchayat president, who inaugurated the programme, expressed concern over the pace of growth of population and apprehended that it would have a serious bearing on the development of the country. She also called upon the various government departments and the public to join hands to contain population growth and maintain stability. Vijayalakshmi, District Family Welfare Officer, explained about the ill-effects of population explosion and the government’s endeavour in controlling it.

US-developed weapon system may cause global warming: Government - The Economic Times of India - A US-developed weapon system that strikes the atmosphere with a focussed electromagnetic beam may cause global warming, the government today said and acknowledged that climate change is likely to reduce the yield of major crops like wheat and maize in India. "The US has developed a type of weapon called High Frequency Active Auroral Research Programme. HAARP strikes the upper atmosphere with a focussed and steerable electromagnetic beam," Environment Minister Anil Madhav Dave told the Rajya Sabha in a written reply. "HAARP is an advanced model of a super powerful ionospheric heater which may cause the globe to warm and have global warming effect," he said. Dave was replying to a question on whether the government is aware of HAARP, capable of effecting devastating impact on the world's climate including that of India and resulting in destabilisation of agricultural and ecological systems. He said a study conducted by Indian Council of Agricultural Research has projected the impact of climate change to be adverse in terms of reduction of yield of major crops including wheat, maize, mustard, potato and sorghum.

‘The most singular of all the things that we have found': Clouds study alarms scientists - The new study was led by Ramanathan’s Scripps Institution of Oceanography colleague Joel Norris, though Ramanathan said he was not involved in the work and didn’t know about it until shortly before publication. But Ramanathan said that the study basically confirms that there’s nothing to prevent the world from reaching the high levels of warming that have long been feared — except for our own swift policy actions, that is.   “Maybe the 4 to 5 degree warming, certainly we were all wishing there was some certainty that would make it go away. So I consider the findings of this paper, the data shows major reorganization of the cloud system.”  This matters because clouds are fundamental regulators of how much solar radiation makes it to the Earth’s surface (rather than being reflected back to space by white cloud tops), and how much infrared or “longwave” radiation escapes back to space once again.  The new study used satellite records going back to 1983 to show that cloud patterns have shifted on the Earth as cloud belts have pushed poleward, expanding what are called subtropical dry zones between about 20 and 30 degrees latitude in both hemispheres.  The shift is expected to exacerbate climate change, as moving clouds toward the poles means they reflect less sunlight back to space — there is less sunlight at the poles than at Equator, so the reflectivity of clouds counts for less there.

Broiled Alaska: soaring temps, crackling lightning ignite wildfires -- After months of record-setting warmth culminating in extremely high temperatures last week, much of Alaska was primed for wildfire.Things had been quiet until then, despite the warmest January through June period in Alaska since 1895.Then the lightning came — with a sudden vengeance: some 45,570 strikes between July 13 and 16th.The result: Flames finally exploded through Alaskan landscapes, with 114 new wildfires resulting in a more-than-100,000-acre increase in the total number of acres burned in Alaska this season, according to the Alaska Division of Forestry.During one day last week, the acreage burned was one-third of the total that has burned during the entire season. As of July 16th, 481 wildfires had burned 299,632 acres of Alaska.It should be said that this burned acreage is way down from last summer’s apocalyptic pace. (By the third week of July in 2015, 5 million acres had already burned — an area larger than Connecticut.) But Alaska’s wildfire season typically lasts into August. So especially considering the warm conditions — which are forecast to continue well into August — we shouldn’t be surprised if the current upsurge continues. The animated gif at the top of this post shows a closeup of several fires burning on Alaska’s North Slope on July 15th. The natural color image was acquired by NASA’s Terra satellite. The false color image was captured by the Suomi NPP satellite. That second image shows the active burning areas in orange, and burned over areas in dark brown.

Retreating glaciers a sign of Alaska’s major meltdown — High Country News: In late June, the Mendenhall Glacier was melting fast – and the lake below was rising. Reports of the water level were coming in every hour to the office of John Neary, director of the Mendenhall Glacier Visitor Center. He watched nervously as the readings showed a sharp increase, indicating that the lake was about to overflow its banks, sending rising waters into the visitor center. Outside, visitors were scattered along trails, catching glimpses of the popular glacier in Tongass National Forest in southeast Alaska. Water had already begun creeping closer to the Nugget Trail, normally more than eight feet above the lake. Neary made the call: Close that trail and the nearby campground, and evacuate about 100 people. Warning signs were placed along other nearby trails, and glacier tours and trips to nearby ice caves were cancelled. And then, on July 1, the thing he’d feared most happened. Glacial meltwater gathering in Suicide Basin, above Mendenhall Lake, finally punctured a dam formed by glacial ice. As more water rushed through the widening gap, the lake flooded, inundating nearby trails. It wasn’t the first time that such flooding had occurred. The first overflow was in 2011, and since then, as the Mendenhall Glacier melts away, they’ve become more frequent – and more destructive. In 2014, the water rose to 11 feet, two feet over flood level, breaking a record set three years earlier. This year’s outburst set a new benchmark with the water rising to nearly 12 feet.

Greenland lost a staggering 1 trillion tons of ice in just four years - It’s no news that Greenland is in serious trouble — but now, new research has helped quantify just how bad its problems are. A satellite study, published last week in the journal Geophysical Research Letters, suggests that the Greenland ice sheet lost a whopping 1 trillion tons of ice between the years 2011 and 2014 alone. And a big portion of it came from just five glaciers, about which scientists now have more cause to worry than ever. It’s the latest story in a long series of increasingly worrisome studies on ice loss in Greenland. Research already suggests that the ice sheet has lost at least 9 trillion tons of ice in the past century and that the rate of loss has increased over time. Climate scientists are keeping a close eye on the region because of its potentially huge contributions to future sea-level rise (around 20 feet if the whole thing were to melt) — not to mention the damage it’s already done. Ice loss from Greenland may have contributed as much as a full inch of sea-level rise in the last 100 years and up to 10 percent of all the sea-level rise that’s been documented since the 1990s. The new study takes a detailed look at ice loss in Greenland between 2011 and 2014 using measurements from the CryoSat-2, an environmental research satellite launched by the European Space Agency in 2010. It relied on a type of measurement known as altimetry — basically, measuring how the surface of Greenland’s altitude changed over time in response to ice gains or losses. “Simplistically, if the ice sheet’s going up, we can find that as evidence that the ice sheet is growing,” said lead author Malcolm McMillan, a research fellow at the University of Leeds. “And where we see that the ice sheet surface is lowering, we can find that the ice sheet is losing ice.”

Scientists think they’ve just pinpointed the key driver of ice loss in Antarctica -- The Antarctic Peninsula is headed for trouble — that much scientists know. Glaciers on the peninsula, which extends from the increasingly unstable West Antarctic region, have been retreating for decades, and some in the region have undergone particularly accelerated melting since the 1990s.     Until recently, many scientists assumed that a steady increase in air temperature around the peninsula, the product of global warming, was the primary cause behind most of the ice loss. But new research looking at the western side of the peninsula suggests that this may not be the case after all. A study published Thursday in the journal Science suggests that warm ocean water may be the biggest driver of glacial retreat in that region — and it’s a problem that may not be getting enough attention.    Many glaciers around Antarctica, particularly in West Antarctica, end at the edge of the sea. Often, these glaciers terminate in what’s known as an ice shelf — a ledge of ice that’s connected to the glacier but not grounded to the bedrock, so it essentially floats on top of the sea. These ice shelves are instrumental in keeping glaciers stable and holding back the flow of ice behind them. If they weaken or break, glaciers can quickly begin pouring ice into the water.  But because these ice shelves aren’t grounded, all the space below them is filled with ocean water, which presses against the front of the glacier right up to the point where the ice becomes connected to the bedrock. As climate change is causing not only the air around the world to warm but also the ocean, scientists are concerned that rising water temperatures may be helping to melt many glaciers from the bottom up. This process can cause ice shelves to thin and even break off, leading to rapid ice loss.

After warming fast, part of Antarctica gets a chill: study | Reuters: The Antarctic Peninsula, among the fastest warming places on Earth last century, has since cooled due to natural swings in the local climate, scientists said on Wednesday, adding that the respite from the thaw is likely to be brief. Rapid warming until the late 1990s on the peninsula, which snakes up toward South America, triggered the break-up of ancient ice shelves, which are vast expanses of ice floating on the sea at the end of glaciers, and declines in some penguin colonies. But a shift to colder winds and more sea ice since then have brought a chill to the region despite the build-up of greenhouse gases in the atmosphere, the scientists wrote in the journal Nature. "The increase of greenhouse gases ... is being overwhelmed in this part of the Antarctic" by natural variations in the local climate, said lead author John Turner of the British Antarctic Survey (BAS). "We're certainly not saying that global warming has stopped. On the contrary," he told a telephone news conference on the study. "We're highlighting the complexity of climate change." Since about 1998, local air temperatures have fallen about 0.5 degree Celsius (0.9 Fahrenheit) a decade, roughly the rate at which they had previously been warming since about 1950. Stabilization of the ozone hole over Antarctica, which shields the planet from ultra-violet rays and has been damaged by man-made chemicals, may partly explain the shift in winds that led to the cooling, the study said. But the build-up of greenhouse gases, mainly from the global burning of fossil fuels, means the cooling may be just a blip in a corner of Antarctica. Temperatures were likely to start rising again and could gain by 3-4C (5.4-7.2F) by 2100, Turner said.

Cold and calculating: what the two different types of ice do to sea levels - It was back in 250ʙⅽ when Archimedes reportedly stepped into his bathtub and had the world’s first Eureka moment – realising that putting himself in the water made its level rise. More than two millennia later, the comments sections of news stories still routinely reveal confusion about how this same thing happens when polar ice melts and sea levels change. This is in marked contrast to the confidence that scientists have in their collective understanding of what is happening to the ice sheets. Indeed, the 2014 Assessment Report of the Intergovernmental Panel on Climate Change  reported “very high confidence” that the Greenland Ice Sheet was melting and raising sea levels, with “high confidence” of the same for the Antarctic Ice Sheet. Despite this, commenters below the line on news stories frequently wonder how it can be true that Antarctica is melting and contributing to sea-level rise, when satellite observations show Antarctic ice expanding. Unravelling the confusion depends on appreciating the difference between the two different types of ice, which we can broadly term “land ice” and “sea ice” – although as we shall see, there’s a little bit more to it than that. The two different types of ice have very different roles in Earth’s climate, and behave in crucially different ways.

Something Is Causing Siberia’s Tundra to Literally Bubble Underground - The frigid plains of northern Siberia are becoming a hotspot for mysterious geological phenomena. Over the past couple of years, sudden craters have been exploding from the permafrost-laden ground. Last month, we reported on a giant chasm in the Sakha Republic that looms so wide and deep, locals refer to it as a “gateway to the underworld.”  In a video released today by the Siberian Times, researchers Alexander Sokolov and Dorothee Ehrich investigate a seemingly nondescript tract of grass that turns out to be a large, concealed pocket of… something. Kind of like a trampoline, the subterranean bubble forcibly undulates as Sokolov puts pressure on one side using his foot. According to the Russian scientists, a total of 15 blister-like patches were discovered on the island. The researchers who captured the strange footage said both methane and carbon dioxide poured out of the bubble when it was punctured. It’s still unclear why or how these pockets of gas first formed, but it’s possible that an unusual heat wave caused permafrost to thaw, which allowed trapped methane gas to escape.  This wouldn’t be the first time that leaky methane has been blamed for Siberia’s wild anomalies. Geologists suspect that massive sinkholes and craters started to pop up when previously frozen tundras began to rapidly melt. Many scientists are concerned that Arctic methane emissions could “trigger additional warming.” One study estimated that by 2100, up to 205 billion tons of carbon emissions will be released by permafrost if climate change continues to worsen.

Why Obama’s top scientist just called keeping fossil fuels in the ground ‘unrealistic’ -- White House science adviser John Holdren’s comment Monday that it was “unrealistic” to halt fossil fuel extraction altogether in the U.S. may have seemed like stating the obvious. But it has further highlighted the tensions that exist even among top American policy makers and environmental advocates concerned about curbing the rate of climate change.  Bernie Sanders and his followers, influential green movement leaders like Bill McKibben and powerful organizations like the Sierra Club, have been pushing a “keep it in the ground” approach. For these advocates, a future strongly dependent on wind, solar  and batteries can’t come fast enough. And they have led campaigns not only to oppose fracking for natural gas but also to block — successfully — the Keystone XL pipeline. Most recently, Sanders’s supporters have been deeply engaged in a push to make the Democratic Party’s official platform more strongly reflective of this point of view, although they were unsuccessful in trying to incorporate a fracking ban into the platform.  Yet Obama administration officials and many energy policy wonks continue to suggest that we will need to rely on burning natural gas, nuclear energy and even outfitting coal plants with carbon capturing technologies for some time. In contrast to “keep it in the ground,” their approach has sometimes been labeled “all of the above.” Meanwhile, Clinton has called natural gas, in particular, a “bridge” to a cleaner energy future.  According to a Tweet by Brian Scheid, a reporter for Platts, Holdren yesterday called the “keep it in the ground” movement “unrealistic” in his keynote speech at the conference.  Morning Consult also reported that Holdren stated, “The notion that we’re going to keep it all in the ground is unrealistic. We are still a very heavily fossil-fuel dependent world.”  “When asked whether it was feasible to leave all the remaining fossil fuels in the ground, Dr. Holdren noted that it is not, because the U.S. — and the world — still depend on fossil fuels for more than 80 percent of all the primary energy we use,” said White House spokeswoman Lindsey Geisler said in an email. “It’s not practical or affordable to replace the huge, fossil-fuel infrastructure with nuclear and renewables overnight, no matter how badly we may want to. As a result, the U.S. will be using fossil fuels for decades to come, albeit, one hopes, with the share of non-fossil supplies increasing over time.”

US says fuel economy likely won't meet 2025 targets - (AP) — The U.S. government says the fuel economy of the nation’s fleet of cars and trucks likely won’t meet its targets in 2025 because low gas prices have changed the types of vehicles people are buying. Under standards set in 2012, automakers’ fleets were expected to get an average of 54.5 miles per gallon by 2025. But in a report issued Monday, the government says that’s more likely to be between 50 miles per gallon and 52.6 miles per gallon. A summary of the report — by the U.S. Environmental Protection Agency, the U.S. Department of Transportation and the California Air Resources Board — was obtained by The Associated Press. The report is part of a review that will decide whether to relax the standards or keep them in place.

U.S. fuel efficiency goals could fall short by 2025, federal report finds - The fuel efficiency standards championed by President Obama in 2012 will fall short of the 54.5-miles-per-gallon 2025 target the administration set because consumers are buying more pickup trucks, vans and sports utility vehicles than expected, according to a new technical assessment report by the Environmental Protection Agency and the National Highway Traffic Safety Administration. The shift could slightly undercut one of Obama’s signature climate initiatives, trimming the greenhouse gas benefits as cheaper-than-expected oil prices — and large ad campaigns — have lured car buyers toward bigger vehicles than anticipated. The two agencies said that based on current trends, the average vehicle in 2025 would consume between 50 and 52.6 mpg. That measurement, used by the Transportation Department, would translate into a real world fuel economy of 36 mpg. But the executive summary of the report issued Monday also said that there is no economic or technological barrier preventing automakers from continuing to boost fuel efficiency and to hit the standards for vehicles based on their size and footprints. It said that “a wider range of technologies exist” for manufacturers to meet targets “and at costs that are similar or lower” than those used to set the standards. The report said that so far automakers had “overcomplied” in each of three model years under the new rules, exceeding the targets by 1.4 mpg in 2014. The report marks the start of a so-called mid-term review of fuel efficiency standards that were designed to reshape the motor vehicle fleet and more than double fuel efficiency by 2025. In setting the standards, the Obama administration in 2012 agreed to auto industry demands that the targets be reexamined for technological and economic feasibility and possibly reset in 2017. But the administration said the possibility meant that the regulations could be tightened as well as loosened.

EPA Study Bolsters Keeping 2025 U.S. Fuel Economy Targets - Based on current trends, the average car would get between 50 and 52.6 miles per gallon by 2025, falling short of the original projection of 54.5, according to the draft technical assessment released Monday by the U.S. Environmental Protection Agency, the National Highway Transportation Safety Administration and the California Air Resources Board. However, the report said automakers can draw on an array of technologies to satisfy the target and it will cost less than expected. “The draft report supports that the administration’s fuel economy program can continue to incentivize innovation and reduce fuel consumption while also ensuring that consumers can continue to choose the vehicles they want to drive," National Highway Traffic Safety Administrator Mark Rosekind said in a news release. Midterm Review The document lays the foundation for next year’s "midterm review" of the standards, which are set to become progressively tougher by 2025 and will be especially challenging for the big pickups on which Detroit automakers depend. Although President Barack Obama’s successor will have significant discretion over the requirements, the technical document provides a hint into the EPA’s thinking about how achievable the standards are and suggests regulators could adopt a stay-the-course approach during next year’s evaluation.

40 senators seek higher biodiesel mandate | TheHill: Forty senators are asking the Obama administration to increase the proposed volume for blending biodiesel into the nation’s fuel supply. The senators, led by Sens. Roy Blunt (R-Mo.) and Patty Murray (D-Wash.), argue that biodiesel volume the Environmental Protection Agency (EPA) proposed for 2018 is less than the industry’s production capacity.  “The EPA’s 2018 proposal calls for just 100 million gallons in growth over the 2017 volume,” the bipartisan group of senators wrote Thursday to the EPA. “This does not capture the full potential of the biodiesel and renewable diesel industries in our states and should be strengthened to at least 2.5 billion gallons, an increase of 400 million gallons.” The EPA proposed in May to require that refiners of traditional diesel blend 2 billion gallons of biodiesel into their supplies in 2017 and 2.1 billion gallons in 2018. The mandate is part of the renewable fuel standard, which also includes annual ethanol mandates for gasoline. “We urge you to continue to support higher [volumes] for biodiesel to encourage additional development and use of this fuel,” the senators said. The National Biodiesel Board welcomed the letter and agreed with it.

Canada to Introduce National Carbon Price in 2016, Minister Says -  The federal government will publish an emissions reduction plan this fall that could include expanded, standardized emissions disclosure requirements for companies, McKenna said in an interview with Danielle Bochove on Bloomberg TV Canada. McKenna spoke after appearing with Bank of England Governor Mark Carney in Toronto on Friday. Her comments come as provinces work to reach a deal on whether to set a mandatory cross-Canada carbon price, a plan not all provinces support. “What we want to see is uniformity in terms of a national price, also that we’re doing it in a thoughtful way, and provinces and territories need to decide what they’re doing with the revenues,” McKenna said. Asked whether she’d force a carbon price on provinces that have resisted a new measure. “I don’t like the word forced. I think this is really an opportunity,” McKenna said. “We need a national price on carbon. So that’s what we’re going to have in the fall.” The government also favors increased emissions disclosure by the private sector, including standardizing. McKenna later wavered when pressed on whether a mandatory national carbon price or mandatory disclosure would be included in her final plan. “Disclosure is certainly part of the equation,” she said, adding that, for industry, “I’m going to promise them a plan and the plan will include carbon pricing.” Businesses “want certainty, they want us to be moving forward in a transparent way,” she added.

Clean energy won’t save us – only a new economic system can do that --  As important as clean energy might be, the science is clear: it won’t save us from climate change. Why? Because the burning of fossil fuels only accounts for about 70% of all anthropogenic greenhouse gas emissions. The remaining 30% comes from a number of causes. Deforestation is a big one. So is industrial agriculture, which degrades the soils to the point where they leach CO2. Then there’s industrial livestock farming which produces 90m tonnes of methane per year and most of the world’s anthropogenic nitrous oxide. Both of these gases are vastly more potent than CO2 when it comes to global warming. Livestock farming alone contributes more to global warming than all the cars, trains, planes and ships in the world. Industrial production of cement, steel, and plastic forms another major source of greenhouse gases, and then there are our landfills, which pump out huge amounts of methane – 16% of the world’s total.    The climate movement made an enormous mistake. We focused all our attention on fossil fuels, when we should have been pointing to something much deeper: the basic logic of our economic operating system. After all, we’re only using fossil fuels in the first place to fuel the broader imperative of GDP growth.  The root problem is the fact that our economic system demands ever-increasing levels of extraction, production and consumption. Our politicians tell us that we need to keep the global economy growing at more than 3% each year – the minimum necessary for large firms to make aggregate profits. That means every 20 years we need to double the size of the global economy – double the cars, double the fishing, double the mining, double the McFlurries and double the iPads. And then double them again over the next 20 years from their already doubled state.

How Renewable Energy Is Blowing Climate Change Efforts Off Course - Is the global effort to combat climate change, painstakingly agreed to in Paris seven months ago, already going off the rails? Germany, Europe’s champion for renewable energy, seems to be having second thoughts about its ambitious push to ramp up its use of renewable fuels for power generation. Hoping to slow the burst of new renewable energy on its grid, the country eliminated an open-ended subsidy for solar and wind power and put a ceiling on additional renewable capacity. Germany may also drop a timetable to end coal-fired generation, which still accounts for over 40 percent of its electricity, according to a report leaked from the country’s environment ministry. Instead, the government will pay billions to keep coal generators in reserve, to provide emergency power at times when the wind doesn’t blow or the sun doesn’t shine.Renewables have hit a snag beyond Germany, too. Renewable sources are producing temporary power gluts from Australia to California, driving out other energy sources that are still necessary to maintain a stable supply of power. In Southern Australia, where wind supplies more than a quarter of the region’s power, the spiking prices of electricity when the wind wasn’t blowing full-bore pushed the state government to ask the power company Engie to switch back on a gas-fired plant that had been shut down. But in what may be the most worrisome development in the combat against climate change, renewables are helping to push nuclear power, the main source of zero-carbon electricity in the United States, into bankruptcy. The United States, and indeed the world, would do well to reconsider the promise and the limitations of its infatuation with renewable energy.An analysis by Bloomberg New Energy Finance, narrowly distributed two weeks ago, estimated that nuclear reactors that produce 56 percent of the country’s nuclear power would be unprofitable over the next three years. If those were to go under and be replaced with gas-fired generators, an additional 200 million tons of carbon dioxide would be spewed into the atmosphere every year.

Some Climate Change Adaptation Algebra --  I'm in Bozeman, Montana.  While there are 40,000 people in this city. I see a lot of open space.  Google taught me that Montana has 380,000 square kilometers of land.  Suppose that 50% of that can be built upon.  Suppose we built up at Hong Kong's density of 7000 people per square mile.  So, we would re-create dense cities at a higher latitude.  Let's do some math.  190,000*7000 = 1.33 billion people could live in Montana.  This migration and real estate construction would create great wealth.  Now, given that the U.S population has only 340 million people --- we could open up migration for those who could jump over Don Trump's wall and house them.   This example is meant to show folks how urbanization facilitates adaptation.  We need to use our resources more efficiently. Why do I focus on Montana?  It is towards the North and it is off the coast and there is plenty of land here.  Yes, this land has some economic activity taking place on it right now but urban use would be more valuable.   I am now working on a natural disaster project with Leah Boustan and Paul Rhode and once I can access our disaster data, I will update this post to see whether Montana is exposed to more disasters than would be predicted given its size.

Another Inconvenient Truth: It’s Hard to Agree How to Fight Climate Change - By just about any measure, the movement to battle climate change has grown so large that the truths of Al Gore’s decade-old movie now seem more mainstream than inconvenient. In Paris in December, 195 nations agreed to reduce greenhouse gases. In the United States, 70 percent of Americans say that climate change is real. Pope Francis has joined the call for action. Hundreds of thousands of people have come together for climate marches in Paris and New York, and demonstrators recently held fossil-fuel protests on six continents. “That’s what I call momentum,” Daniel R. Tishman, the chairman of the board of the Natural Resources Defense Council, said in its recent annual report. “This isn’t just the wind at our backs; these are the winds of change.”But the movement that started with a straightforward mission — to get more people to appreciate the dangers of climate change as a precursor to action — is feeling growing pains. What may seem like a unified front has pronounced schisms, with conflicting opinions on many issues, including nuclear power and natural gas, that are complicating what it means to be an environmentalist in this day and age.The factional boundaries are not hard and fast, with groups shifting their positions as the science and waves of activism evolve. The environmental movement has always been a congregation of many voices, and some disagreement should be expected on such complex and intractable problems as saving the planet. Still, the tensions remain strong.Consider some of the biggest points of contention:

Under a single minister, will energy and the environment be friends or foes? -- One of the most notable moves in yesterday’s cabinet reshuffle was Prime Minister Malcolm Turnbull’s decision to merge the environment and energy portfolios, and hand them both to current energy minister Josh Frydenberg. The immediate reaction was mixed. The Australian Petroleum and Exploration Association described it as “the holy grail”, whereas others branded the move a nightmare scenario. Often when two agencies are combined, the culture of one dominates. In this case, it will hinge on the agenda chosen by Frydenberg, Turnbull, and the government as a whole. If the resource-oriented, centralised, growth-focused energy industry culture dominates, we could see emerging industries blocked, the climate response crippled, and environmental destruction. On the other hand, if the various interest groups are forced to engage with the climate issue, and the abuse of market power, fossil fuel subsidies and other longstanding conflicts are worked through, it could be the circuit-breaker that’s so sorely needed. One thing that’s clear is that Frydenberg has been given a remarkably complicated brief. Energy and environment are both great examples of “wicked problems” – issues so complex that we struggle to define the problems, let alone agree on how to deal with them.

World leaders poised to seal landmark emissions deal in Vienna - In 1987, the Montreal Protocol set the ozone layer on the path to recovery. In 2016, it could take a bite out of greenhouse gas emissions. Officials convened in Vienna this week to amend the Montreal Protocol, which phased out ozone-killing refrigerants called CFCs nearly three decades earlier. Now the delegation is nearing an international deal to reduce HFCs, says EPA administrator Gina McCarthy. “We are seeing all countries coming into this meeting with an incredibly positive and collaborative energy level,” Ms. McCarthy said at a press conference on Thursday. “There is no country that appears to be standing on the sidelines in this discussion.”Chlorofluorocarbons (CFCs) are organic compounds composed of carbon, chlorine, and fluorine. CFCs, which were commonly used in air conditioners and aerosol cans, catalyze the conversion of ozone (O3 ) to oxygen (O2 ). In the 1970s, researchers found that atmospheric CFC levels were weakening Earth’s protective ozone layer. Manufacturers replaced CFCs with hydrofluorocarbons (HFCs). By comparison, these compounds were ozone-friendly and worked about as well in refrigerants. But later research indicated that HFCs are potent greenhouse gases, contributing significantly to climate change. International officials have reconvened in hopes of amending the Montreal Protocol to include HFC limits. The EPA has stated that a global reduction in HFCs could prevent 0.5 degrees Celsius in warming over the next century. It doesn’t sound like much, but it’s a moderate step in suppressing climate change.

When Subpoenas Threaten Climate Science - Last week, my organization — the Union of Concerned Scientists — received a subpoena signed by Lamar S. Smith of Texas, the Republican chairman of the House Committee on Science, Space and Technology. The subpoena orders me to hand over correspondence between my staff members and state attorneys general, and between my staff members and environmental organizations and funders. This demand impinges on our group’s constitutional rights, and it would set a terrible precedent affecting many other advocacy groups were we to comply with it.The subpoena concerns our efforts to inform state attorneys general of our research into Exxon Mobil. Our research details, among other things, how much Exxon Mobil knew about the dangers posed to the planet from carbon emissions from its products at the same time it was spending millions to misinform the public about the science of climate change.Mr. Smith makes no claim that our organization violated any law or regulation; he simply demands to see our correspondence. This is a deeply troubling request. It is, in effect, a bullying tactic that threatens the work that advocacy groups like mine do under the protection of the First Amendment when we “petition the government for a redress of grievances.” Are we to expect a subpoena every time we have a conversation with a public official if some committee chairman dislikes or disagrees with us?Mr. Smith’s demand also interferes with continuing law enforcement proceedings by New York and Massachusetts state attorneys general who — acting under their own state laws — have commenced investigations into Exxon Mobil’s potentially fraudulent actions. (Mr. Smith has sent similar subpoenas to the other environmental organizations and funders as well as the offices of the attorneys general of New York and Massachusetts.)

New EPA Rules Will Cut Landfills’ Methane Emissions By A Third - Last Friday, the EPA announced new rules that will cut landfills’ methane emissions by one third. The latest regulation is an update to rules last updated over 20 years ago. They are expected to reduce methane emissions by around 334,000 tons a year in 2025. That is equivalent to reducing 8.2 million metric tons of carbon dioxide emissions.  Methane is a greenhouse gas with a global warming potential over 25 times that of carbon dioxide, according to the EPA. But over a 20 year period, it can be 86 times more potent. Methane is the second-most common greenhouse gas emitted by human activities, and nearly 20 percent of those emissions come from landfills.The methane regulations update the New Source Performance Standards (NSPS) and, in a separate action, revise the Emissions Guidelines from 1996. These actions further implement President Obama’s Climate Action Plan and its “Strategy to Reduce Methane Emissions.”Under the NSPS rule, new landfills — after July 17, 2014 — will have to install a gas collection control system if non-methane organic compounds exceed 34 metric tons per year. That number is one third less than the previous threshold of 50.  The control system may either route it to a non-enclosed flare, an enclosed combustion device, or a treatment system which can ultimately sell the methane as a source of energy. An estimated 128 landfills will be subjected to this rule, and of these, 115 will be required to install the controls in 2025. The remaining 13 will report their emissions.  An estimated 1,014 active existing landfills will be affected, with 731 controlling landfill gas in 2025. However, this is only 93 more than under the previous rules.

Volkswagen Emissions Scandal Just Got Worse  - Attorneys general for New York, Massachusetts, and Maryland announced Tuesday they are suing the company for fraud, saying that the Volkwagen’s installation of defeat devices to thwart emissions testing was part of a “willful, systemic scheme.”“Today’s suit and the nine-month investigation that led to it are designed to hold Volkswagen accountable for their actions,” New York Attorney General Eric Schneiderman said at a press conference Tuesday. “What we found in our investigation was shocking and reveals a cunningly cynical fraud at the heart of this scandal.” This clean diesel was no more than a dirty cover-up Last fall, the EPA charged Volkwagen with violating the Clean Air Act. Volkswagen’s so-called clean diesel cars were programmed to be able to pass emissions tests, even though in real-life driving situations, they emitted up to 40 times more ntitrogen-oxide (NOx) compound emissions than allowable under EPA regulations. Two subsidiaries, Audi and Porsche, were also found to have installed defeat devices. Investigators believe the company pursued this strategy after it was unable to meet U.S. air quality standards by using diesel while still achieving fuel efficiency and providing desired performance capabilities. NOx compounds react with sunlight to cause ground-level ozone, which is tied to increased asthma and other respiratory and cardio health impacts. Ironically, as Schneiderman noted, during the period of 2009-2014, when Volkswagen was willfully deceiving regulators, the company was simultaneously marketing its cars as good for the environment. In 2010, Audi’s A3 diesel model won Green Car Journals “Green Car of the Year” award. Audi ran a Super Bowl ad touting the car’s environmental bona fides.  According to Schneiderman, it was the second-most watched ad in history.

Volkswagen executives did a benefit cost analysis of cheating U.S. environmental regulations -- New York state has field suit against Volkswagen claiming that not only did someone at Volkswagen designed a system to bypass emissions tests (for which VW has already agreed to pay over $15 billion), but that upper management actually performed a benefit cost analysis on what would happen if they got caughtExecutives even carefully evaluated what the cost would be to the company if they were caught. Reviewing previous cases of violations of environmental regulations by auto manufacturers in the U.S. they predicted that the likely fines posed “only a moderate cost risk.” They cited the highest fine, imposed against Hyundai/Kia as amounting to “barely $91 per vehicle” and added “fines in this amount are not even remotely capable of influencing the share price of a globally operative company such as Volkswagen.”  Oops...and then they apparently tried to cover it up: The most senior VW officer listed in the indictment is Martin Winterkorn who was CEO of Audi from 2002 to 2007, when the original defeat device was developed, and CEO of VW from 2007 until resigning on September 23, 2015. The day before he resigned, Winterkorn made a video statement that referred to “irregularities” in the diesel engines and said the company would act with “the greatest possible openness and transparency.” A few weeks earlier, according to the complaint, a senior VW attorney advised multiple employees that a litigation hold was about to be issued, making it impossible to destroy or delete documents. A team of at least eight employees, all in the departments involved in designing the defeat devices, then deleted or removed data from the company records.“Some, but not all, of the data has been recovered,” the lawsuit said.

EPA updates methane requirements for landfills | TheHill: Under new rules announced by the Environmental Protection Agency (EPA) on Friday, solid waste landfill operators must begin capturing methane emissions from their sites at levels one-third lower than current standards permit. The rule, finalized Friday after being proposed a year ago next month, updates 20-year-old standards for methane emissions at landfills.  The new standards will reduce landfill emissions by up to 334,000 tons a year by 2025 and produce climate benefits worth $512 million annually by then, the EPA announced. Landfill waste produces pollutants such as air toxins, carbon dioxide and methane as it decomposes. Landfills are the second-largest industrial source of methane emissions in the U.S., the EPA said, beyond oil and gas drilling sites. The rule comes as the Obama administration works to crack down on emissions of methane, a greenhouse gas with 25 times the global warming power of carbon dioxide. Officials have committed to cutting methane emissions from the oil and gas sector by between 40 percent and 45 percent by 2025, an EPA push that has prompted resistance from the drilling sector.

EIA: Natural gas to generate more than one-third of US power this year | Utility Dive -- Dive Brief:

  • Natural gas will generate 34% of the United States' power this year, with production peaking this month and next as the families fire up their air conditioners to cope with hot summer weather.
  • Total gas generation will be 4% higher this year compared with 2015, according to new analysis from the U.S. Energy Information Administration.
  • Coal's share of the power mix is expected to be 30%, with nuclear and renewables following at 19% and 15%, respectively.Dive Insight:

Coal's decline and the rise of natural gas generation is accelerating. EIA's latest predictions regarding the United States generation mix show a significant shift from the estimates released less than a year ago. "Natural gas-fired electricity generation in the United States is expected to reach a record level this year," the agency said in a note digging into data form its most recent Short-Term Energy Outlook. "Monthly natural gas-fired generation is expected to reach record highs in July and August, when weather-related demand for air conditioning increases electricity demand. Gas will generate 34%, compared to coal's estimated 30%, edging out EIA's prediction in December when the agency estimated gas' share of generation would be 31.6%, with the coal generation set at 34.1%. Gas was second to coal for years and first generated more energy in April of last year. But since then, its share has been rising while environmental regulations and cheap fuelstock have pressured coal plants offline. However, renewable growth will soon begin to cut into gas' dominance, EIA said.

Former Cleanup Workers Blame Illnesses on Toxic Coal Ash Exposures: It was April 28, 2014, five years after Craig Wilkinson's 12-month stint as a backhoe operator at a massive coal-ash spill in Tennessee. Wilkinson was desperate for answers. Bearing a list of metals -- arsenic, lead, mercury and others concentrated in coal ash -- he arrived at a clinic specializing in toxic exposures. Maybe someone there could tell him what was coursing through his body. Wilkinson, then 56, adopted a "weather-through-it" mentality on the job. But his body had betrayed him since he had signed on as a cleanup worker following a dike failure that unleashed a billion gallons of ash from a Tennessee Valley Authority power plant. His vision grew dull, his head dizzy. Within months, he experienced a cough so persistent that it left him gasping for breath. By 2012, he was diagnosed with chronic obstructive pulmonary disease, a lung ailment. . A nodule sprouted on one lobe; pneumonia wreaked havoc on both. When he began coughing up blood, he suspected a connection to his work. The TVA spill marked a turning point in the debate over the dangers of coal ash, an often-toxic byproduct of coal-fired electricity. In December 2008, an earthen dam collapsed at a pond brimming with ash generated by the utility's Kingston Fossil Fuel Plant, 36 miles southwest of Knoxville. The cascading waste deluged nearly 400 acres in gray muck, destroying houses and dirtying a river, along with several inlets. It ranks among the largest industrial disasters in American history. The disaster thrust coal ash disposal into the public consciousness. Immediately afterward, the U.S. Environmental Protection Agency pledged to regulate this industrial waste, sparking a battle in Washington that is still playing out. In 2014, the agency set national standards that amount to guidelines for the states -- guidelines that call for treating the ash as if it were household trash. Weakened by loopholes, the EPA rule is the product of vigorous lobbying by the utility industry. Across the country, meanwhile, coal ash has fouled water sources and endangered public health.

The Continuing Battle Over Coal Ash Ponds -  Coal production and use in the United States has plummeted in recent years, but the wastes left behind after burning it — largely as a fuel for generating electricity at power plants — keep on coming, and they have been stored in lightly regulated, water-filled basins since at least the 1950s. Environmentalists have long raised concerns over this sort of storage, and a recent study out of Duke University’s Nicholas School of the Environment, which found evidence of contamination in local water near 21 of these so-called coal ash ponds across five southern states, would seem to add new credibility to those concerns. The Duke team took surface water samples from several sites in Georgia, Kentucky, and Virginia, and both groundwater and surface water samples in Tennessee. Alongside those they examined water sample data that had been previously collected by the North Carolina Department of Environmental Quality at 14 sites in that state. Jennie Harkness, lead author on the study, published last month in the journal Environmental Science & Technology, said the Duke team ultimately determined that all 21 sites showed signs that coal ash storage facilities were leaking into the water table. This included some storage basins that are no longer in use but still hold coal ash. Harkness could not confirm that the chemicals from any of these ash basins actually pollute local drinking water supplies, but the data are worrisome, she suggested. At one disposal site near a retired coal plant in Wayne County, southeast of Raleigh, North Carolina, for example, the data revealed levels of arsenic in nearby groundwater that the researchers called “conspicuously high” — more than 66 times the maximum level of arsenic that the Environmental Protection Agency says should be allowed in drinking water. The highest levels of boron were also found at that site near the plant.

Republican platform aims to dismantle US environment and climate laws - DW.COM | 19.07.2016: Republicans would implement drastic changes in American environment and climate policy if elected to power in November, according to the party platform adopted on Monday (18.07.2016) at the Republican National Convention in Cleveland. Erich Pica, the president of Friends of the Earth US, says it is "one of the most anti-environmental platforms we have ever seen." The platform, which would be implemented both by presidential nominee Donald Trump and by Republican lawmakers in the United States Congress, would end limits to CO2 emissions, pull the US out of the United Nations climate process, open protected forests to logging and end all subsidies to renewable energy. The document makes the argument that climate change is not proven science - and that in any event, "climate change is far from this nation's most pressing national security issue." The Environmental Protection Agency (EPA), set up by Republican President Richard Nixon in 1970, would be dismantled and transformed into an "independent bipartisan commission similar to the nuclear regulatory commission." The platform accuses the Democratic administration of outgoing president Barack Obama of having a "radical anti-coal agenda." "The Democratic Party does not understand that coal is an abundant, clean, affordable, reliable domestic energy resource," it states.

GOP platform, which calls coal 'clean', would reverse decades of US climate and energy policy  - The Republican Party platform adopted Monday night would bring a total about-face on U.S. energy and climate policy, declaring that the priority placed on combating climate change under President Obama “the triumph of extremism over common sense, and Congress must stop it.” The GOP platform calls coal “clean,” pledges to reverse a Supreme Court ruling on the scope of the Clean Air Act, seeks to open vast amounts of federally protected public lands and waters to oil, gas and coal exploitation, rejects the Paris climate accord and Obama’s Clean Power Plan, and opposes a carbon tax. It takes aim at “environmental extremists” and calls the environmental movement “a self-serving elite.” The document says the party would “transform the EPA into an independent bipartisan commission, similar to the Nuclear Regulatory Commission.” In four pages devoted to energy and climate, the platform tosses aside an environmental regulatory structure built on congressional legislation and judicial rulings over more than four decades, dating to the creation of the Environmental Protection Agency under President Richard M. Nixon. The Republican Party platform would limit agencies’ power to make rules to carry out legislation. And it would seek to bar the EPA from regulating carbon dioxide emissions, a power the Supreme Court said unambiguously in a 2007 ruling that the agency possessed. Responsibility for environmental regulation would be moved from “the federal bureaucracy” to the states, which generally have fewer resources and less commitment to enforcing environmental standards. Oil and gas companies can get drilling permits in as little as 30 days in states such as North Dakota, whereas it can take months to get federal permits for drilling on protected lands.

GOP Climate Platform Gets Crazier Every Election -- Eight years ago, the Republican Party’s platform had a fairly sane position on climate change. It acknowledged “human activity” had “increased the amount of carbon in the atmosphere,” and pledged “technology-driven, market-based solutions that will decrease emissions, reduce excess greenhouse gasses in the atmosphere, increase energy efficiency, mitigate the impact of climate change where it occurs.” Then, four years ago, it started to get crazy. All of the acknowledgements of climate change and greenhouse-gas emissions were gone from the 2012 platform, replaced with the vague statement, “The causes and long-range effects of a phenomenon are uncertain.” The platform also opposed cap-and-trade or regulation of greenhouse-gas emissions. This year’s draft platform has a stance on climate change that is even crazier than the last one. The new platform expresses even more skepticism about the theory of anthropogenic global warming, which Republicans now officially declare to be cooked up by U.N. bureaucrats: Information concerning a changing climate, especially projections into the long-range future, must be based on dispassionate analysis of hard data. We will enforce that standard throughout the executive branch, among civil servants and presidential appointees alike. The United Nations’ Intergovernmental Panel on Climate Change is a political mechanism, not an unbiased scientific institution. Its unreliability is reflected in its intolerance toward scientists and others who dissent from its orthodoxy. We will evaluate its recommendations accordingly. Notably, after calling for “hard data” and then dismissing the IPCC — the body accepted by climate scientists as the leading authority — as hopelessly biased, the Republican platform does not specify which scientific authority it would accept.

11 Things the Republican Party Just Promised to Do to the Environment - The Republican Party's 2016 platform, released on Monday at its national convention in Cleveland, has sections called "A New Era in Energy" and "Environmental Progress." Both titles are inaccurate. Perhaps they're meant sarcastically?  Here are the 11 biggest lowlights:

  • Cancel the Clean Power Plan.
  • Build the Keystone XL pipeline and more like it.
  • Kill federal fracking regulations. Because nothing should stand in the way of fossil fuel development.
  • "Oppose any carbon tax." Many conservative policy wonks support a carbon tax as the most market-friendly, efficient way to reduce carbon emissions. The Republican Party, though, is determined to quash anyone's hopes of a bipartisan compromise on climate action.
  • Expedite export terminals for liquefied natural gas. To liquefy gas, ship it across the ocean, and re-gasify it uses a lot of energy and results in a huge carbon footprint. Republicans want more of this.
  • Abolish the EPA as we know it.
  • Stop environmental regulatory agencies from settling lawsuits out of court. Huh? Republicans have been pushing this for a while.
  • "Forbid the EPA to regulate carbon dioxide."
  • Turn federal lands over to states.
  • Revoke the ability of the president to designate national monuments.
  • Halt funding for the UN's Framework Convention on Climate Change.

There's also some random small-bore stuff, like opposition to listing the gray wolf or the lesser prairie chicken as endangered species. There are a ton of right-wing talking points, like declaring the Intergovernmental Panel on Climate Change "a political mechanism, not an unbiased scientific institution." And there are additional paeans to the virtues of increased fossil fuel extraction.

Green Republicans resist Trump's climate denial in Cleveland | Reuters: Republican presidential candidate Donald Trump has called climate change a hoax and has vowed not to let regulation stand in the way of expanded U.S. oil drilling if elected. But a group of his supporters at the Republican National Convention in Cleveland this week are lobbying him to soften that stance. Youth, religious and investor activists aligned with the Republican Party are working the sidelines of the July 18-22 conclave, arguing that a greener platform could help the New York businessman-turned-politician win voters in November. "In an age where the Republicans are particularly interested in winning the presidency, they are not supporting an agenda that reflects that most Americans recognize climate change is a problem," said Rachel Lamb, national organizer for the Young Evangelicals for Climate Action group. Lamb and representatives from other organizations like the Greater Cleveland Young Republicans, environmental advocacy group RepublicEn, and clean energy foundation ClearPath taken part in panel discussions and held private meetings with operatives on the sidelines of the convention. Trump was formally nominated on Tuesday to compete in the Nov. 8 presidential election against presumptive Democratic nominee Hillary Clinton, who has made combating climate change a key theme in her campaign. The Republican Party has adopted a platform that calls coal a “clean” source of electricity and would open more federal land to drilling and mining, while Trump has said he would reverse some of President Barack Obama's key climate change initiatives.

Clean-Coal Project Slammed by Watchdog Gets Late U.S. Reprieve - The Energy Department had planned to yank its support for the Texas Clean Energy Project on Friday, if Summit failed to provide firm commitments from lenders and investors to finance the whole project. But before the agency announced its decision, developers cited a regulation to launch an informal dispute resolution process that buys more time for talks. The Department of Energy said in an e-mailed statement that while it "has a responsibility to the taxpayer," it also is governed by existing laws, and "that includes the right of a company to seek an informal dispute resolution." "We have been working with the project as we understand how important it is to move this technology forward," the Energy Department said. "We will continue to work with the company to figure out the best next steps." The last-minute lifeline shows how difficult "clean coal" can be to shake. The Texas Clean Energy Project was once viewed as a promising potential showcase of how carbon capture technology could clean up coal-fired power generation, but it has come under increasing scrutiny. In April, the Energy Department’s acting inspector general said he was “concerned about the viability of the project" and questioned the continued government support.

Republicans have no real answer for the collapsing US coal industry - Vox: On Tuesday night at the Republican National Convention, Sen. Shelley Moore Capito of West Virginia went onstage and railed against Hillary Clinton's "anti-coal agenda." Her kicker: "I weep for the fabric of my state." Capito’s right that West Virginia’s coal industry is collapsing, mining jobs are vanishing, and it’s genuinely hurting the state. She’s also right that the industry will likely keep shrinking under Clinton, who plans to tackle global warming by further curtailing America’s coal use in favor of cleaner energy sources. But here’s the secret Capito didn’t mention: West Virginia’s coal industry would also keep shrinking under Donald Trump. And he has no real idea what to do about it. Because despite Trump’s airy boasts that he’ll revitalize Appalachia, he can’t bring back all those lost coal jobs. So far, Republicans have been in complete denial about this fact — and, to boot, they’ve been blocking efforts to help coal communities adapt to this uncomfortable new reality. Here’s the big picture: Coal production across the entire United States is falling off a cliff. Back in 2008, the country produced a record 1.2 billion short tons of coal, supplying fully one-half of the nation’s electricity. By 2015 that had fallen to 900 million tons, and coal supplied just one-third of our power.

Nuclear math doesn’t add up — Writing in the National Review, Robert Bryce< of the Manhattan Institute criticises the Democratic Party platform for omitting any mention of nuclear power, and accuses the Democrats of failing to “do the math”. Unfortunately, although he throws some numbers about, he doesn’t do any math to support his key conclusion  "But even if we doubled the rate of growth for wind and solar — and came up with a perfect method of electricity storage (which of course, doesn’t exist) — those renewables aren’t going to replace nuclear energy any time soon" So, I’ll do the math for him. Here’s the data Bryce supplies

  • In 2015, America’s nuclear plants produced 839 terawatt-hours of electricity (this industry source says 798), compared to 253 for hydro, 193 for wind, and 39 for solar
  • The current rate of growth is 7GW per year for wind, with output of 2.6 TWh/GW, and 5 GW per year of solar with output of 1.5 TWh/GW

That’s enough to check Bryce’s claim The gap between nuclear and renewables is currently 552 TW/year. The current rate of addition of capacity for solar and wind combined amounts to additional generation 25.7 TW/h per year. Doubling that gives 51.4. So, assuming a doubling of the current installation rate, which seems plausible even without any new policies, it will take 10.5 years for renewable generation (including hydro) to surpass nuclear. Excluding hydro it will take 15 years. So, if the goal of policy were to replace nuclear with renewables, the answer is that it could be achieved in the fairly near future. Of course, replacing nuclear power is not the goal of climate policy. The objective is to replace coal and, as far as possible, gas as sources of electricity. We can’t afford to spend 10-15 years replacing nuclear first. <p>

San Onofre reactor was pushed too hard, leak resulted, report says. -- Owners of the failed San Onofre nuclear power plant operated the reactor outside the allowable limits for pressure and temperature, causing the radiation leak that shut down the facility for good in 2012, a new report has found. Citing documents recently obtained from the U.S. Nuclear Regulatory Commission, former Southern California Edison engineer Vinod Arora issued a report Tuesday laying blame for the breakdown squarely on Edison."Higher primary reactor coolant temperatures and higher steam pressure caused tube-to-tube contact resulting in dangerous and potentially deadly tube ruptures," he said. Excessive tube wear inside replacement steam generators forced the shutdown in 2012. Edison called the comments by Arora "misinformed" and again faulted Mitsubishi Heavy Industries, the Japanese firm that built the replacement steam generators that failed decades ahead of schedule. "As far back as September of 2013, the Nuclear Regulatory Commission (NRC) identified flaws in how Mitsubishi Heavy Industries (MHI) used its computer codes to design the failed steam generators at SONGS," Edison said in an email. "The NRC further issued a 'Notice of Non-Conformance' against MHI for its flawed computer modeling in the failed design. "In particular, the NRC reports indicated that MHI’s use of its computer codes in the design of the steam generators inaccurately predicted thermal hydraulic conditions in the steam generators, leading to tube vibration and wear, and a steam generator tube leak."

The Chances of Another Chernobyl Before 2050?  50%, Say Safety Specialists -  Given that most countries with nuclear power intend to keep their reactors running and that many new reactors are planned, an important goal is to better understand the nature of risk in the nuclear industry. What, for example, is the likelihood of another Chernobyl in the next few years? Today, we get an answer thanks to the work of Spencer Wheatley and Didier Sornette at ETH Zurich in Switzerland and Benjamin Sovacool at Aarhus University in Denmark. These guys have compiled the most comprehensive list of nuclear accidents ever created and used it to calculate the likelihood of other accidents in future.Their worrying conclusion is that the chances are 50:50 that a major nuclear disaster will occur somewhere in the world before 2050. “There is a 50 per cent chance that a Chernobyl event (or larger) occurs in the next 27 years,” they conclude.The nuclear industry has long been criticised for its over-confident attitude to risk. But truly independent analyses are few and far between, partly because much of the data on accidents is compiled by the nuclear industry itself, which is reluctant to share it.  The International Atomic Energy Agency rates accidents using a system called the International Nuclear Event Scale, which is related to the amount of radiation released.  Wheatley and co have significantly increased this number.  The metric they use in assessing each accident is its total cost in U.S. dollars (based on the dollar value in 2013). And they define an accident as “an unintentional incident or event at a nuclear energy facility that led to either one death (or more) or at least $50,000 in property damage.” Each accident must have occurred during the generation, transmission, or distribution of nuclear energy.

Nuclear waste: keep out for 100,000 years -- France is the world’s largest exporter of electricity and the world’s most committed nuclear nation, with 58 reactors producing 75 per cent of the country’s power. As a result, it also produces enough toxic radioactive waste every year to fill 120 double-decker buses (about 13,000 cubic metres worth, or 2kg a year for every French person). The challenge at Bure is not only to build a massive dump for radioactive trash but also to guard it from human intervention for an impossible amount of time — more than 4,000 human generations. The waste, which will be placed in a quarter of a million sealed containers slotted into horizontal tunnels more than 100m long, is the byproduct of burning uranium in the nuclear reactors and includes some of the most deadly and long-lasting radionuclides in the world. Chlorine-36 has a half-life of 300,000 years and neptunium-237 a half-life of 2 million years. People do not often come into direct contact with such materials, aside from in a nuclear accident, but those that do meet a horrific end. In 1987, thieves in Brazil stole a source of high-level radiation from an old abandoned hospital. It was sold, its lead case broken open. After three days, four people who were handling it began to suffer internal bleeding in their limbs, eyes and digestive tracts, according to doctors. Then their hair fell out. Within weeks, they were dead.

Several nonpowered dams along the Ohio River to be converted to hydroelectric dams in 2016 -- In 2016, nearly 300 megawatts (MW) of electricity generating capacity is expected to come online from dams that did not previously have electric generating units, commonly referred to as nonpowered dams (NPDs). NPD capacity additions make up 92% of the 320 MW of planned hydroelectric capacity for 2016. Expected capacity additions at NPDs in 2016 are large compared to recent NPD additions, which totaled 126 megawatts (MW) over 2006–15, but relatively small compared with total U.S. hydroelectric capacity of nearly 80,000 MW as of April. The National Hydropower Association estimates that 3% of the nation's 80,000 dams currently generate electricity. Existing conventional hydroelectric generators in the United States provided 251 million megawatthours of electricity in 2015, or about 6% of annual total net generation. Unlike other forms of renewable-fueled electricity, such as solar and wind, hydroelectric capacity additions have been relatively modest in recent years. Also, about 1,000 MW of hydroelectric capacity has been decommissioned over the 2006–15 period, mainly through the removal of existing dams. New conventional hydroelectric generators may not be eligible for federal tax credits, unlike new wind and solar additions. Depending on the state, hydroelectric generation may not be eligible for compliance with state renewable portfolio standards or voluntary goals. Although electric generating units have been installed at NPDs throughout the country, the Ohio River accounts for much of this activity. About 74% of all the new and planned NPD capacity additions from 2006 to 2016 occurred along the Ohio River. Many of the existing dams along the Ohio River that have been or will be converted to produce electricity are used to maintain navigable depths during periods of low water flow.

FirstEnergy to shut down or sell several coal-fired units in Ohio - Crain's Cleveland Business: Akron-based FirstEnergy Corp. announced on Friday, July 22, that it will shut down or sell some of the operations at two of its coal-fired generation plants in Ohio. The company said it will either sell or deactivate its 136-megawatt Bay Shore Unit 1 in Oregon, Ohio, and retire four units of its W.H. Sammis Plant in Stratton, Ohio. The Sammis units are among seven the company operates at the Sammis plant, and the four units represent 720 megawatts of generation capacity, or about 4% of all the electricity FirstEnergy produces. The remaining three units at Sammis will continue to provide 1,490 megawatts of baseload power generation, the company said. FirstEnergy said it will complete its closure or sale of the Bay Shore unit by October 2020 and will shut down the Sammis units in May 2020. The company had been hoping to get some subsidies for its older coal-fired power plants from the Public Utilities Commission of Ohio, but those efforts have not gone smoothly, as there was opposition by environmental groups and, ultimately, the Federal Energy Regulatory Commission (FERC) rejected the plan. Since then, the PUCO staff has recommended that FirstEnergy receive $131 million annually, in the form of a special rate rider, to help preserve the company’s credit rating. However, FirstEnergy now says that the plants are just too small to compete in today’s market.

FirstEnergy to partially close coal-fired Sammis power plant and Bayshore on Lake Erie, competing gas-fired plants now being built | -- FirstEnergy told investors this morning that it intends to close the four smaller boilers at the coal-fired W.H. Sammis power plant on the Ohio River because they are no longer able to compete in wholesale markets dominated by new gas-fired power plants. The company also plans to close or sell its small Bay Shore power plant in Oregon, Ohio, which burns coke supplied by a nearby BP refinery. "We have taken a number of steps in recent years to reduce operating costs of our generation fleet, said Jim Lash, president of the corporation's generation company, in a release. "However, continued challenging market conditions have made it increasingly difficult for smaller unit like Bay Shore and Sammis Units 1 through 4 to be competitive. It's no longer economically viable to operate these facilities." The company said it does not intend to layoff the 368 employees affected at Sammis or the 78 at Bay Shore. Sammis units 5, 6 and 7 will continue to run. The shutdowns would occur in 2020 and would impact the company's financial results with non-cash "impairment" charges. The closings must be approved by PJM Interconnection, the non-profit company that manages the high-voltage power grid in 13 states, including Ohio. PJM could refuse to allow the closings because it could disrupt the stability of the grid. The company could then receive extra payments from PJM to continue operating the plants, exactly what it did when in 2012 it announced it would close its Eastlake power plant and other coal-fired plants on Lake Erie in 2015. Customers paid for that with slight increases in delivery charges. Ultimately, the company built a new transmission line to Northeast Ohio from power plants in Pennsylvania. Customers are now paying for that. But unlike the 2012 announcement, today's announced closings come at a time when large, clean natural gas-fired power plants are being built all over Ohio which will more than make up for FirstEnergy's closings.

FirstEnergy closing Bay Shore, Sammis coal-fired units - FirstEnergy Corp. is seeking to sell or shut down its 136-megawatt Bay Shore plant six miles east of Toledo and also will close a significant portion of its W.H. Sammis plant, its largest coal-fired electric generator that sits along the Ohio River in Stratton. The Akron utility announced the changes Friday. FirstEnergy said it will sell or deactivate Bay Shore Unit 1 by Oct. 1, 2020. The plant, on 571 acres along Maumee Bay, primarily burns coal and also has a small, 16-megawatt oil-fired peaking unit. FirstEnergy has not yet determined what it will do with the oil peaking unit there. It also will deactivate, by May 31, 2020, units 1 through 4 at Sammis that now generate 720 megawatts out of the facility’s capacity of 2,210 megawatts. The four units were built from 1959 through 1962, making them the plant’s oldest. Most recently, they have been used to meet peak demand, not baseload demand, the utility said. Sammis takes up 187 acres along the Ohio River. FirstEnergy said it will take impairment charges of $150 million for the Bay Shore closure or sale and impairment charges of $497 million for Sammis. The company did not give specific reasons for the sale or closures other than saying in a letter to investors that “the business environment for the [Competitive Energy Services] segment continues to be challenged by the current market conditions.” FirstEnergy spokeswoman Jennifer Young said the coal units the utility will close down are uneconomical and no longer needed. The units will continue to make electricity into 2020, she said.“We continue to face challenging market conditions,” she said. That includes pricing pressures as well as lower demand for electricity, she said. The Sierra Club applauded the announcement and issued a statement, noting FirstEnergy said it is no longer economically viable to operate the facilities.  “The majority of these units have been front and center in an ongoing two-year fight before the Ohio Public Utilities Commission where FirstEnergy has been trying to secure subsidies from its customers that could be used to keep these aging and ailing coal units open,” the environmental group said.

Charter group claims election board member has conflict of interests - Athens Messenger -- A group promoting a home rule charter in Meigs County is asserting that an elections board member has a conflict of interests. The board member, Jimmy Stewart, disputes that there is a conflict. Stewart is president of the Ohio Gas Association. The proposed Meigs County charter, like the one that was declared invalid by the Athens County Board of Elections, would prohibit the use the county’s water for high-volume hydraulic fracturing (fracking) for extraction of shale gas and oil, and prohibit the disposal of fracking waste in the county. On July 8, the Meigs County Board of Elections voted unanimously that the charter petition submitted by the Meigs County Home Rule Committee did not have enough valid signatures. A total of 596 were needed, but of the 821 submitted only 592 were valid — although Ohio law allows additional signatures to be submitted. Stewart then made a motion that the charter petition be declared invalid because it does not meet the requirement of Ohio Revised Code 302.02 that the an alternative form of county government must include an elected or appointed county executive. (The proposed charter contains a sentence saying that it is not forming an alternative government under ORC 302.) Stewart and board member David Fox voted to declare the charter petition invalid, while board members Rita Slavin and Charlie Williams abstained. According to minutes of the meeting, Slavin and Williams both questioned whether the board should even consider content of the charter, but should instead just determine if the petition was filled out properly and contained enough valid signatures. On July 11, the board decided to ask Secretary of State Jon Husted how it should proceed from this point — including whether the July 8 vote constitutes a tie, a board spokeswoman told The Messenger. As of Friday, a response had not been received from Husted. A tie vote would send the matter to Husted to decide the validity of the charter petition.

Anti-fracking group leaning toward appeal of local Board of Elections rejection of petitions - Athens NEWS - A group that submitted petitions to place a proposed charter government for Athens County on the November ballot was still weighing its options Sunday after the Athens County Board of Elections voted unanimously to reject the proposal for the ballot earlier this month. Nonetheless, communications from the group indicate plans to challenge the elections board decision. This is the second time the county Board of Elections has rejected a charter proposal from the Athens County Bill of Rights Committee (ACBORC) in as many years. The committee’s proposed charter does not propose to alter the structure of Athens County government with regard to officeholders or duties, but does seek to ban local water use for oil and gas hydraulic fracturing, as well as injection wells for fracking wastes. The former restriction, if enforced, likely would prevent deep-shale drilling in Athens County, a process that uses immense amounts of water. The state of Ohio reserves regulation of oil and gas drilling activities to the Ohio Department of Natural Resources, a set-up that state courts have upheld repeatedly. At the very least, this raises questions about whether any local fracking rules could be enforced by Athens County. On July 8, the county Board of Elections found that the proposal had enough valid signatures to go on the ballot, with 1,720 valid signatures out of 1,441 needed and 2,392 collected. Nevertheless, after voting 4-0 against putting the charter to voters, the elections board informed the Athens County Commissioners that they had determined that although the petition contained sufficient valid signatures, “the petition is not valid.” The Board of Elections cited a letter from Athens County Prosecutor Keller Blackburn wherein he advised the board that he doesn’t believe the proposal is a valid charter but recommended the board certify the proposal for the ballot regardless. The board decided instead to reject the proposal.

Meigs elections board says charter petition invalid — A home rule charter submitted for placement on the November ballot has been ruled invalid by the Meigs County Board of Elections. If the decision stands, it means the issue will not be on the ballot. The 4-0 vote by the board was taken during a meeting Thursday afternoon. As required by state law, the board has notified the Meigs County Commissioners of its decision. In a letter to the commissioners, the elections board stated that the proposed charter does not meet the threshold requirements of Ohio Revised Code 302.02 because it seeks to create an alternative form of government without the requirement of having an elected or appointed county executive.“It’s a false argument, they’re all being coached by the secretary of state,” said Greg Howard, a member of the Meigs County Home Rule Committee that submitted the charter petition to the elections board. According to Howard, the charter would be formed under the authority of the Ohio Constitution and does not seek to form an alternative government under Section 302 — which the proposed charter states. The charter would prohibit the use the county’s water for high-volume hydraulic fracturing (fracking) for extraction of shale gas and oil, and prohibit the disposal of fracking waste in the county. Elections Director Meghan Lee said no one from the charter committee was at Thursdays meeting, although she said a meeting notice was posted on the board’s Facebook page and in the newspaper. Howard said he was unaware the meeting was taking place.

University of Cincinnati Geologists Identify Sources of Methane, Powerful Greenhouse Gas, in Ohio, Colorado and Texas - Researchers from the University of Cincinnati recently studied the sources of methane at three sites across the nation in order to better understand this greenhouse gas, which is much more potent at trapping heat in the atmosphere than is carbon dioxide. The UC team, led by Amy Townsend-Small, assistant professor of geology, identified sources for methane in Carroll County, Ohio; Denver, Colorado; and Dallas/Fort Worth, Texas, by means of an analysis technique that consists of measuring carbon and hydrogen stable isotopes (isotopic composition). This approach provides a signature indicating whether methane is coming from, say, natural gas extraction (fracking), organic/biologic decay, or the natural digestive processes of cattle.Said Townsend-Small, “This is an analysis technique that provides answers regarding key questions as to specific sources for methane emissions. With isotopic composition analysis, it’s possible to tell whether the source is fracking or biogenic processes (like bacterial decomposition in landfills or algae-filled water). It’s a laborious technique to implement, but its use makes it possible to trace and attribute the source of methane production.” In findings to be presented at the July 20 Kentucky Oil and Gas Association annual meeting held in Covington, Ky., Townsend-Small will report on a 2012-15 study examining methane levels and origins of methane in groundwater in the Utica Shale region of eastern Ohio: Results from this study, where 23 wells were tested three to four times each year and a total of 191 samples examined, found that methane levels in these groundwater wells came from decay of organic matter (decomposition of plants) biological processes occurring in subsurface coal formations. In less than a handful of cases, the natural methane levels were relatively high (above 10 milligrams per liter). However, most of the wells carried low levels of methane.

Utica Region Drilling Productivity Report for July is out - Akron Beacon Journal - The Utica Drilling Region Productivity report for July is out from the U.S. Energy Information Administration. You can see the report here.Compressor Stations Open Up New Front in Fracking Debate - WYSO - Back in February, 300 people crowded into a school gym in Medina County, Ohio, to lob questions, concerns—and some unvarnished anger—at state environmental regulators. At issue was the siting of a new natural gas compressor station along the planned NEXUS pipeline—a 250-mile transmission line being built to carry gas from Ohio to Chicago,  southeast Michigan and Ontario. The Ohio Environmental Protection Agency held the meeting as part of the permitting process for the new compressor station. Such facilities are critical—if not well-known—components of the nation’s energy infrastructure. They are needed every 40 to 100 miles along pipelines to re-pressurize natural gas and keep it moving. There are about 150 such stations in Ohio already, and state officials say there are about 15 new ones planned. Like other industrial facilities, compressor stations are allowed to emit limited amounts of air pollutants. And while the Ohio EPA and energy companies say the facilities are safe and well-regulated, some people who live near them say the pollution is making them sick.  Initially, Carroll County resident Barry Booth, who’s retired from manufacturing, didn’t have a problem with the nearby gas exploration. He even signed a lease agreement with Chesapeake Energy to make some extra money. Then one day, he went to get his wife, Mary Booth, a cup of coffee. The next thing he knew, he was on the floor—nauseated and dizzy. “I jumped up to check on him and then ended up beside him,” Mary Booth remembers. “It was just really hard to breathe, and the odor was very strong.” The Booths say they also started getting rashes, nosebleeds and headaches. And Mary Booth has battled breast cancer.The couple blames air emissions from the nearby gas facilities—especially a big compressor station—for their recent health problems. That facility’s permit allows it to emit limited amounts of carbon monoxide, volatile organic compounds and particulates—among other pollutants.

On The Hunt For Methane Leaks - They are in rural Susquehanna County looking for methane—the powerful greenhouse gas and the main component of natural gas.Lead researcher Naomi Zimmerman, a post-doctoral research associate at Carnegie Mellon University, turns on a gas monitor to see how much methane is in the air. The monitor starts to pick up a reading of 1.2 parts per million. That’s about 12 times what they would expect to see from a gas well. Judging by the wind direction, Zimmerman and fellow Carnegie Mellon scientists Mark Omara and Aja Ellis think the gas is coming from a nearby pipeline.“I think we have a pipeline leak,” Ellis says.The monitor climbs to nine parts per million, prompting a few “whoas” and “wows” from the trio of scientists, who are decked out in navy blue fire-resistant overalls.Their work is adding to a growing body of research into how the fracking boom is contributing to climate change. There are thousands of gas wells in the Marcellus and Utica shale formations of Pennsylvania, Ohio and West Virginia—and a growing number of pipelines moving that gas around the Northeast. And even though low gas prices have slowed the flurry of drilling activity, the hills and dairy farms of northeast Pennsylvania are criss-crossed with pipelines, compressor stations and other infrastructure sending gas to market. .But exactly how much of this infrastructure is leaking methane? That’s what the Carnegie Mellon researchers are trying to find out.

Fracking may worsen asthma for nearby residents, study says | Fracking may worsen asthma in children and adults who live near sites where the oil and gas drilling method is used, according to an 8-year study in Pennsylvania. The study found that asthma treatments were as much as four times more common in patients living closer to areas with more or bigger active wells than those living far away. But the study did not establish that fracking directly caused or worsened asthma. There's also no way to tell from the study whether asthma patients exposed to fracking fare worse than those exposed to more traditional gas drilling methods or to other industrial activities. Fracking refers to hydraulic fracturing, a technique for extracting oil and gas by injecting water, sand and chemicals into wells at high pressure to crack rock. Environmental effects include exhaust, dust and noise from heavy truck traffic transporting water and other materials, and from drilling rigs and compressors. Fracking and improved drilling methods led to a boom in production of oil and gas in several U.S. states, including Pennsylvania, North Dakota, Oklahoma, Texas and Colorado. Sara Rasmussen, the study's lead author and a researcher at Johns Hopkins University's Bloomberg School of Public Health, said pollution and stress from the noise caused by fracking might explain the results. But the authors emphasized that the study doesn't prove what caused patients' symptoms.

Medical Study: Asthma Exacerbations Linked To Fracking Activities | The American Medical Association’s Journal of Internal Medicine released the results of a study this week that documented a correlation between fracking activities and an increased risk of asthma exacerbations for nearby residents. Unconventional natural gas development (UNGD) has previously been associated with air quality disturbances, which can lead to the exacerbation of asthma symptoms. The pollution has been known to stem from truck traffic and sleep disruption, the article said. "Asthma is a common disease with large individual and societal burdens, so the possibility that UNGD may increase risk for asthma exacerbations requires public health attention,” the report’s authors noted. “As ours is the first study to our knowledge of UNGD and objective respiratory outcomes, and several other health outcomes have not been investigated to date, there is an urgent need for more health studies.” “These should include more detailed exposure assessment to better characterize pathways and to identify the phases of development that present the most risk," the study concludes.”

Fracking wells increase rate of asthma attacks in nearby residents, study finds  -- Natural gas wells created by fracking in Pennsylvania may elevate the number of asthma attacks for nearby asthma patients, according to a study published Monday in JAMA Internal Medicine. The investigation found a patient living near one of these sites — known as unconventional natural gas development (UNGD) wells — was 1.5 times more likely to have a severe asthma attack and four times as likely to have a moderate attack. While the study doesn’t prove natural gas pollution caused the asthma attacks, it is likely to stir the debate over the health effects of fracking.  “We believe it is time to take a more cautious approach to well development with an eye on environmental and public health impacts.”    Schwartz and his colleagues came to this conclusion by tracking 35,508 asthma patients in the Geisinger Health System, which serves northeastern and central Pennsylvania. The team collected data on how often these patients had mild, moderate and severe asthma attacks from 2005 to 2012. The study stated more than 6,200 wells were drilled during this timeframe. The researchers then cross-referenced how far these patients lived from UNGD wells. Along with finding that a well’s proximity correlates with asthma attack, the study said the most hazardous stage was the production stage. UNGD wells are made in four stages: pad preparation, drilling, stimulation (hydraulic fracturing/fracking) and production where natural gas is consistently extracted and typically lasts for the longest period of time.

Medical Daily: How Fracking Wrecks Havoc On Your Lungs - New research published Monday in JAMA Internal Medicine adds more fuel to the fire concerning fracking’s unintended side-effects on human health with new claims that fracking may worsen asthma symptoms. Fracking, known as unconventional natural gas development, requires four major phases, all with the purpose of retrieving natural gas (and oil) from previously unreachable veins found deep inside the earth. They involve preparation, drilling, stimulation, and the actual production of gas via wells. The stimulation phase, most commonly associated with fracking, is when highly pressurized water and other chemicals are used to crack open rocks so that natural gas and oil can be better extracted.Critics have accused fracking companies of poorly safeguarding the building and maintaining of these wells, citing the leakage of fracking fluids into the water supply, and have also noted that gas from wells may be unhealthy, and release pollution into the air. To test these claims of negative health impacts caused by fracking, the researchers, primarily hailing from Johns Hopkins University in Baltimore, studied the electronic health records of 35,508 patients with asthma living in and around Pennsylvania from 2005 to 2012, a major hub of fracking development. They specifically tracked any documented flare-ups of the patients’ asthma, ranging from needing steroid medication for a mild attack to being hospitalized for a severe attack. Lastly, they cross-referenced the incidence of these events with how close the patients lived next to a fracking work site. They found that those who lived closest to a site, regardless of which phase of development it was in, experienced more asthma-related incidents than did those who lived farthest away. Depending on the severity of attack and the site’s phase of development, the odds of an asthma attack were 1.5 to four times higher for those who lived nearby.

Sunoco's Mariner East pipeline wins big in court but hurdles remain --- Commonwealth Court on Thursday upheld Sunoco Logistics Partners' power to take private property for its Mariner East Pipeline, adding momentum to Sunoco's plan to deliver more energy from the Marcellus Shale region to Marcus Hook. The court, in a 5-2 ruling, affirmed a Cumberland County judge's decision last year that Sunoco's pipeline subsidiary is a public utility as determined by the Pennsylvania Public Utility Commission, which Sunoco says gives it the authority to take rights of way from property owners who decline to negotiate agreements along the pipeline's 351-mile route. The majority opinion, written by Judge Renée Cohn Jubelirer, concluded that "Sunoco is regulated as a public utility by PUC and is a public utility corporation, and Mariner East intrastate service is a public utility service." Sunoco Logistics called the ruling decisive. "Although this case confirmed Sunoco Pipeline's public utility status, we have always worked with landowners to reach mutually acceptable agreements, and pursued legal proceedings only in those instances where an agreement could not be reached," the Newtown Square company said in a statement. The Mariner East project, which would deliver natural gas liquids like propane, butane and ethane to Delaware County, still faces obstacles that were unresolved by Thursday's ruling. A separate suit, filed last year in Philadelphia by the Clean Air Council, also argues that Sunoco has no legal right to use eminent domain to build its pipelines, which it argues would not serve a public need. "This is not the end of the story," said Alex Bomstein, a Clean Air Council attorney. He said the ruling on Thursday was "quite narrow" and did not address the constitutional challenges raised by the Philadelphia suit, including arguments that the pipeline violates the state's Environmental Rights Amendment. Bomstein said the issues will ultimately be decided by the state Supreme Court.

New gas pipelines would make U.S. miss climate target: report | Reuters: The United States will miss its emission-reduction targets under the Paris climate agreement if 19 pending natural gas pipelines are built across eastern states, a report published on Friday by environmental groups said. Oil Change International and 11 other organizations found that 19 proposed pipelines due to move natural gas from the shale fields of Pennsylvania, Ohio and West Virginia to states from Louisiana to New York would unlock at least 15.2 billion cubic feet per day of new natural gas production. This would lock the country into more natural gas-fired electricity rather than renewable energy, and cause the United States to miss a target of cutting greenhouse gas emissions 83 percent from 2005 levels by 2050, the report said. "Our calculations show that the rise in gas consumption projected by the EIA (Energy Information Administration) would alone lead to emissions that would surpass the current long-term U.S. climate target by 2040," it added. Owners of the pipelines cited included Spectra Energy Co, Williams Cos Inc and EQT Corp. The study comes as opponents of hydraulic fracturing, or fracking, move from targeting drilling sites to planned pipeline routes. By limiting the capacity for transporting carbon-based fuels, they hope to reduce the number of projects developed. Environmentalists and landowners in states like New York have helped to block or slow down construction of proposed pipelines, such as the Pennsylvania-to-New York Constitution Pipeline.

New Gas Infrastructure Is Going To Completely Undermine U.S. Climate Goals - The fossil fuel industry is building a giant machine to extract more fossil fuel in the United States. The country is in the process of building hundreds of miles of natural gas pipeline that will tie the United States to fossil fuel production and consumption for decades — well past when most scientists predict we will have done irreparable harm to our human habitat. “Once the pipelines are built and permitted and operating, it significantly lowers the cost for operators to get their gas to market,” Stephen Kretzman, executive director of Oil Change International, told ThinkProgress. “All of that additional production that gets triggered needs to be thought about.”  In fact, if the United States continues with its current natural gas policy, there is no way for the country to meet its emissions reduction goals, according to a report released Friday by Oil Change International.  The report, which focuses on the natural gas-producing area of the Appalachian Basin, specifically Ohio, Pennsylvania, and West Virginia, details the growth in natural gas infrastructure in the region. This includes pipelines that will make the gas accessible across the country and around the world. There are currently 19 major pipelines in the works in the region, which has increased production 13-fold since 2009. Production is expected to double again by 2030. “The fossil fuel industry is building a giant machine to extract more fossil fuel in the United States,” Kretzman said. His group is pushing for the Federal Energy Regulatory Commission (FERC), which approves natural gas infrastructure permits, to include a climate test in its approval process. Right now, despite the fact that there are several national goals and international commitments to reduce emissions, the country does not consider climate impact when evaluating projects. In addition, projects are evaluated individually, rather than in aggregate

Whoa, why no criminal charges in dumping of radioactive fracking waste? -   Attorney General Andy Beshear’s decision not to pursue criminal charges in the illegal dumping of radioactive fracking sludge in a solid-waste landfill in Estill County is disappointing.  Beshear did recommend pursuing civil damages and penalties “to the fullest extent of the law” against the owners of a West Liberty company, Advanced TENORM Services, for “flagrant violations and reckless disregard for the safety of the community.” Beshear urged the Cabinet for Health and Family Services, which is responsible for controlling radiation hazards, to “levy the harshest civil penalties available under Kentucky law against those responsible in this troubling case.”  There are gaps in both state and federal oversight that should be tightened to protect the environment and public health from the enormous amount of waste, much of it radioactive, that is being generated by new oil and gas drilling techniques. But the ban on importing low-level radioactive waste into Kentucky for disposal is already clear and indisputable — and has been for a long time.  It’s inconceivable that a Kentucky company that billed itself as expert in managing radioactive drilling waste could have been ignorant of the Kentucky law. After all, the “TENORM” in the company’s name stands for technologically enhanced naturally occurring radioactive material.  If there’s any doubt about what the company knew and when, consider environmental lawyer Tom FitzGerald’s testimony that in April 2015, months before the waste was trucked to Estill County, a state official emailed an Advanced TENORM executive links to the laws and regulations that prohibit importing low-level radioactive waste into Kentucky from any state but Illinois. Intentionally violating this prohibition is a class D felony.

U.S., Enbridge reach $177 million pipeline spill settlement | Reuters: Canadian pipeline operator Enbridge Inc has agreed to pay $177 million in penalties and improved safety measures in a settlement with the U.S. government tied to one of the largest inland oil spills in U.S. history. The settlement, announced on Wednesday by Enbridge, the U.S. Justice Department and the Environmental Protection Agency, resolves Clean Water Act violations stemming from the 2010 failure of Enbridge's Line 6B near Marshall, Michigan, which spilled some 20,000 barrels of oil into a branch of the Kalamazoo River. It also resolves a second spill that same year in Illinois and commits the company to spend at least $110 million to prevent future spills and improve operations on its pipeline system that extends through seven U.S. states in the Great Lakes region. Under the settlement, Enbridge Energy Partners, a U.S. subsidiary of Calgary-based Enbridge, will pay a $61 million fine related to the Marshall spill, plus a $1 million fine for a September 2010 spill of about 6,400 barrels of oil from a second pipeline in Romeoville, Illinois. Enbridge said it accepts the fines and measures required under the consent decree. Brad Shamla, Enbridge vice president of U.S. operations, said the settlement "won't have a material impact on us from a financial perspective." The company estimated the total cost for cleanup to date at $1.2 billion.

This $177 Million Oil Spill Fine Is Everything That Is Wrong With Environmental Enforcement - Six years after spilling more than 27,000 barrels of oil into local rivers, Enbridge Energy Limited Partnership is finally facing the music: a $177 million settlement with the U.S. government. The music is a little soft. The settlement covers two spills, but one of them was a doozy. On July 25, 2010, an Enbridge pipeline ruptured, ultimately spilling 20,000 barrels of tar sands oil into the Kalamazoo River and becoming the largest ever on-shore tar sands oil spill. Tar sands oil, extracted primarily in Canada and piped into and across the United States, is heavy, thick, and mud-like. Unlike most other oils, it sinks, making it even more difficult to clean up. After the Kalamazoo spill, Enbridge had to dredge the river and then replant native vegetation. At the five-year mark of the spill, the river’s ecology had not fully returned. “The fines amount to a slap on the wrist, far from what a historic spill like this should garner,” Anthony Swift, Canada director for the Natural Resources Defense Council, said in a statement. “This will do little to force the pipeline industry to think about spills—even historically massive ones—as a cost of doing business.”The company will pay $62 million in civil fines, $5.4 million in unreimbursed expenses the federal government incurred. The remaining $110 million will go to spill prevention and response measures. Enbridge had previously agreed with Michigan to pay $75 million for the spill. But the truly shocking thing might be that all Enbridge faces is costs.According to the government's complaint, "Although the [pipe] Line 6B rupture triggered numerous alarms in Enbridge’s control room, Enbridge failed to recognize a pipeline had ruptured until at least 17 hours later. In the meantime, Enbridge had restarted Line 6B... pumping additional oil into the ruptured pipeline causing additional discharges of oil into the environment." That means Enbridge had a detection system in place and had the ability to know that the pipeline ruptured. Someone at Enbridge — or someones, most likely — chose to ignore the alarm and continue pumping oil.

Like a sick joke: Snyder appoints BP lobbyist to head MDEQ: Enbridge says its Pipeline 5 -carries millions of gallons of oil and natural gas each day under the Mackinac Straits.This photo filmed last summer shows a diver inspecting the 62-year-old pipleline.(Photo: Enbridge) In the wake of the Flint water crisis, amid profound concerns over an aging oil pipeline under the Great Lakes, with an ongoing, urgent need to decrease pollution and improve air quality and public health in southwest Detroit, Gov. Rick Snyder has appointed ... wait for it ... a former oil-industry lobbyist, Heidi Grether, to head the state's Department of Environmental Quality. It's a stunning look into the way the governor views the state's responsibility to protect Michigan's environment, and Michiganders' health. And in the aftermath of the Flint water crisis, it's like Snyder is rubbing the noses of his constituents in his own mess. The move is astoundingly tone-deaf to Michiganders, who rely on the state's environmental regulatory agency to keep us safe. It's also a tacit announcement that Snyder no longer finds rebuilding Michiganders' trust in government, something nearly everyone agreed was paramount after the Flint crisis, to be particularly important.

Court affirms decision blocking frac sand mine (AP) — A state appeals court has affirmed a decision blocking a frac sand mine in western Wisconsin. The Mississippi Land Connection and Timber Company LLC and Wisconsin Bluff Sands LLC filed an application for a permit for a mine in the town of Waumandee in 2013. The Buffalo County Board of Adjustment denied the application after hearing from experts that little vegetation would grow in the area after the mine closed and from members of the public concerned about potential traffic, declining air quality and declining property values. The 1st District Court of Appeals upheld the board’s decision on Tuesday, finding that the board properly considered the mine’s environmental impact. The companies’ attorney, Richard White, said he hadn’t seen the decision and had no comment.

Group calls for action to stop fracking in Big Cypress National Preserve -- Fracking in Southwest Florida’s Big Cypress National Preserve? Unthinkable? No. With the National Park Service’s approval of a proposal for seismic testing in the preserve in order to begin drilling, hydraulic fracturing, fracking, acid fracking, acidization and well stimulation, it could be just around the corner. Saying that drinking water for more than seven million Floridians is at risk, Thursday the League of Women Voters of Palm Beach County called for residents to contact Sen. Bill Nelson urging him to do everything he can to keep the testing from happening. Here is a letter that will be sent to Senator Nelson. The recently approved permit will allow Texas-based Burnett Oil to begin seismic testing in 70,000 acres of federally protected land in the Big Cypress in Collier County. Big Cypress and the Everglades provide fresh water to the Biscayne Aquifer, which provides Palm Beach County’s drinking water. The letter asks Nelson to:

  • Ban any form of seismic testing and any form of fracking and drilling
  • Protect Our Drinking Water, air, health, climate and communities
  • Prevent contamination of drinking water sources from disposal and leaking wells

Sempra gets OK to boost exports from proposed expansion (AP) — A San Diego energy company says it has federal permission to boost planned exports by 39 percent from a proposed expansion of the plant it’s building in southwest Louisiana. Sempra Energy said Monday that the U.S. Department of Energy approved exporting an additional 1.4 billion cubic feet of natural gas a day to countries outside U.S. free-trade agreements. According to a news release, that will bring Cameron LNG’s export capacity to 3.5 billion cubic feet a day, or 24.9 million tons a year. The company says the Federal Energy Regulatory Commission already has approved adding up to two more liquefaction trains and one more LNG storage tank. Sempra is building Phase 1 of the $10 billion project, which calls for three liquefaction trains and four storage tanks. It expects to begin operations in 2018, with 2019 as its first full year of operations.

Fayetteville Shale boom gone bust; glory days’ jobs, cash now history | NWADG: Abram initially planned to raise cattle. But when drilling rigs and other heavy equipment began rolling into the community, he realized there was an alternative use for his 773 acres. A crush of companies arrived in north-central Arkansas in the mid-2000s eager to pull natural gas from the Fayetteville Shale, a formation that stretches across the state to the Mississippi River. The nation was on the verge of a shale boom that would change the American energy landscape. In Arkansas, it offered a gold-rush opportunity for people like Abram, and thousands of jobs and wealth for local communities. When gas companies approached Abram about leasing his property for drilling, he agreed to a lease of $25 an acre, plus one-eighth mineral royalties. "If they offer me upwards of $20,000, they must be a gift from God," he recalled thinking at the time.   But it didn't last. The energy companies' success at extracting natural gas from shale soon became their undoing. An oversupply of gas pushed prices to record lows. That led to layoffs, bankruptcies and meager royalty checks. The glory days of the Fayetteville Shale are over. The main drillers are gone. What remains is sobering. Businesses have closed. Once-bustling highways are mostly empty now, and equipment sits idle along the roadsides.

Energy firms gone, but their impact lingers | NWADG: As large equipment sits idle in cow pastures of the Fayetteville Shale in north-central Arkansas, some locals worry that years of natural-gas drilling there will have lasting consequences for the land and environment. Drilling in the Fayetteville Shale began in the mid-2000s and came to a halt in December. "We're left with hundreds of drilling sites," said Kathy Golding, who lives in the Heber Springs area. "What happens in the future?"   Energy companies streamed into the area and began hydraulic fracturing, a high-intensity drilling technique known as fracking, to extract natural gas from in the dense shale rock. Initially, "many people didn't know what was taking place," said Buck Layne, president of the Searcy Chamber of Commerce. "There were a few people in town that knew about the gas business," he said. "Most people in the area were just learning on the fly."Many now worry that fracking can contaminate water or create excessive air emissions that contribute to global warming. And there is the matter of earthquakes. Small earthquakes in recent years have shaken communities near oil patches across the United States, and many scientists believe they are linked to oil and gas drilling activity. In Arkansas, drilling in the shale has generated dozens of environmental problems, including oil spills and eroded reserve pits that contain drilling fluids, according to a state agency. The bulk of the problems -- recorded by the Arkansas Department of Environmental Quality -- involved the three largest companies drilling in the formation and were found between 2008 and 2010, the height of the Fayetteville Shale boom. Only a handful of the problems led to formal action by the department. The Arkansas Public Policy Panel, which reviewed the department's inspections in the shale between July 2006 and August 2010, found more than 500 violations of water and other environmental regulations resulting from just under 300 inspections.

Permian gas output levels off, but processing capacity is rising - Crude oil has always been the big draw for producers in the Permian –– and in the especially prolific Delaware Basin within the Permian –– but the wells there also produce large volumes of “wet” natural gas that needs to be gathered, processed and transported to market. A lot’s been written about the Permian’s still-strong oil production and the infrastructure developed to support it; we’ve also covered natural gas liquids (NGLs) in the play. Now it’s time to delve into the gas processing and gas pipeline capacity out of West Texas and southeastern New Mexico, including pipes into the increasingly important Mexican market. Today, we discuss recent developments on the gas side of the U.S.’s hottest (remaining) oil production area.  It’s been a tough 24 months in the U.S. oil patch, with falling crude oil prices, cutbacks in drilling and production, and –– more recently –– concern that the hoped-for recovery in crude prices may not be gaining traction. The situation’s been a lot less gloomy in the Permian, though, which is “still the one” where the production economics are more favorable than in other plays and where output levels for crude, associated natural gas and NGLs remain very close to the peaks they had reached a few months ago. The Permian region covers about 75,000 square miles of West Texas and southeastern New Mexico (slightly larger than North Dakota, and twice the size of New England!), and includes several sub-regions such as the Delaware, Central and Midland basins (see Figure 1), each with their own geologic and hydrocarbon-production characteristics.

Trump looking to pick top fracking mogul Hamm as energy secretary - Japan Times -Republican presidential candidate Donald Trump is considering nominating Oklahoma oil and gas mogul Harold Hamm as energy secretary if elected to the White House on Nov. 8, according to four sources close to Trump’s campaign. The chief executive of Continental Resources would be the first U.S. energy secretary drawn directly from the oil and gas industry since the Cabinet position was created in 1977, a move that would jolt environmental advocates but bolster Trump’s pro-drilling energy platform. Dan Eberhart, an oil investor and Republican financier, said he had been told by officials in Trump’s campaign that Hamm was “the leading contender” for the position. Eberhart said he had discussed the possible appointment with top donors at the Republican National Convention in Cleveland this week. Three other sources close to the Trump campaign confirmed Trump was considering Hamm for the post. One of the sources said he first heard that Hamm was a contender from Trump officials on Sunday. Hamm, 70, became one of America’s wealthiest men during the U.S. oil and gas drilling boom over the past decade, tapping into new hydraulic fracturing drilling technology to access vast deposits in North Dakota’s shale fields.

Trump would appoint fracking exec Harold Hamm as energy secretary -— Republican presidential candidate Donald Trump is considering nominating Oklahoma oil and gas mogul Harold Hamm as energy secretary if elected to the White House on Nov. 8, according to four sources close to Trump's campaign.The chief executive of Continental Resources (CLR.N) would be the first U.S. energy secretary drawn directly from the oil and gas industry since the cabinet position was created in 1977, a move that would jolt environmental advocates but bolster Trump's pro-drilling energy platform. Dan Eberhart, an oil investor and Republican financier, said he had been told by officials in Trump's campaign that Hamm was "the leading contender" for the position.  Eberhart said he had discussed the possible appointment with top donors at the Republican National Convention in Cleveland this week. Three other sources close to the Trump campaign confirmed Trump was considering Hamm for the post. One of the sources said he first heard that Hamm was a contender from Trump officials on Sunday. Hamm, 70, became one of America's wealthiest men during the U.S. oil and gas drilling boom over the past decade, tapping into new hydraulic fracturing drilling technology to access vast deposits in North Dakota's shale fields. Hamm's future was discussed at a private fundraiser organized by a Trump Super PAC, Great America PAC, in Cleveland on Monday. Hamm was there, along with major donor Foster Friess and former Republican presidential candidate Ben Carson, one of the sources said, asking not to be named.

Fracking Tycoon Admits Democrats Better for Business Than GOP -- Despite the widely-held belief that the Republican Party and the fossil fuel industry are natural allies, one of the world's most prominent fracking tycoons admitted Tuesday that, actually, his business has fared better under Democrats. "The industry has actually historically done better under Democratic presidents during my 42 years, going back, than under Republican presidents," said Scott Sheffield, chairman and CEO of Pioneer Natural Resources, which runs an enormous oil drilling operation in West Texas' Permian Basin. Sheffield went on to explain how from the time Democratic President Barack Obama took office in January 2009 to the crash of the oil market at the end of 2014, his business skyrocketed, with Pioneer stock reaching the fifth place on the S&P exchange and first in the industry market. The remarks came in response to a question from a reporter with Inside Climate News during a CEO speaker session at the Washington, D.C.-based Center for Strategic and International Studies (CSIS). The reporter was asking Sheffield to comment on how important the 2016 presidential election is for the future of fossil fuel industry, and more specifically, the industry's tepid support for Republican Party nominee, Donald Trump. "I think most of us would agree that [...] there are better candidates on each side," Sheffield said, referring to Trump and presumptive Democratic nominee Hillary Clinton. "That doesn't meant that either person [couldn't] end up doing a great job."

Here's what a President Trump would do on energy, Harold Hamm says: The biggest geopolitical weapon the United States has is crude, and a President Donald Trump would ensure that the country developed more oil and gas, Continental Resources CEO Harold Hamm said Wednesday. Hamm, who is an informal advisor to Trump on energy policy, is set to speak at the Republican National Convention Wednesday night. He believes if Trump were elected to the White House, the GOP nominee would back off of some of the "punitive" regulations the industry has endured during the Obama administration. "While we've been doing this the last seven or eight years — doubling U.S. production — we've had an onslaught, a tsunami if you will, of punitive regulations designed to put us out of business," he said in an interview with CNBC's "Closing Bell." The Obama administration has pushed through measures regulating hydraulic fracturing on government land and the release of methane from new and modified wells, citing concerns about environmental, health and safety risks. The industry has suffered "death by a thousand cuts" because of those regulations, and he thinks that if Hillary Clinton is elected to the Oval Office, it will be more of the same — or worse. If the U.S. produces more oil, then it won't have to rely on countries that are connected with terrorism, Hamm said. "We do not need to be funding the nations that are funding terrorism. And that's what we're doing unless we produce more here and certainly that's what we need to be doing."

Oil Industry CEO Claims Democrats Have Done More For Oil | With the Republican National Convention set to wrap up on Thursday, and the Democratic National Convention getting ready to kick off in Philadelphia next week, one prominent oil executive is noting that the industry has fared better under Democrats than Republicans. Scott Sheffield, CEO of Pioneer Natural Resources, says that he has noticed the trend during his 42 years in the business. That may sound strange considering the two parties’ diverse platforms when it comes to energy. The Republican party is touting deregulation and has said that it does not support the Paris Climate Accords. Going a few steps further, the party has plans to defund renewable energy, and open public lands and the outer continental shelf to drilling. Additionally, the party also wants to leave the regulation of fracking and drilling to the states, and increase oil and gas exports. Conversely, the Democrats are calling for an 80 percent reduction in greenhouse gas emissions and oppose the expansion of oil and gas production. They also want to phase down energy production on public lands. The party supports the inquiries into the alleged “climate change cover-up” by Exxon Mobil, and wants to see the nation using only renewable energy by the middle of the century.  Comparing the two platforms, the GOP clearly appears to be the ally of the oil and gas industry. However, Sheffield says that under President Obama, Pioneer became the fifth largest company in the S&P in 2014.

Another Fracking Disaster: Explosion Causes 36 Oil Tanks To Burn -- A huge oil field erupted in flames in New Mexico on July 11. The fire broke out at a fracking site operated by WPX Energy, closing a highway and forcing the evacuation of local residents.  The site, which is known as the 550 Corridor and is a part of Greater Chaco Canyon, contained six new oil wells and 30 temporary oil storage tanks. All 36 storage tanks caught fire and burned, according to the Tulsa, Oklahoma-based energy company.  Two days later, “only 7 of 36 tanks at production site on fire this morning,” the company tweeted.  “The site that exploded is a brand new facility that consists of six wells drilled to shale formations that have never been adequately analyzed for impacts and safety concerns,” Mike Eisenfeld, the Energy and Climate Program manager at the San Juan Citizens Allliance told EcoWatch in an email. WPX was given approval to develop the site from the New Mexico Oil Conservation Division in September. The U.S. Bureau of Land Management (BLM) Farmington Field Office gave final approval to drill the land in December.“In a leap before looking scenario, the federal Bureau of Land Management in Farmington, New Mexico has allowed WPX to proceed with these shale facilities discounting the inherent danger that has now become clear with the explosion,” Eisenfeld said.“This highlights the failure to have adequate safeguards in place to protect local communities and also raises serious questions about chemicals and toxicity associated with the explosion,” he went on. “Emergency response for this explosion was hours away. A thorough investigation is necessary.”

New Mexico Gas Co. plans natural gas pipeline to Mexico (AP) — New Mexico Gas Co. says it’ll seek a federal permit to begin building a natural gas pipeline from southern New Mexico to Mexico. Company spokesman Teala Kail says the $5 million project would extend the company’s existing pipeline in Santa Teresa about five miles to the U.S.-Mexico border and enlarge the pipeline. The Albuquerque Journal ( reports that additional facilities would need to be built on the Mexican side of the border before exports of gas could begin. A federal permit is required for pipelines that reach the border between the United States and Canada or Mexico, and Kail says the company expects the permit process will take a few months. New Mexico Gas is the state’s largest natural gas utility, serving more than 515,000 customers.

Trump vs Clinton: How Will Energy Fare? -- The Republican platform offers standard industry-friendly fare, calling for deregulation and promising no action on climate change. It rejects the Paris climate change agreement, rejects a carbon price, and pledges to defund renewable energy programs. The platform also downplays the significance of climate change as a national security threat (even though the Pentagon would disagree). At its core, the platform simply calls for more fossil fuel development. The party supports “opening of public lands and the outer continental shelf to exploration and responsible production, even if these resources will not be immediately developed.” It criticizes Democrats for wanting to “keep it in the ground,” a popular rallying cry among the environmental movement. And in another nod to the industry, Republicans want to leave regulation of fracking, methane emissions, and horizontal drilling to states and not the federal government. Finally it calls for fully liberalizing energy trade, allowing for greater oil and gas exports. In short, oil and gas companies will probably be pretty pleased with President Trump – although there is quite a bit of uncertainty regarding whether or not he is in line with his party’s articles of faith. Drillers would likely see fewer regulatory roadblocks and weaker support for competing technologies.  The Democratic platform is much more complicated for the industry.  Democrats call for an 80 percent reduction of greenhouse gas emissions by 2050 and lambast Republicans for denying climate change science. They support a Department of Justice inquiry into the role that oil companies played in misleading the public on climate change, a statement that all but mentions ExxonMobil. They also want to end fossil fuel subsidies and tax breaks while expanding public support for renewable energy and mass transit. Unlike the Republicans, the Democrats do not clearly support an expansion of oil and gas production. They oppose drilling in the Arctic and Atlantic Oceans, and support a “phase down” of fossil fuel development on public lands.  But what should frighten oil and gas producers the most is the Democrats’ vision for the future. For example, one statement says “America must be running entirely on clean energy by mid-century.” On the way to that future the Democrats issued an interim goal of 50 percent clean electricity within a decade. There are massive questions marks around the Democrats ability and willingness to pursue such a strategy, but it presents an existential threat to both the production of oil and gas, and the long-term demand for those resources.

Federal Agents Went Undercover To Spy on Anti-Fracking Movement, Emails Reveal -- When more than 300 protesters assembled in May at the Holiday Inn in Lakewood, Colorado — the venue chosen by the Bureau of Land Management (BLM) for an auction of oil and gas leases on public lands — several of the demonstrators were in fact undercover agents sent by law enforcement to keep tabs on the demonstration, according to emails obtained by The Intercept.The “Keep it in the Ground” movement, a broad effort to block the development of drilling projects, has rapidly gained traction over the last year, raising pressure on the Obama administration to curtail hydraulic fracturing, known as fracking, and coal mining on federal public lands. In response, government agencies and industry groups have sharply criticized the activists in public, while quietly moving to track their activities.The emails, which were obtained through an open records act request, show that the Lakewood Police Department collected details about the protest from undercover officers as the event was being planned. During the auction, both local law enforcement and federal agents went undercover among the protesters.The emails further show that police monitored Keep it in the Ground participating groups such as, Break Free Movement, Rainforest Action Network, and WildEarth Guardians, while relying upon intelligence gathered by Anadarko, one of the largest oil and gas producers in the region.“Gentlemen, Here is some additional intelligence on the group you may be dealing with today,” wrote Kevin Paletta, Lakewood’s then-chief of police, on May 12, the day of the protest. The Anadarko report, forwarded to Paletta by Joni Inman, a public relations consultant, warned of activist trainings conducted by “the very active off-shoot of” that had “the goal of encouraging ‘direct action’ such as blocking, vandalism, and trespass.” The protesters waved signs and marched outside of the Holiday Inn. The auction went on as planned and there were no arrests.

Colorado business coalition reactivates to fight “economically damaging” oil and gas initiatives - The Denver Post -- Coloradans for Responsible Reform, a battle-hardened business coalition, is mobilizing to help the state’s petroleum industry fend off three ballot initiatives that target oil and gas development in the state. “We will raise what we need to raise to be successful,” said Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce, and co-chair of the effort. Brough expressed a mix of resolve and frustration that the group, first assembled in 1994, must redeploy to fight what it considers ill-conceived and economically damaging initiatives trying to become part of the Colorado constitution. One way to think of the CFRR is as the political equivalent of a tested military reserve unit that the chamber calls into action when it believes business interests in the state face a serious threat.  Earlier this year, there were 11 proposed initiatives targeting oil and gas and other business activities, but only three have survived ahead of an Aug. 8 deadline to submit signatures to make the November ballot. Initiative 75 would give local governments a greater say in limiting oil and gas activity within their boundaries and implementing restrictions that go beyond state standards. Initiative 78 would require new wells be setback 2,500 feet from inhabited dwellings and sensitive environmental areas. Initiative 63 would permit local governments to implement environmental standards on businesses independent of state and federal law. While not specifically aimed at oil and gas drilling, the new rules could be used to block it.

The August, 2016, EIA US Drilling Productivity Report Has Been Posted -- July 19, 2016 -- Link here. Note:The Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions.  EIA's approach does not distinguish between oil-directed rigs and gas-directed rigs because once a well is completed it may produce both oil and gas; more than half of the wells produce both.   While shale resources and production are found in many U.S. regions, at this time EIA is focusing on the seven most prolific areas, which are located in the Lower 48 states.  These seven regions accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14. Of the seven, the Bakken is the only "almost" pure oil play. The Eagle Ford, with regard to oil comes next, but it also produces a significant amount of natural gas. The Permian produces both.  Interestingly, if you look at the regional map at the link, the EIA is not yet including the STACK/SCOOP in Oklahoma in their monthly productivity report.

EIA Predicts Slump in Shale Outputs By August  - The United States Energy information Administration’s monthly report on domestic shale outputs puts oil production down by 99,000 barrels per day from July to August of this year. The report included production rates from the seven largest shale players in the U.S. market and predicted that the per day barrel count would land at 4.55 million by the end of next month. The Eagle Ford shale site in Texas will suffer the largest downturn, with output slumping by 48,000 barrels in August, the EIA site said. The Bakken shale play, which begins in Canada and extends into North Dakota and Montana, will see output declines by 32,000 barrels a day, according to the report. The report did not provide causes for the output declines. U.S. shale is the lowest cost option for new oil production, a report from Wood Mackenzie last week said. The U.S. shale industry has weathered the oil price downturn, tweaking drilling practices and cutting costs in order to stay in business, the report said, adding that the industry is proving to be resilient and flexible in the face of the worst oil market crisis in three decades. The report concludes that U.S. shale companies have managed to cut costs by as much as 40 percent since 2014. Much of that comes from lower costs from equipment suppliers and oilfield services firms. But it also comes from improved productivity from the average shale well. Instead of drilling anywhere and everywhere, U.S. shale companies are getting better at finding the “sweet spots.”

Natural gas flaring ticks upward | Prairie Public Broadcasting: The flaring of natural gas spiked upward in May. It’s back up to 11-and-a-half percent. "There are a couple of reasons," said State Mineral Resources Director Lynn Helms. "Natural gas production went up, and there was no additional processing or gathering capacity ready to take that up." Production rose to 1,643,522 MCF per day, from April's 1,616,769 MCF per day. Helms said the Hess Tioga gas plant ran only at 74 percent of capacity. He said that’s because of a delay in a project that would bring natural gas from south of Lake Sakakawea to that plant. "They (Hess) had been counting on the river crossing under Lake Sakakwea, in order to bring that plant up to full capacity," Helms said. "It has just been continuously delayed, and delayed, and delayed." Helms said Hess is awaiting federal approvals for that. But he said it looks like the approvals will come later this year. Helms also said three new gas plants should be coming on-line shortly. Meanwhile, this summer, natural gas prices have increased. That’s because more utilities are using the gas to generate electricity. And it is the summer air conditioning season. The norm used to be – natural gas prices would go up in winter, for heating, and down in summer. Helms said this summer, prices went up – and storage went down. And he said that bodes well for the development of natural gas processing plants in North Dakota.

Over 10K gallons of oil, produced water spill near Keene (AP) — North Dakota officials say more than 10,000 gallons of a mixture of oil and produced water have spilled at a well site in McKenzie County. The state’s Oil and Gas Division says the incident happened Tuesday at a site about 10 miles southeast of Keene. Officials say the incident was caused by a “piping connection leak.” The division says more than 9,500 gallons of the mixture have been recovered. Clean-up efforts are ongoing. A state inspector visited the site Wednesday. Produced water is a mixture of saltwater and oil and can contain drilling chemicals. Hess Bakken Investments II operates the site. A company spokeswoman did not immediately return a call seeking comment Wednesday.

A dirty little secret -  The Economist - METHANE is invisible to the naked eye and does not make for good television. So when about 100,000 tonnes billowed out of a natural-gas system in Aliso Canyon, Los Angeles, over 112 days last winter (pictured in infra-red above), it drew relatively little media attention—even though it forced the evacuation of thousands of homes and the plume was big enough to be detectable from space..Unsurprisingly, many oil and gas companies would prefer methane leaks to remain out of the public eye, even though their industry now surpasses cow burps as a source of emissions (see chart). Methane is the predominant constituent of natural gas, a fuel that energy companies are embracing over oil and coal as a “bridge” to a post-carbon future and which has been given a new lease on life by America’s shale revolution. When burned, it emits about half as much carbon dioxide as coal and far less sulphur, soot and other pollutants. But greenhouse gases insulate the Earth in different ways. Carbon dioxide stays in the atmosphere for more than 500 years; methane just for 12. But the latter is about 25 times more potent.The American Petroleum Institute (API), a lobby group, says America is in “good shape” thanks to natural gas. Yet even environmentalists who acknowledge a preference for natural gas over coal believe methane leaks could be its fatal flaw. The Environmental Defence Fund (EDF), an American NGO that works with industry to reduce methane emissions, has in recent years deployed infra-red cameras along energy firms’ pipelines and beside thousands of oil and gas wells, as well as airborne monitoring kit to gather data. The results suggest methane leaks are significantly higher than had been previously understood. EDF has found that a disproportionate amount of fugitive emissions from the oil and gas infrastructure comes from a few “super-emitting” sites. In rare cases, like Aliso Canyon, they can take months to plug. More often the culprits may be well-side storage tanks with faulty valves, which may be fixable just with a wrench, but while left unattended billow methane into the air.

Another California County Just Approved A Fracking Ban -  California’s anti-fracking movement just recorded its latest win Tuesday with the passage of fracking ban in Alameda County.  Alameda, which has environmentally-friendly cities like Berkeley and Oakland within its borders, is now the first Bay Area county with a fracking ban in place and the fifth in the state. Last month nearby Butte County residents approved a fracking ban through a ballot measure.Alameda is fracking-free and has just one oil drilling company operating out of the city of Livermore, according to the San Jose Mercury News. Yet the county could have substantial oil reserves since part of Alameda is near the Monterey Shale, one of largest reservoirs of frackable oil in the U.S. Environmentalists had been working for two years to get the ban in place, arguing that fracking could harm the county’s wine region. California environmentalists have also long argued that fracking’s water-intensive nature is incompatible with a state going through the fifth year of a crippling drought that forced regulators to implement mandatory water restrictions. Some property owners criticized the move during Tuesday’s meeting, however, saying the ban trumped their property rights. Alameda County Board of Supervisors ultimately sided with environmentalists and unanimously approved the ban.

Why Do We Pretend to Clean Up Ocean Oil Spills? -- When the Deepwater Horizon well operated by BP (formerly British Petroleum) exploded and contaminated the Gulf of Mexico with at least 650 million litres of crude oil in 2010, blue-smocked animal rescuers quickly appeared on television screens. Looking like scrub nurses, the responders treated oil-coated birds with charcoal solutions, antibiotics and dish soap. They also forced the birds to swallow Pepto-Bismol, which helps absorb hydrocarbons. The familiar, if not outlandish, images suggested that something was being cleaned up. But during the chaotic disaster, Silvia Gaus poked a large hole in that myth. The German biologist had worked in the tidal flats of the Wadden Sea, a region of the North Sea and the world's largest unbroken system of intertidal sand and mud, and critical bird habitat. A 1998 oil spill of more than 100,000 litres in the North Sea had killed 13,000 birds in Wattenmeer National Park, and the scientist had learned that cleaning oil-soaked birds could be as harmful to their immune systems as the oil accumulating in their livers and kidneys. Kill, don't clean, she advised responders in the 2010 BP spill. Gaus then referred to scientific studies to support her unsettling declaration. One 1996 California study, for example, followed the fate of brown pelicans fouled by oil. Researchers marked the birds after they had been "cleaned" and released them into the wild. The majority died or failed to mate again. The researchers concluded that cleaning brown pelicans couldn't restore them to good breeding health or "normal survivability."

Canadian Q2 oil, gas drilling falls 57%; signs of recovery seen: Precision CEO - The number of oil and natural gas wells drilled in the second quarter of 2016 in Canada fell 58% year on year to 313, but the industry is now showing signs of a "modest recovery" as crude prices improve, a leading drilling contractor said Thursday. "This is the sixth consecutive quarter since the downturn [began in late 2014], but clearly the tone and the sentiment has changed now," Precision Drilling CEO Kevin Neveu said during a earnings webcast. "Our customers are moving from a cash conservation mode to a more normalized drilling activity keeping in mind the long-term fundamentals of demand for energy. We will not call this a rebound, but rather a recovery," Neveu added. As of Wednesday, Precision had 29 rigs active in Canada, another 29 rigs in the US and seven internationally that included three each in Saudi Arabia and Kuwait and one in Mexico, he said.The company has 57 rigs contracted for the third quarter, which is an increase of three new rigs compared with its position four months ago, Neveu said. Neveu's comments came after a "weak" Q2 that saw Precision's active rig count in the US standing at 24 rigs, compared with 57 rigs in Q2 2015. In Canada, its rig count last quarter was 13, compared with 26 rigs in Q2 2015.

Canadian energy company says crude oil has leaked into river (AP) — Canadian energy company Husky Energy says between 52,834 gallons (200,000 liters) and 66,043 gallons (250,000 liters) of crude oil and other material has leaked into the North Saskatchewan River in west-central Canada. Husky Energy said Friday that booms are being used in an effort to contain the spill, which leaked Thursday morning near Maidstone, Saskatchewan. Saskatchewan Mayor Ian Hamilton says in the event any oil makes it through to North Battleford, the city will shut down its water treatment plant, which draws its supply from the North Saskatchewan River. The pipeline runs from Husky’s heavy oil operations to its facilities in Lloydminster, between the border of Alberta and Saskatchewan, and carries oil mixed with a lighter hydrocarbon, called a diluent, that’s added to ease the flow.

Big Oil Begins To Worry About Trump’s Wall - Donald Trump’s idea to build a wall along the southern border of the U.S. has been called everything from controversial to harebrained, but—to the likely dismay of some of the oil majors—it’s now officially part of the Republican Party’s platform. As it turns out, the idea has been on the GOP table for a while, and Trump was just the man to voice it loudly and persistently enough. Trump’s wall is on the agenda, should he become president. A wall stopping people and vehicles from illegally crossing into the U.S. may appear to be a simple and effective solution to illegal immigration, but it sure won’t sound so good to Marathon Oil, Anadarko Petroleum, Exxon, Chevron, Kinder Morgan and their peers. The reason: since Mexico liberalized its energy market back in 2014, it has become an attractive investment destination for U.S. energy companies. E&Ps are bidding for oil and gas blocks. Service providers are building pipelines to export oil and gas to the south. Gas is a top priority, as it is gradually becoming the dominant element in Mexico’s energy mix. U.S. natural gas exports to its southern neighbor spiked following the 2014 liberalization, reaching 103.42 billion cubic feet in March 2016, from just 20.63 billion cubic feet in April 2010, according to the Energy Information Administration. To put this into perspective, let’s see how prices have been moving since 2014. The U.S. exported natural gas at $2.26 per 1,000 cubic feet in November 2015, which fell to $$2.20 in February this year and further to $1.88 in March, before inching up to $2.03 in April. The EIA’s latest natural gas report noted higher prices would stimulate production, and these higher prices, if they translate into higher export prices for Mexico, could add to the pre-wall pressure between the two countries. Especially since there are large-scale gas transportation projects underway.

Energy Giant Schlumberger Fires Another 8,000 As "Market Conditions Worsened" In Q2 –-- Last quarter, Paal Kibsgaard, the Chairman and Chief Executive Officer the world's largest oilfield services company, Schlumberger warned that "the decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis. This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity." He then promptly fired 8,000 workers in the first quarter, and said that he is not expecting a meaningful recovery in the company’s activity until sometime next year. He was right, because while the oil industry was touted as experiencing a substantial rebound since then, this appears to not have been the case for the energy services giant. This was confirmed in the results reported moments ago by Schlumberger which announced another unexpected loss or $2.16 billion, or $1.56 cents a share, compared with a profit of $1.12 billion, or 88 cents, a year earlier. As Bloomberg notes, as the downturn dragged on, executives at the world’s largest oilfield services provider have had to push back their expectations for an improvement in drilling and fracking work, with crude prices remaining more than 50 percent lower than their peak in 2014. As a result, the tone of Paal Kibsgaard this quarter was even gloomier than in Q1: In the second quarter market conditions worsened further in most parts of our global operations, but in spite of the continuing headwinds we now appear to have reached the bottom of the cycle.  Or so he hopes.

Halliburton signals better demand for fracking equipment | Reuters: Halliburton Co indicated that demand for its fracking equipment was returning, despite the fewer number of rigs at work, as high-intensity shale drilling soaked up all the available capacity in the market. Halliburton is the world's largest provider of equipment used in hydraulic fracturing or fracking - the process of pumping water and chemicals, known as proppants, into shale rocks to extract oil and gas. U.S. shale oil producers - Halliburton's customers - are now drilling longer horizontal wells with multiple fracking stages, and deploying more horsepower and proppants to cover larger areas. This high-intensity drilling is boosting demand for fracking equipment. "Let me start today with a headline: 900 is the new 2,000 for U.S. rig activity," the company's president, Jeff Miller, said on a post-earnings call on Wednesday. "I believe it will only take 900 rigs to consume all of the horsepower available in the market." The company reported a smaller-than-expected quarterly loss and said it expected a "modest uptick" in rig count in the second half of the year. The U.S. rig count climbed by 7 to 447 in the week ended July 15, but is far short of the 1,931 at work in September 2014.

Despite Optimism, Oil Firms Keep Cutting Jobs - WSJ: Energy companies continued to cut thousands of jobs during the second quarter, even though many chief executives are now voicing optimism that the oil market crash is ending and a rebound in drilling is afoot. Although the heads of Halliburton, Schlumberger and other major firms forecast higher crude prices and a return to U.S. shale fields when discussing earnings this week, those companies and others disclosed another 15,000 industry layoffs. Among the recent job cuts were 8,000 employees from Schlumberger, the world’s largest oil-field service company, and 5,000 from its rival Halliburton. FMC Technologies, which makes offshore oil equipment, cut 1,000 workers in the spring and summer. ConocoPhillips,  one of the biggest U.S. oil producers, confirmed another 1,000 employees will be let go by the end of September. Further bloodletting in the oil patch has brought the number of global energy jobs lost during this downturn to more than 385,000 people, with the bulk of the latest cuts coming in the U.S. and Canada, according to data from Houston-based consultancy Graves & Co.  Paal Kibsgaard, the chief executive of Schlumberger, characterized the state of the market this way: “We aren’t expecting a uniform V-shaped recovery here,” Schlumberger, which helps oil-and-gas producers tap new wells and coax more fuel out of old ones, has clients from Oklahoma to Oman, but in the last two years it has reduced its world-wide workforce by 50,000 people.

ConocoPhillips to Trim 6% of its Workforce  |  Rigzone -- ConocoPhillips will lay off approximately 6 percent of its global workforce, the exploration and production (E&P) company confirmed to Rigzone in an email. ConocoPhillips, which has headquarters in Houston, has undertaken a series of cost-reduction measures over the last 18 months in response to the industry downturn, ConocoPhillips spokesperson Daren Beaudo told Rigzone. Beaudo said ConocoPhillips has significantly reduced its capital activities and finished some major projects, leaving the company with “more organizational capacity” than it needs. “We have been transparent with employees that we will have targeted workforce reductions in certain areas of our business to align our organizational capacity with future activity levels,” Beaudo said. North America will be impacted the most by the job cuts.

Keppel Sees Prolonged Dearth Of Oil-Rig Orders Amid Glut  |  Rigzone-- Keppel Corp., the world’s largest builder of oil rigs, sees little prospect of an improvement in global demand amid a supply surplus that’s caused quarterly profit to fall to the lowest in almost a decade. The company may consider reducing its workforce and mothballing some facilities in its rig-building operations because of excess capacity, the Singapore-based company said Thursday. Keppel Offshore & Marine Ltd. has already shrunk its workforce by about 11,000 and subcontractor headcount by some 8,500 since 2015, according to Chief Executive Officer Chow Yew Yuen. "It’s about hunkering down," Keppel Corp. Chief Executive Officer Loh Chin Hua said at a briefing. "What we have seen in the industry, it’s not just about oil prices. We have to look at the oversupply of rigs and the current situation with the traditional customers." Keppel sees a long, harsh "winter" in its rig-building business after net income fell 48 percent in the second quarter to S$205.8 million ($152 million). The company is among Asian shipyards that have cut jobs and are considering dock closures after oil prices more than halved in two years, leading to a slump in orders for offshore drilling and production, deferrals and cancellations. The company has been hit by non-payments from one of its biggest clients, Sete Brasil Participacoes SA, which filed for bankruptcy protection in April. Shares of Keppel fell as much as 1.8 percent to S$5.48 and traded at S$5.50 as of 9:27 a.m. in Singapore, while smaller rival Sembcorp Marine Ltd. dropped 2.6 percent to S$1.485. The stocks have both fallen about 15 percent this year, compared with a 1.8 percent advance in the benchmark Straits Times Index. Keppel said the order outlook is weak because of oversupply of oil rigs and falling day rates, or the fees charged to lease a drilling rig. Demand is expected to return eventually when oil companies curb falling production and replenish declining reserves to meet the world’s requirements for fossil fuels. Revenue at Keppel fell 37 percent on year to S$1.63 billion in the second quarter.

Old and In The Way - Jones Act Fleet Retirements and Their Effect on Charter Rates -- Since 2012, the capacity of the Jones Act fleet of tankers and large articulated tug barges (ATBs) has increased by more than one-third, to 22.5 million barrels, and over the next 18 months, new-build tankers and more large ATBs will add another 4.5 million barrel –– or 20% –– to the capacity total. That’s raised a lot of concern among vessel owners about a capacity glut and the potential for bargain-basement charter rates. What’s important to factor in, though, is that a lot of older Jones Act vessels are getting close to retirement age, and their exit from the shipping “work force” will help to mitigate the effects of any over-build. Today, we continue our series on recent developments in the Jones Act fleet and how they affect crude oil and petroleum products shippers. In the first episode of this series, Flirtin’ With Disaster –– The Coming Oversupply of Jones Act Tankers and ATBs, we noted that 17 Jones Act tankers and large, ocean-going ATBs (combined capacity of more than 4.5 million barrels, or MMbbl) will be delivered by the end of 2017, boosting the total fleet capacity of these types of vessels by one-fifth. These new-vessel orders were made a few years ago in response to increased shipments of crude oil within the U.S. that, at the time, had resulted in a shortage of Jones Act product tankers and large ATBs. This in turn led to higher charter rates and the resulting increased costs of shipping crude oil and petroleum products in the coastwise trade. Now though, the decline in U.S. crude oil production has upended those expectations.

US agency creates Jones Act enforcement division -  Amid increased pressure from the US maritime industry to boost Jones Act enforcement, the US Customs and Border Protection has created a new division of enforcement for the nearly century-old law. CBP's Office of Field Operations has created the National Jones Act Division of Enforcement, which has a mission to "assist CBP and industry partners on issues concerning coastwise trade, with the goal of being a clearinghouse for all coastwise trade issues," according to a July 15 notice from Vernon Foret, director of the Area Port of New Orleans. The division, known as JADE, will be headquartered in New Orleans and will include a staff of Jones Act experts, Foret wrote. "The JADE will work in partnership with industry stakeholders in the enforcement of the Jones Act, along with all other coastwise trade laws," Foret wrote, adding that the Jones Act was the "foundation" of US maritime policy.There are few public details on this new division and their future work outside of Foret's notice. Katrina Skinner, a CBP spokeswoman, declined to comment beyond the announcement. But sources said the JADE was likely created in response to lobbying from the US maritime industry, a fierce defender of the Jones Act, and may lead to more Jones Act enforcement cases. "This plainly is the outgrowth of industry lobbying to get CBP to take Jones Act enforcement more seriously,"

The Glut Is Far From Over As Offshore Oil Storage Continues To Swell - Nine tankers carrying as much as nine million barrels of crude are floating in the North Sea as traders can’t afford to sell the crude they have—at least not profitably enough. In May, there were seven million barrels of oil stored in tankers in the North Sea.  Bloomberg reports, citing the International Energy Agency, that worldwide crude oil amounts at sea had reached 95 million barrels at the end of June, the highest since the global financial recession in 2008. However, during the 2008-2009 rise in crude oil storage at sea, traders were holding off the sales to make bigger profits – crude then was in triple-digit territory, hitting US$140 a barrel in 2008. Now they can’t afford to sell it, as prices are down once again, following API’s estimate that U.S. stockpiles have risen by 2.2 million barrels in the week to July 8. Even official figures from the EIA did not reverse the trend, even though they were for a draw of 2.5 million barrels. So, it seems that regardless of what Saudi Arabia’s new Oil Minister recently said about the excess supply having disappeared and the market close to balance, the situation is pretty much the same as it was a month ago in terms of supply. While the IEA concurs that excess is diminishing, this is not the same as “glut over”. In its latest report, the agency said global supplies of crude rose in June, by 600,000 barrels per day to 96 million bpd. Production, on the other hand, was 750,000 bpd lower than last June, with OPEC pumping more, but not enough to offset the decline in the U.S. The IEA also noted that there was healthy demand for crude in Europe and that this demand supported global growth of 1.4 million bpd, which should continue through the end of the year.

UK probes Unaoil for 'bribery, corruption and money laundering' - Petro Global News: The UK Serious Fraud Office said Tuesday it is “conducting a criminal investigation into the activities of Unaoil, its officers, its employees and its agents in connection with suspected offenses of bribery, corruption and money laundering.” A report in late March by Fairfax Media and the Huffington Post said Monaco-based Unaoil paid bribes on behalf of large companies in the oil and gas sector. HuffPo said its story was based on leaked internal Unaoil documents. The SFO said Tuesday it has “been approached by a number of sources who may have information relevant to this investigation.” The SFO opened its investigation in March 2016 but didn’t announced it until Tuesday. The agency said it couldn’t comment further “at this time.” Unaoil has denied the allegations of corruption.In June, it said in a statement it would take legal action against Fairfax Media and its partners for “malicious and damaging allegations negligently published” by them. Unaoil also said it would file a criminal complaint with law enforcement in Monaco for the theft of company data. Police in Monaco raided Unaoil’s offices after the Fairfax Media / Huffington Post report appeared. The report named about a dozen companies as “beneficiaries of Unaoil’s network in the Middle East.” The leaked Unaoil documents, according to HuffPo, mentioned Core Laboratories, FMC Technologies, Rolls-Royce, and Weatherford. Also named were Saipem, MAN Turbo, SBM Offshore, ABB, Cameron/Natco, Leighton Offshore, and Petrofac.

Gazprom sees efficiency coming from fracking - (UPI) -- Hydraulic fracturing of oil reservoirs is part of the long-term goal of making drilling operations more efficient, Russian energy company Gazprom Neft said. Gazprom Neft, the fourth largest oil company in Russia, announced it became the first Russian company to use a multi-stage hydraulic fracturing method while drilling into the Yuzhno-Priobskoye field. First Deputy CEO Vadim Yakovlev said hydraulic fracturing, or fracking, is "inextricably" bound to long-term efficiency goals. "Improving oil recovery and bringing into development reserves previously considered non-viable are key components of the company's technology strategy," he said in a statement. By drilling horizontally, some fracked wells can yield more than conventional drillings operations. Gazprom Neft in April said it reached a production milestone at the Yuzhno-Priobskoye field. Most of the oil in the basin, however, is considered "hard-to-recover." Production started in 1999, more than a decade after discovery. Initial rates of production were around 3,300 barrels per year. The economics of fracking may be prohibitive. U.S. crude oil production is on the decline because drillers are unable to generate a viable revenue stream at some shale basins because of the low cost of crude oil. Russian oil supplies to the world are expected to increase slightly to average almost 11 million barrels per day in 2016, a level that's higher by 10,000 bpd from the previous estimate. More narrowly, however, second quarter output was 40,000 bpd lower than the first quarter average.

Venezuela's oil production just sank to a 13-year low, and things are going to get worse - Venezuela’s oil production plunged to a 13-year low in June as the economic crisis continues to eat into the nation’s only source of export revenue. Venezuela’s oil production has declined by 170,000 barrels per day since the start of 2016, dipping to 2.18 million barrels per day (mb/d) in June, according to the IEA’s latest Oil Market Report. Part of that was due to electricity blackouts that cut 120,000 barrels per day from the country’s output between April and June, but even with some of those issues resolved – rain has restored some output at hydroelectric dams – the IEA says that “further losses are expected in 2H16.” A year-on-year decline in oil production of 200,000 barrels per day “looks unavoidable as foreign oil service companies reduce their activity and international oil companies face repayment issues and daily operational challenges.” But 200,000 barrels per day could be just the start. Venezuela does have some of the largest oil reserves in the world, but much of its oil production occurs at mature fields that require maintenance. But maintenance requires cash, something that is increasingly scarce in the country. Venezuela’s state-owned PDVSA was already failing to properly invest in oil production even when oil prices were in triple-digit territory several years ago. In fact, production has been gradually declining for more than a decade. The problem is that the declines are now accelerating. In the mature oil fields around Lake Maracaibo in the west, wells are depleting as investment falls short. The IEA says that even in the Orinoco Belt in the southeast output is falling because PDVSA is struggling to process the heavy crude due to a shortage of light crude for blending.  Venezuela has long predicted that it would be able to ramp up production from its heavy oil fields in the Orinoco Belt, which holds some of the largest heavy oil reserves in the world and accounts for half of the country’s output, in order to compensate for the aging fields in the Maracaibo region. The predictions were always overoptimistic, but now they are entirely off the table.

Turkey coup attempt: Asian crude traders see little impact - Asian crude traders say Monday they do not see much immediate market impact from the failed coup attempt launched by Turkish army officers late last week. The August/September Dubai crude swap traded at minus 46 cents/b at 3 pm Singapore time (0700 GMT), down slightly from minus 41 cents/b at Singapore close on Friday. At 3 pm in Singapore, ICE September Brent crude was at $47.54/b, while NYMEX August crude was at $45.80/b, both slightly down from Friday's settle. September ICE Brent had jumped to as high as $48.25/b late Friday as news of the coup attempt in Turkey spread. "So far, we don't see any impact yet [from the failed coup attempt] ... market is relaxed, it's OK,"Industry officials had told S&P Global Platts late Sunday that the failed coup attempt launched late Friday by Turkish army officers had little or no impact on oil and gas flows through Turkey. A spokesman for BP Turkey had said Azeri crude flows through the Baku-Tbilisi-Ceyhan pipeline were continuing as normal, as were gas flows through the South Caucasus gas pipeline. An official from the Kurdistan Regional Government confirmed to Platts Saturday that crude flows through the main Iraq-Turkey pipeline to Ceyhan were continuing as normal and had not been affected, while a spokesman for the region's main crude producer, Anglo-Turkish Genel Energy, said he was unaware of any interruptions to flows. Tanker traffic through Istanbul's Bosporus was halted for a period from late Friday, but restarted the following day, local media reported.

WTI Tumbles To $45 Handle As 'Failed Coup' Leaves Flows Unhindered -- Despite Turkish turmoil, oil prices have resumed their downturn as the 'failed coup' has left flows unhindered and a stronger dollar (and waning gasoline demand) pushed WTI back to a $45 handle this morning. Catalysts for the downside push appear to be:

  • 0il tankers loading, unloading cargoes normally at Turkey’s ports and supplies arriving in ships and pipelines from neighboring countries, according to Turkey's Energy Ministry.
  • Demand for gasoline in the U.S. fell last week even though it remains higher than the same period last year, as well as the five-year average.
    However, overproduction in the past means gasoline inventories remain at a high level of around 240 million barrels, says the Oil Market Journal. The worry is that, as the end of the U.S. driving season is around the corner, demand for gasoline will plunge, leaving gasoline stocks elevated.
    "With demand failing to meet expectations, and stocks holding high, we believe the risks remain to the downside,"
    the note says.
  • And the US dollar is strengthening.

Nigeria's oil war festers as truce hopes fade - The Nigerian oil industry risks sinking deeper into crisis in the months ahead with more disruptions to oil output and exports as the government's dialogue with militant groups has failed to curb violence in the Niger Delta. Some 700,000 b/d of Nigerian oil output is currently shut-in due to the latest wave of attacks on pipelines and other production facilities in the Niger Delta region, the state oil firm NNPC said Thursday, taking production to around 1.5 million b/d. The Nigerian government had hoped that by August oil production would recover to its pre-January levels of around 2.2 million b/d after plummeting to 1.4 million b/d in May. But this looks increasingly unlikely. Negotiations with the militants have so far yielded little in the way of positive results and some oil companies and analysts said time is running out for the government to stem the wave of disruptions to their operations. Despite a temporary lull in attacks on oil assets late last month following a short-lived ceasefire, industry insiders now believe the recent rise in attacks shows the government may be over-promising on progress of peace talks."Maybe in order to assuage the concern of the companies, the government said it was meeting with some groups; but the continued attack on facilities does not suggest so," an official from Shell, which is very active in Nigeria, said.

Workers: Force majeure at ExxonMobil Nigeria may last weeks (AP) The force majeure — or freedom from contractual obligations because of extraordinary circumstances — declared by ExxonMobil on Nigeria’s largest crude stream could last a month because of extensive damage to its 300,000 barrel-a-day Qua Iboe export terminal, workers of the U.S.-based oil giant told The Associated Press on Friday. ExxonMobil has denied that militants bombed the facility July 11 and cited a “system anomaly.” Spokesman Todd Spitler said Qua Iboe was “operating and production activities continue.” But a company security official said the damage is too great to be a system failure. He and two other workers said the force majeure could last weeks. All spoke on condition of anonymity for fear of losing their jobs. Futures sales of Nigerian oil have been affected by frequent declarations of force majeure since attacks by oil militants resurged this year. Qua Iboe terminal had just restarted production after a month-long force majeure in June following an attack claimed by the Niger Delta Avengers. President Muhammadu Buhari on Thursday said his government has initiated indirect talks with the militants but the Avengers denied that Friday through social media. The 400,000 barrel-a-day Forcados terminal of British-Dutch Shell has not resumed exports since the Avengers in February blew up a subsea pipeline. Shell also shut its 180,000 barrel-a-day Trans-Niger Pipeline after it was dynamited earlier this month. The Avengers have hit facilities of U.S.-based Chevron and Italian Agip as well as state-owned pipelines. The attacks have stopped production at two of Nigeria’s five oil refineries and slashed supplies of gas used to fuel electricity generators.

Why Another Oil Price Downturn Is A Distinct Possibility - In June 2015, oil prices surged to $60 per barrel, raising hopes that the oil price downturn would have been brief and the recovery swift. But by July, oil prices were heading back down, the beginning of a deeper slump that would continue for months. A year later, a similar pattern could be playing out, or at least, that is what oil producers are fearing. After hitting a low point in February of this year, oil prices began a four-month rally, rising from $26 to $51 per barrel by June, the third year in a row in which the month of June saw a relative peak for oil prices. Now, July could once again mark a renewed nose-dive. This time around, an array of oil producers are not taking any chances. According to Bloomberg, more and more E&Ps are hedging their production, protecting themselves against a crash in prices. Earlier this month, Laredo Petroleum Inc., for instance, hedged more than 2 million barrels of its 2017 production. “The producers have sold the hell out of this rally,” Stephen Schork, president of Schork Group Inc., told Bloomberg. “The companies that did survive, they’ve been hedging into this rally. And they’re counting their blessings.” Hedging even began before prices rallied. Reuters surveyed shale firms earlier this month, finding that 17 out of 30 had increased their hedging in the first quarter when oil prices were at a low point. Even though they locked in at low prices, doing so offered some stability and certainty in their revenue projections. But it was also an indication of the level of anxiety with which E&Ps were approaching 2016. The rally since February has buoyed spirits, but with oil prices back to $45 per barrel, negative sentiment once again pervades the market. For the week ending on July 12, oil traders increased their short bets by 1.6 percent, the third week in a row that shorts climbed. Production is falling but global supplies are still elevated. Worse, inventories are only coming down slowly from record highs. Then there is the possibility of new drilling – the rig count rose again last week, with the industry adding 6 oil rigs and 1 natural gas rig, according to Baker Hughes. On the other hand, although drillers could get back to work, the markets are likely overestimating the impact of a few dozen rigs coming back into operation.

Why Oil Prices Might Never Recover - By Arthur Berman -- Two years into the global oil-price collapse, it seems unlikely that prices will return to sustained levels above $70 per barrel any time soon or perhaps, ever. That is because the global economy is exhausted. The current oil-price rally is over as I predicted several months ago and prices are heading toward $40 per barrel. Oil has been re-valued to affordable levels based on the real value of money. The market now accepts the erroneous producer claims of profitability below the cost of production and has adjusted expectations accordingly. Be careful of what you ask for. Meanwhile, a global uprising is unfolding. The U.K. vote to exit the European Union is part of it. So is the Trump presidential candidacy in the U.S. and the re-run of the presidential election in Austria. Radical Islam and the Arab Spring were precursors. People want to throw out the elites who led the world into such a mess while assuring them that everything was fine. The uprising seems to be about immigration and borders but it’s really about hard times in a failing global economy. Debt and the cost of energy are the pillars that underlie that failure and the resulting discontent. Immigrants and infidels are scapegoats invented by demagogues. Energy is the economy. Energy resources are the reserve account behind currency. The economy can grow as long as there is surplus affordable energy in that account. The economy stops growing when the cost of energy production becomes unaffordable. It is irrelevant that oil companies can make a profit at unaffordable prices. The oil industry is damaged and higher prices won’t fix it because the economy cannot bear them. It is unlikely that sustained prices will reach $70 in the next few years and possibly, ever. Lack of investment will inevitably lead to lower production, supply deficits and price spikes. These will further damage the economy. The future for oil prices and the global economy is frightening. I don’t know what beast slouches toward Bethlehem but I am willing to bet that it does not include growth. The best path forward is to face the beast. Acknowledge the problem, stop looking for improbable solutions that allow us live like energy is still cheap, and find ways to live better with less.

The Peak Oil Paradox – Revisited --Euan Mearns -  Back in the mid-noughties the peak oil meme gained significant traction in part due to The Oil Drum blog where I played a prominent role. Sharply rising oil price, OPEC spare capacity falling below 2 Mbpd and the decline of the North Sea were definite signs of scarcity and many believed that peak oil was at hand and the world as we knew it was about to end. Forecasts of oil production crashing in the coming months were ten a penny. And yet between 2008, when the oil price peaked, and 2015, global crude+condensate+NGL (C+C+NGL) production has risen by 8.85 Mbpd to 91.67 Mbpd. That is by over 10%. Peak oilers need to admit they were wrong then. Or were they?  It is useful to begin with a look at what peak oil was all about. This definition from Wikipedia is as good as any: Peak oil is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time. Those who engaged in the debate can be divided into two broad classes of individual: 1) those who wanted to try and understand oil resources, reserves, production and depletion rates based on a myriad of data sets and analysis techniques with a view to predicting when peak oil may occur and 2) those who speculated about the consequences of peak oil upon society. Such speculation normally warned of dire consequences of a world running short of transport fuel and affordable energy leading to resource wars and general mayhem. And none of this ever came to pass unless we want to link mayhem in Iraq*, Syria, Yemen, Sudan and Nigeria to high food prices and hence peak oil. In which case we may also want to link the European migrant crisis and Brexit to the same.  Firmly belonging to the group of data analysts, in this post I want to take a look at two different data sets to explore where peak oil stands today. Is it dead and buried forever, or is it lurking in the shadows, waiting to derail the global economy again?

OilPrice Intelligence Report: Oil Prices On Edge With Few Upside Catalysts: Oil prices are still hovering around levels at the close of last week – WTI sitting just above $45 per barrel and Brent around $47 per barrel. High levels of refined products are weighing on the market (more below), and while all major analysts see the market continuing down the path towards supply/demand balance, there is disagreement over how quickly that will arrive. In the very short-term, there do not seem to be a lot of bullish catalysts on the horizon, although weekly EIA data could provide a lift if stock drawdowns are stronger than expected. Three weeks of rig count increases. The rig count increased for a third consecutive time for the week ending on July 15, rising to 357. That brings the total increase to 41 rigs since the end of May, a clear sign that more than a few companies feel that they can get back to work. However, since the rig count data lags behind the oil markets, it often reflects conditions from weeks prior. The increase likely has more to do with $50 oil in June than it does with $45 oil in July. High inventories move to forefront. After rallying to $50 per barrel in June, and then faltering, the markets have recently sent conflicting signals about what to expect in the coming months. Now, after several weeks of new data, the problem of excess inventories for gasoline and diesel are taking center stage as the elephant in the room for any price rally. Elevated levels of refined products are found not just in the U.S., but in Europe and Asia as well – a global problem of too much supply. A glut of refined products is increasing the incidence of tankers being used for floating storage, a sure sign of a near-term glut. New York saw some gasoline tankers backed up because onshore storage was at a premium. Reuters reports that some floating storage is cropping up off the coast of the UK. Oil prices will run into a price ceiling until these inventories are drawn down.

Oil Slides After Unexpected Gasoline Inventory Build --Following last week's surprise distillates build (and lower than expected crude draw) API reported inventories largely in line with expectations (-2.3mm vs -2mm exp. This nevertheless managed to pump and dump crude futures before drifting slightly lower asGasoline showed a bigger than expected build (+800k vs -500k exp.). API":

  • Crude -2.3mm (-2mm exp)
  • Cushing -84k (-100k exp)
  • Gasoline +805k (-500k exp)
  • Distillates -484k

This is the 9th weekly draw in crude in a row... and Gasoline showed a major build vs expected draw...

Unexpected Gasoline Inventory Build, Production Rise Spark Crude Chaos - Following last week's surprise Distillates build (and bounce in production) and API's overnight surprise Gasoline build, DOE data this morning was mixed confirming the 2.3mm draw in overall crude inventories (9th weekin a row) but surpringly large builds in both Cushing and Gasoline inventories (expectations were for draws). Oil prices were chaotic - running stops high and low - as algos noted crude production also rose (for the 2nd week in a row). DOE

  • Crude  -2.3mm (-2mm exp)
  • Cushing +189k (-100k exp)
  • Gasoline  +911k (-500k exp)
  • Distillates -214k

This is the 9th straight week of crude inventory drawdowns...Following last week's bounce (as Alaska came back on line), crude production rose for the 2nd week in a row...Crude was extending losses early on USD strength - AUG16 dropping below $44 for the first time in 2 months - but was panic bid into the DOE data... then went into full stop-running panic-mode (just as it did after API) following the print...

More pain seen for U.S. crude as product glut adds to gloom (Reuters) - A glut of refined products has worsened the already-grim outlook for U.S. crude oil for the rest of the year and the first half of 2017, traders warned this week, as the spread between near-term and future delivery prices reached its widest in five months. A stubborn, massive supply overhang punished crude over the winter as U.S. oil futures hit 12-year lows in February. As supply outages and production cuts increased, crude rallied and spreads tightened significantly in May. But the unusually large amount of gasoline and oil in storage, combined with expectations of a ramp-up in crude production, has made traders more bearish on the price outlook for late 2016 and early 2017. West Texas Intermediate (WTI) futures for delivery in September traded at a discount of as much as $2.23 to those for delivery in December on Wednesday, the biggest this year. Turnover in that spread soared, touching a record high of more than 19,000 contracts, or about 19 million barrels of oil. December spreads, which are the most actively traded, have also blown out in the past month. The discount of the WTI December 2016 contract to December 2017 widened to $4.11 last week. On Wednesday it traded as wide as $3.92 with over 15,000 lots traded. In May that spread had narrowed to just 50 cents, the tightest since November 2014. The market is concerned that gasoline supply will not clear up in the second half of 2016, causing refinery run cuts and another wave of excess crude, a North Carolina-based trader said. These are, however, short-term concerns, leading to more pressure on the front part of the curve, he said. Crude inventories have fallen for nine straight weeks, but at 519.5 million barrels, stockpiles are at historically high levels for this time of year, the U.S. Energy Department said. ""The market may be adjusting to the reality that crude stocks are not only not going to draw rapidly, but also that as we move into refinery maintenance season, that could exacerbate the problem,"

As China Floods The World With Gasoline, European Stocks Hit All-Time High -- Two weeks ago, when referring to an unprecedented gasoline glut, we said: Several months ago we reported that the next big threat to oil prices had nothing to do with oil fundamentals, either lack of demand or excess supply, or technicals, i.e., algo buying or selling, and everything to do with the upcoming glut of the most important crude byproduct: gasoline. We concluded by saying that "with the inventory bottlenecking having reached all the way to the gasoline level, in lieu of refiner buying, crude producers will be forced to start selling oil and dumping prices just to get marginal demand as both onshore and offshore storage is near capacity.  Today, it appears that this story has reached the mainstream and as a Bloomberg note titled "WTI Drops as Gasoline Glut Weighs on the Market" it quotes an expert who says precisely what we have been warning about for the past few months, to wit: “we are gradually shifting from a crude glut to a refined product one, particularly in gasoline,” Thomas Finlon, director of Energy Analytics Group said by phone “The gasoline production numbers in the United States are just astounding.” The China gasoline export story is also attracting attention. In a separate note Bloomberg writes, that "the volume of China’s gasoline exports caught up with diesel last month as refiners dumped excess output in overseas markets to alleviate swelling stockpiles at home amid record domestic production. The world’s largest energy consumer more than doubled shipments in June compared with a year earlier to a record 1.1 million metric tons, or about 312,000 barrels a day, data from the General Administration of Customs in Beijing showed on Thursday. Exports of the motor fuel increased 75 percent to 4.45 million tons between January and June. Diesel volumes slowed to 1.1 million tons, the lowest level in four months even as overseas sales in the first half of the year more than tripled to 6.6 million tons.The country processed a record 11 million barrels a day of oil in June, boosting gasoline output by 8.7 percent to the highest monthly level ever. The nation’s refiners have been adjusting their facilities to maximize gasoline production at the expense of diesel to take advantage of robust vehicle growth in the world’s largest auto market. Commercial gasoline inventories increased to a record 7.83 million tons at the end of May, according to data released by Xinhua’s Oil, Gas & Petrochemicals newsletter.

Oil Rally Hopes Crushed As Inventories Hit All-Time High - Oil prices sank on Thursday following fresh data showing oil and product stocks rising to an all-time high. The EIA released its weekly data on July 20, revealing a slight drawdown in crude oil inventories. Crude oil stocks were down 2.3 million barrels, posting the ninth straight week of declines and adding momentum to a slow but steady oil market balancing. Still, oil inventories stood at 519.5 million barrels as of mid-July, about 60 million barrels higher than year-ago levels. Combined, all U.S. crude oil and refined product stocks jumped to 2.08 billion barrels, an all-time high. This comes at a time of year when peak demand is supposed to draw down on inventories. Part of the increase came because gasoline stocks unexpectedly rose yet again, rising by 0.9 million barrels to 241 million barrels, the highest level since April. It was also the fourth weekly increase in five weeks, a sign that refiners continue to pump out more product than the market is demanding. In fact, refinery runs increased by 1 percent last week from the week before (using a four-week average), about five times higher than analysts had expected. In other words, refiners are contributing to the drawdown in crude oil stocks, pulling oil out of storage, but they are simply spinning that into gasoline, which then ends up in storage because people are not using as much as the industry thought it would. As summer comes to an end and refiners turn to maintenance and cutback on refining runs, the upward pressure on gasoline inventories could subside, but the demand on crude could also fall.It isn’t just maintenance season that could push refiners to cut back. The elevated inventory levels and the high rates of refining have shrunk margins. There is little scope to continue at the current rates as refiners earn less.

WTI Tumbles To $43 Handle - 3-Month-Lows - As Gasoline Glut Deepens --- Mainstream media is beginning to catch on to what we detailed first in February, the gasoline glut is about to bite back. As Bloomberg reports, Oil’s retreat to a three-month low this week demonstrates that surpluses in other parts of the market, most notably refined fuels like gasoline, are holding back any lasting recovery. Combined inventories held by industrialized nations of all forms of oil -- from crude to refined products to natural gas liquids -- reached a record of more than 3 billion barrels last month, data from the Paris-based International Energy Agency shows.In the U.S., gasoline stockpiles were at the highest for the time of year since 1984 as record consumption failed to drain the glut refiners created when crude was cheap, according to the Energy Information Administration. Sept 16 WTI has tumbled from over $51 a month ago to a $43 handle today.. Three-month lows... (pre-OPEC plunge and ramp levels) Tracking last year's pump-and-dump of hope perfectly. “In many ways, the bigger issue is the total inventory overhang,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London, said by e-mail. “It is the plight of oil products -- in particular the light products such as gasoline -- that is slowing the pace of total stock-draws even as crude stocks fall, and of the eventual re-balancing.”

OilPrice Intelligence Report: Oil Markets Spooked By Glut Fears -- Oil is set to close out the week with a loss as worries over a glut of refined product inventories persist. The EIA did nothing to dispel those concerns this week, reporting another uptick in gasoline stocks, the fourth increase in five weeks. Those gains in inventories come even as June saw record gasoline demand in the U.S. as motorists failed to put a dent in the high levels of supply. Gasoline stocks ended June at their highest level since 1984 for the time of year. "The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion," UBS oil analyst Giovanni Staunovo, told Reuters.After Oil Search backed away, it appears that ExxonMobil will move forward with a takeover of InterOil. The $3.6 billion in stock and cash for the company will be Exxon’s largest purchase in several years. That gives the oil supermajor a much larger stake in LNG exports from Papua New Guinea, which is really a play on the LNG trade to China, Japan and Korea in the decades to come. As Royal Dutch Shell becomes one of the largest LNG producers on the planet with its takeover of BG Group, Exxon appears to be upping the stakes in the region.  Halliburton reported dismal second quarter numbers this week, revealing a $3.2 billion loss. But the oilfield services company also said that the market is moving passed the bottom and is on an upswing. Schlumberger posted a $2.16 billion loss in the second quarter, and also announced that it eliminated another 16,000 positions in the first half of the year. At the same time, Schlumberger echoed Halliburton’s sentiment and is looking ahead to better days. The declaration from the executives of the two largest oilfield services companies is a good signal that the oil markets are indeed on the mend.

Baker-Hughes Rig Count July 22, 2016: Highlights The Baker Hughes North American rig count rose for the eighth week straight and is up 22 to 564 in the July 22 week. The U.S. rig count is up 15 at 462 and is down 414 rigs from last year. The Canadian rig count is up 7 from last week to 102 and, compared to last year, is down 98 rigs. Rigs classified as drilling for oil were up 14 in the U.S. and up 4 in Canada, while gas rigs were down 1 in the U.S. and up 3 in Canada.

US Rig Count Up 15 This Week to 462 - The New York Times: — The number of rigs exploring for oil and natural gas in the U.S. increased by 15 this week to 462.A year ago, 876 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration.Houston oilfield services company Baker Hughes Inc. said Friday that 371 rigs sought oil and 88 explored for natural gas this week. Three were listed as miscellaneous.Among major oil- and gas-producing states, Texas gained 15, California was up by two and New Mexico gained one.Louisiana declined by two. Alaska and Kansas each lost one.Arkansas, Colorado, North Dakota, Ohio, Oklahoma, Pennsylvania, Utah, West Virginia and Wyoming were unchanged.The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.Continue reading the main story

U.S. Oil & Gas Rig Count Jumps By 15, Pushing Oil Prices Down | The U.S. rig count is up 15 oil and gas rigs this week, nearly doubling last week’s rig increase and heralding new supply to add to the existing glut and push oil prices down further. According to the Baker Hughes rig count released at 1:00 EST today, oil rigs are up 14 for the week, while gas rigs were down by one, and ‘miscellaneous’ rigs were up two. The biggest gains were in Texas, where 15 new rigs were brought on line, with the Permian basin specifically seeing eight new rigs put into action. The total U.S. rig count is now 462, with Canada coming in with seven new rigs at 102. At the time of the rig count release, West Texas Intermediate (WTI) was trading at US$43.94 per barrel, while Brent crude was trading at US$45.37. This week trading has seen oil prices slump downward by US$0.83 by mid-day Friday (EST). On Wednesday, prices closed at a weekly low of US$43.96. The decline is being attributed to a ramp-up in drilling fields that are profitable with oil below US$50 per barrel, adding further to the supply glut. The U.S. rig count took a major dive beginning in August 2015, but since May 2016 has started the climb back upwards, with 41 drilling rigs at work since late May and until last week’s rig count.

Crude Drops After US Oil Rig Count Jumps Most Since 2009 - Having risen for 6 of the last 7 weeks, the US oil rig count extended its run with a 14 rig surge this week - the biggest absolute rise since Dec 2015. Oil rigs have now risen 55 rigs in the last 8 weeks - the biggest percentage rise since Dec 2009. WTI is tumbling to fresh 3-month lows on the news...


The 14 rig surge to 371 is the biggest weekly percentage rise since Nov 2009...

Saudi Arabia Offers Hope For An Oil Price Rally -- Crude oil prices hit a 10-week low on Tuesday, but one piece of data from Saudi Arabia could provide a glimmer of hope for those longing for an oil price rally. Saudi Arabia is burning through some of its oil inventories as exports combined with scorching domestic demand exceed its total production. In 2015, Saudi Arabia built up crude storage levels to a record high, as the kingdom stepped up production in the face of a global supply surplus. As other producers have cut back on production, there is more room for Saudi and OPEC to export. At the same time, domestic demand is rising quickly in Saudi Arabia. In order to meet that demand and also pursue greater market share, Saudi Arabia has had to draw on its oil sitting in storage. That led the sharp monthly gains in inventories to flip into a deficit late last year. From October 2015 to May 2016, Saudi crude inventories dropped 12 percent to 289 million barrels, according to The Wall Street Journal, the longest period of decline in 15 years. But part of the reason that domestic demand is so strong is seasonal. Saudi Arabia’s oil consumption spikes in the summer because it uses a substantial volume of crude for electricity, and with all the air conditioners running full blast in the hot summer months, more oil is needed. In 2015, the country used 25 percent of its oil production domestically. The Wall Street Journal says that Saudi Arabia is reluctant to simply ramp up production further in order to plug the deficit for fear of spooking the markets. An increase in output beyond 10.5 million barrels per day – a record set in June 2015 – could spark a sell off if oil traders interpreted the move as an attempt to flood the market. Moreover, although the country says it has a production capacity of 12.5 million barrels per day, it also values holding onto spare capacity in the case of a supply disruption. That means that it is already near its practical limit in terms of how far it is willing to ratchet up production.

OPEC's pyrrhic market share victory: -- OPEC’s decision to defend its market share by opting for freewheeling crude oil production appears to be working. It was only a few months ago the International Energy Agency said the market was “drowning in oil” and prices plummeted to less than $30/b. Fast forward to July and the IEA said there had been an “extraordinary transformation” from a major surplus in the first quarter to near-balance in the second. Non-OPEC production remains on course to fall 900,000 b/d this year before staging a modest recovery in 2017, according to the IEA. Meanwhile, OPEC production hit an eight-year high in June, helped by Iran’s post-sanctions return being better than most analysts expected. Couple that with Iraq’s substantial rise in 2015 and the IEA commenting that “low-cost Middle Eastern OPEC countries have seen output rise steadily in recent years” and not only is OPEC defending its market share, it’s slowly increasing it. So far, so good. However, there are a number of flaws to the plan. First, it has only delayed the inevitable. US shale producers are becoming more flexible and prices around $50/b start to make it economic for some to increase output. Second, even the better placed OPEC members have felt the squeeze — evidenced by the mooted privatizations from Kuwait and Saudi Arabia to generate extra cash for depleted government coffers.  Third, OPEC may well have a shared goal but that is often driven by Saudi Arabia and it doesn’t mean individual members are fully committed: they do say a camel is a horse designed by a committee.

Analysis: Demand grows for Middle East's newest heavy crude oil grade -  A year or so after Iraq's State Oil Marketing Organization was having to defend the quality and stability of flagship crude Basrah, the Middle East's newest grades - Basrah Heavy and Basrah Light - have established themselves, with the heavier grade in particular growing in popularity. SOMO has made inroads with all major Asian crude importers, while also selling nearly a third of its volumes to the competitive European market and a not insignificant 11% into the US, according to shipping data compiled by S&P Global Platts. Looking at loading data since June last year, it is possible to see the average API for the two grades, which are both loaded from Iraq's southern oil export terminals and single point moorings in the Persian Gulf. Basrah Heavy averaged 23.96 over the course of the year to end May, with a high of 24.32 degrees in December. In June 2016, it was just 23.65 degrees, its heaviest point. Basrah Light averaged 28.11 degrees over the same period, well within the expected range. Daily loadings of Basrah Heavy averaged around 700,000 b/d over the year, rising from 691,000 b/d at its launch in June to a high of just under 900,000 b/d in August. SOMO hopes to increase this figure to more than 1.1 million b/d in the next three years, driving the country's oil export growth. Much of the heavy oil is used to pay international oil companies developing fields in Iraq. The figure has varied month to month but, on average, around 65% of Basrah Heavy loadings are sold through term contracts, with the remaining loaded as payment to international oil companies. . "We are talking to the customers. They are asking for more",

NY Post: Saudi Government Helped 9/11 Terrorists -  Now we know why the missing 28 pages on 9/11 were kept under lock and key for 15 years: They show the hijackers got help across America from Saudi diplomats and spies in the run-up to the attacks. Because of the coverup, a Saudi terror support network may still be in place inside the United States.  A CIA memorandum dated July 2, 2002, stated unequivocally that the connections found between the hijackers, the Saudi embassy in Washington and Saudi consulate in Los Angeles are “incontrovertible evidence that there is support for these terrorists within the Saudi government.” “Numerous” FBI files also fingered two Saudi government employees who assisted the 9/11 hijackers as “Saudi intelligence officers,” the newly declassified documents reveal. Though much is still redacted, they also show the Saudi government’s ties to the hijackers and other al Qaeda suspects were so extensive that the FBI’s Washington field office created a special squad to investigate the Saudi angle. But this special focus on Saudi Arabia occurred belatedly, only after the 9/11 attacks, “due to Saudi Arabia’s status as an American ‘ally.’ ” Astoundingly, investigative resources were not dedicated to Saudi involvement in financing and supporting terrorism prior to 9/11. The explosive information was locked up in a top-secret, highly secured room in the basement of the US Capitol for the past 15 years, ostensibly to protect the Kingdom from embarrassment. (The Post helped get the declassification ball rolling with the December 2013 piece, “Inside the Saudi 9/11 coverup.”)

It Is A Smoking Gun - Prince Bandar And Other Saudis Financed The 9/11 Terrorists - News reports about the recently released 28 pages of the Joint Inquiry into the 9/11 attacks aretypically dismissive: this is nothing new, it’s just circumstantial evidence, and there’s no “smoking gun.” Yet given what the report actually says – and these news accounts are remarkably sparse when it comes to verbatim quotes – it’s hard to fathom what would constitute a smoking gun. To begin with, let’s start with what’s not in these pages: there are numerous redactions. And they are rather odd. When one expects to read the words “CIA” or “FBI,” instead we get a blacked-out word. Entire paragraphs are redacted – often at crucial points. So it’s reasonable to assume that, if there is a smoking gun, it’s contained in the portions we’re not allowed to see. Presumably the members of Congress with access to the document prior to its release who have been telling us that it changes their entire conception of the 9/11 attacks – and our relationship with the Saudis – read the unredacted version. Which points to the conclusion that the omissions left out crucial information – perhaps including the vaunted smoking gun. In any case, what we have access to makes more than just a substantial case: it shows that the Saudi government – including top officials, such as then Saudi ambassador to the US, Prince Bandar bin Sultan, and other members of the royal family – financed and actively aided the hijackers prior to September 11, 2001.

‘9/11: Bush's Guilt, And The 28 Pages -- On Friday July15th, as the national news media were either on vacation or preparing for the opening of the Trump National Convention on Monday the 18th, the long-awaited release of the ‘missing’ 28 pages from the US Senate’s 9/11 report occurred. It «was kept secret from the public on the orders of former President George W. Bush», and remained secret under Bush’s successor Barack Obama, until that Friday night late in Obama’s Second Administration, right before a week of Republican National Convention news would be dominating the news (along with any racial incidents, which would be sure to distract the public even more from any indication of Bush’s guilt). The pdf was of a picture-file so as to be non-searchable by journalists and thus slow to interpret, and thus would impede press-coverage of it. The file was also of a very degraded picture of the pages, so as to make the reading of it even more uninviting and difficult. Well, that was a skillful news-release-and-coverup operation! The Federal Government had plenty of time to do this right, but they evidently had plenty of incentive to do it wrong. They’re not incompetent; the reasonable explanation is something worse than that. (After all, this information has been hidden from the public for all of the 13+ years since that report was published without the 28 pages at the end of 2002.) What these 28 long-suppressed pages revealed was well summarized by one succinct reader who wrote"The Inquiry discloses that there is a very direct chain of evidence about financing and logistics… [that] goes from the Saudi Royal family (Amb. Bandar's wife and Bandar's checking account) and Saudi consulate employees (al Thumiari) to the agent handlers (Basnan and al Bayoumi) to some of the 9/11 hijackers (Khalid al-Mihdhar, Nawaf al-Hazmi)."

Release of 9/11 report could strain US relationship with Saudi Arabia - The release Friday of a long-classified congressional report on possible ties between Saudi Arabia and the 9/11 terrorist plot has the potential to do lasting damage to the US relationship with the oil-rich Arab kingdom. The so-called “28 pages” suggest a much larger web of connections between al-Qaida and the Saudi royal family than had previously been known. Even as the White House – and the Saudi ambassador to the US – insisted that the 13-year-old report did not implicate senior Saudi officials in supporting al-Qaida, family members of the 9/11 victims who have long demanded the report’s release, as well as some of their congressional allies, said they believed the report demonstrated the need for a new investigation of a possible Saudi government role in the 2001 terror attacks.  The report – classified in December 2002 on orders of then president George W Bush – is almost certain to feed public suspicions that the Saudi government gave extensive support to Osama bin Laden before 9/11, and perhaps even directly to the 9/11 plotters themselves, as the US government looked the other way. Perhaps the most explosive passages in the 28 pages, part of a larger, otherwise unclassified congressional report on American intelligence blunders before 9/11, offer previously unknown information about the actions of a powerful figure in the Saudi royal family. Prince Bandar bin Sultan, who was his country’s ambassador to Washington for several years before and after 9/11 and was a close friend of Bush. According to the report, at least $15,000 went directly from Prince Bandar’s bank account in Washington to the family of a Saudi expatriate, suspected of being a Saudi government spy, who organized a support network in California for two of the 9/11 hijackers while they were living in San Diego in the year before the attacks.

Civilian Death Toll From Coalition Airstrikes in Syria Could Be Single Largest in U.S.-Led War on ISIS -  Scores of civilians trapped in Islamic State-controlled territory in northern Syria were reportedly killed Tuesday by airstrikes from Western coalition aircraft. The reported death toll, potentially the highest ever to result from a coalition bombing in the international campaign against ISIS, continued to climb as The Intercept reached out to monitoring groups tracking operations in the area. The Syrian Observatory for Human Rights said at least 56 civilians were killed when their convoy of vehicles attempted to slip out of an area north of the city of Manbij in the predawn darkness, as U.S.-backed forces pushed forward in an increasingly bloody offensive in the area. In a brief phone interview, a representative from the Britain-based organization said that while coalition aircraft were believed to be responsible for the air raid, the group suspected it was a “100 percent mistake.” Airwars, a nonprofit that tracks claims of civilian casualties resulting from the international air campaign against ISIS, said incoming reports indicated the death toll may prove to be well over 100 civilians — potentially making it the largest single loss of civilian life resulting from coalition airstrikes since the U.S.-led campaign to destroy ISIS began nearly two years ago. Tuesday’s reports were the latest in a string of recent incidents in which coalition aircraft have been implicated in the deaths of civilians in the Manbij area. “Really these civilians are in a desperate situation,” Chris Woods, head of Airwars, told The Intercept. “We’ve never seen anything like this.”

US Has Spent $11.5 Million A Day For Past 542 Days Straight In Fight Against ISIS - After two years of bombing, the U.S. recently marked a horrendous milestone in a war with no clear end in sight. Vocativ reported that the American-led coalition in the Middle East has now dropped 50,000 bombs in the ongoing campaign against Daesh (an Arabic acronym for the terrorist group commonly known as ISIS or ISIL in the West) that began in August 2014. The analysis noted that bombing has increased with time, peaking in June when coalition forces dropped 3,167 bombs on Iraq and Syria. “By comparison, U.S.-led forces in Afghanistan have dropped just over 16,000 bombs in the last six years, military data shows,” Shane Dixon Kavanaugh, a senior writer for Vocativ, wrote on Tuesday. Although reports suggest Daesh is losing to ground forces in the region, the conflict still has no clear end in sight. And despite U.S. government denials, Kavanaugh reported it’s become increasingly clear that civilians are frequently killed by bombs dropped by the U.S. and coalition forces: “Airwars estimates that at least 1,422 civilians have been killed by weapons deployed by coalition warplanes through July 18, a figure far greater than the 41 civilian deaths acknowledged by the Pentagon to-date.” reported Tuesday that hundreds of civilians may have been killed in coalition airstrikes on villages occupied by Daesh near the northern Syrian city of Manbij. Jason Ditz wrote: “U.S. and coalition airstrikes against the northern Syrian villages of Tokhar and Hoshariyeh have killed at least 56 civilians, including 11 children, according to the Syrian Observatory for Human Rights. Other groups claimed the civilian toll was as high as 200.”

U.S. Considers “Pause” In Supplies For Group Beheading Sick Child - Yesterday some ten year old kid in Syria was beheaded by U.S. supported "moderate rebels". The "rebels" alleged that the boy was a fighter for a Palestinian group on the Syrian government side. But the boy looks very small and weak, has infusion tubes in his arm and no military attributes like a uniform or weapons.(picture) There is now additional information about the case: 8:08 AM - 20 Jul 2016 Elijah J. Magnier @EjmAlrai #Palestinian child, Abdullah Issa, was at Hospital, beheaded by Mateen al-Nahlawee coz his father is a militant.  #Palestinian Abdullah Issa was suffering from lack of oxygen n the bloodstream causes thalassemias and needed blood transfusion every month+    He was a patient at the Hospital in #Aleppo when beheaded by pro-#US Zinki. The five "individuals" who killed the child are members of the Harakat Nour al-Din al-Zenki, a group supported by the CIA as well as with Saudi money and weapons. The group issued a statement on the case. It called it "an act of an individual" and blamed the "international community" for its problems. While only one person does the cutting the video shows that the five "individuals" are clearly acting as a group, cheering Takbeer and Allahu Akbar during and after the beheading. Despite the publicly available video and the statement by the Zinki group leaders admitting the case, the U.S. State Department had only a very subdued response to it:  MR TONER: Well, I think if we can prove that this was indeed what happened and this group was involved in it, I think it would certainly give us pause.  We may expect, says the State Department, a "serious pause" in the delivery of new lethal U.S. weapons to the group. Will a day or two do?

US says airstrikes on Syrian city Manbij to continue despite civilian deaths - The US will not pause airstrikes in Syria despite appeals from opposition activists after what appears to be the worst US-caused civilian casualty disaster of the war against the Islamic State. Anas Alabdah, president of the Syrian National Coalition, has called on the US to suspend its airstrikes until it performs a thorough investigation into the attack near the contested northern city of Manbij on Tuesday that Syrian activists say killed at least 73 civilians – and possibly more than 125. Alabdah, in a statement, insisted on “accountability” for those responsible for the devastating airstrike, “revised rules of procedure” for future strikes, and warned that continuing the aerial bombardment would deliver the hard-fought region back into the hands of Isis. More strikes at the moment will drive Syrians “further into a spiral of despair and, more importantly, will prove to be a recruitment tool for terrorist organizations,” Alabdah said. The US has launched at least 12 airstrikes since the destruction in the village of Tokkhar, according to a daily tally released by the military. Asked by the Guardian if the military will pause airstrikes, Army Colonel Christopher Garver, chief spokesman for the US military command in Iraq and Syria, replied: “No. Operations continue against Daesh,” another name for Isis.

Iraqi Shi’ite Cleric Tells Followers to Target US Troops -- Influential Iraqi cleric Moqtada al-Sadr has had his plate full leading a protest movement calling for major reforms, but in comments to followers today instructed them that US ground troops inside Iraq are “a target for us,” the latest indication the US could quickly find itself facing a Shi’ite insurgency on top of the ISIS war in Iraq. This isn’t a surprise, as Sadr has been loudly opposed to US deployments of ground troops into Iraq, warning that his followers would resist any attempt to return to the days of the American occupation, during which US troops repeatedly targeted Sadrists. The timing of the comments, less than a week after the most recent Pentagon announcement of another large deployment to Iraq, suggests that Sadr’s patience for the growing US force is wearing thin, and that, having already gone far beyond the “cap” the Abadi government set on US troop numbers, he doesn’t care to see more troops arriving uncontested. Sadr’s Mahdi Army was disbanded almost a decade ago, but fighters loyal to that army remain across the Shi’ite portions of the country, and have often made public their presence in such cities as a set of “Peace Brigades.” There is little real doubt that Sadr could reform the Mahdi Army as a substantial force overnight, and if he really does intend to begin targeting US forces, it could be a major change in the country’s landscape, and the US view that their latest deployment is limited just to ISIS.

If Trump Tries To Remove ISIS, Will He Be Removed? -- Via The Daily Bell, Donald Trump accused his Democratic rival Hillary Clinton of enabling Islamic State’s emergence with “her stupid policies” in a joint interview with running mate Gov. Mike Pence, while pledging to “declare a war” on the terror group. “Hillary Clinton invented ISIS with her stupid policies. She is responsible for ISIS,” Trump said launching a scathing attack on Clinton’s legacy as US Secretary of State while speaking to CBS’s “60 Minutes” show host Lesley Stahl in an interview aired on Sunday.  -RT. Saying that Hillary Clinton enabled ISIS, is an almost incomprehensible statement. Doesn’t Donald Trump realize that Hillary is not alone? She represents the most massive military and monetary forces available on this planet. Does he not realize they can crush him? Is he somehow doing their bidding? We know what to think of Hillary based on her associates and history. As we wrote here, she represents corporatism and militarism – the coming technocracy, in other words. We are less certain about Trump. He may have decided to run for president on his own and thus opened up possibilities for personal and political manipulation. But when Trump speaks bluntly about Hillary’s role in creating ISIS, he is basically making statements rarely heard in large – mainstream – venues before. Mitt Romney never said anything like this. GOP leaders, despite their supposed antagonism to Democrats, have never made such statements. Many GOP-ers are pro-war. Any war. Just like Hillary. True, in this interview he said he would “declare a full-blown war on the group.” On the other hand, he clarified his statement. “I am going to have very few troops on the ground. We’re going to have unbelievable intelligence, which we need; which, right now, we don’t have,” he said. If Trump really does try to wipe ISIS out – or drastically reduce the power of NATO – will he be risking his own health and well-being? The US is run by corporatist and military entities. Will they hesitate to intimidate or remove Trump if he tries to end ISIS?

Turkey's secret pact with Islamic State exposed by operative behind wave of ISIS attacks --  New evidence has emerged that the Turkish government under President Erdogan is covertly providing direct military, financial and logistical support to ISIS, even while claiming to fight the terror network. The evidence comes in the form of testimony from an ISIS terrorist captured by Kurdish fighters, widely recognised as the most effective force confronting ISIS on the ground. The testimony has been reported by two Kurdish news agencies, the Syrian-Kurdish Harwar News Agency (ANHA) based in Rojava, and the Turkish-Kurdish Ajansa Nûçeyan a Firatê (Firat News Agency or ANF News). The latter’s head office is based in Amsterdam. Websites of both news agencies are blocked in Turkey. Interviews with the ISIS fighter, captured by the Kurdish People’s Protection Units (YPG), reveal that Turkish military and security forces are facilitating ISIS operations within Syria, as well as ISIS terrorist attacks inside Turkey. The new testimony corroborates similar claims made by other former and active ISIS members, as well as Western and Middle East intelligence sources. Yet Turkey is a leading member of the NATO alliance. And while the Western members of NATO have gathered mounting intelligence confirming Turkey’s sponsorship of ISIS, they have refused to act on this intelligence.

Energy Is The Reason Europe Is Still Backing Erdogan | A lot of people in Europe are wondering why political leaders on the continent seem to be ready to agree with whatever Turkish President Recep Tayyip Erdogan says, and do anything he demands. Many resent Erdogan’s hand-twisting approach to the migrant crisis and worry about Turkey turning into a dictatorship, plain and simple. Now, the attempted coup by the Turkish military over the weekend has become the latest event to highlight Turkey’s major role in the global energy market and the implications of any political shakeup in the country for this same market.The Bosphorus is where around 3 percent of daily global crude oil shipments pass, or some 3 million barrels. This may not be a lot in percentage terms, but for Europe it accounts for well over a quarter of its total crude oil imports. Europe imported 1.559 billion barrels from the former Soviet Union last year, or an average of 4 million barrels daily, according to European Commission figures.Besides the Bosphorus, Turkey is also home to two pipelines for Caspian and Iraqi crude, as well as the Southern Gas Corridor, which should provide Europe with an alternative source of natural gas in hopes of undermining the leading position of Russia’s Gazprom on the European market. There is also the Ceyhan port, Turkey’s main crude export terminal. This is where the two pipelines from Azerbaijan and Iraq end up, and this is also allegedly where a lot of ISIS oil ends up. In short, Turkey is already a major hub for oil and gas coming from the Middle East and Central Asia, and its importance in this respect will only grow as new projects—especially gas projects—come online.

Podcast: Why wars in the Middle East will cost the U.S. trillions more | Reuters: The United States is at war and has been for more than a decade. Although major combat operations in Iraq in Afghanistan have ended, America still maintains a presence in both and will for years to come. It also funds Syrian rebels, bombs Islamic State strongholds in the region and runs drones from Afghanistan to the Horn of Africa. With America fighting on so many fronts, it’s hard to understand the Pentagon’s strategy or the endgame for the various conflicts. Retired U.S. Army Colonel Andrew Bacevich says it feels that way because it is that way. According to Bacevich, the American military is fighting a war that began decades before 9/11. This week on War College, Bacevich walks us through what he calls America’s War With the Greater Middle East and tells us how it started and why he thinks it must end.

Iran nuclear treaty assessed on anniversary - One year after major world powers reached a historic nuclear deal with Iran, that country has largely kept up its end of the bargain but Tehran has complained it has not experienced the financial boost it hoped to receive. After years of negotiations, Iran accepted restrictions on and monitoring of its nuclear program – which the world feared was an attempt to make a bomb, despite Iranian assertions to the contrary – in exchange for the lifting of crippling sanctions. Iran moved swiftly to dismantle its nuclear program after the deal was signed July 14, 2015, to speed sanctions relief, which would not come until the International Atomic Energy Agency certified Tehran had fully complied with the requirements. Those also included reducing its stockpile of enriched uranium from 12,000 kilograms to 300 kilograms, filling the core of its Arak heavy-water reactor with cement, removing nuclear material from its Fordow facility and dismantling two-thirds of its 19,000 centrifuges from Natanz.Opponents of the landmark deal, reached between Tehran and the U.S., China, France, Germany, Russia and the U.K, asserted that Iran was sure to cheat given its past illicit nuclear activity. But IAEA monitors have found the country so far has complied, including shipping the bulk of its enriched uranium to Russia. . . “Since implementation day in January, Iran has adhered to all of the restrictions under the agreement, sanctions have been lifted and while Iran isn’t seeing economic windfall it originally anticipated, businesses are demonstrating interest in going back into Iran.”

Why does the world think India is the next big growth center for oil? (video) The International Energy Agency recently said India's thirst for oil will be a key factor driving global demand growth this year and next. In this video, senior oil news and analysis editor Sambit Mohanty, examines India's appetite for oil and the factors contributing to the sub-continent's rising oil consumption, as well as the reasons to remain optimistic about India's growth story despite some signs of a demand slowdown in the past couple of months.

Analysis: China's oil product exports set to break all records - China's oil product exports are likely to stay strong in the second half of 2016 after rising to close to record highs in June as new independent refiners prepare to join the bandwagon and state-owned oil giants sit on large volumes of unused export quotas. Several independent refiners including Chambroad Petrochemicals, Luqing Petrochemical, Wonfull Petrochemical and Lihuayi Group plan to start oil product exports in the second half of the year. Chambroad, Luqing, Wonfull and Lihuayi have a combined 255,000 mt of export quotas. In addition, Sinochem Quanzhou won an oil product export quota of 2.55 million mt in the government's third round of quota allotment -- more than the 2 million-mt quota it received in the first two rounds, indicating its ambitious export plan.At the same time, the state oil giants Sinopec and CNPC hold sufficient quotas to raise their exports going forward. Including quotas awarded in the third round, Sinopec now has a total export quota of 21.2 million mt -- more than double the 10.3 million mt quotas it won over the first three rounds in 2015. CNPC has 13 million mt awarded in the first three rounds, up 68% from the 7.75 million mt in last year. Over January to May, China exported 3.35 million mt of gasoline, 5.49 million mt of gasoil and 4.78 million mt of jet fuel. This represents only 31%, 35% and 32% of the respective quotas for the products granted so far this year.

Iron Ore Rally "Getting Carried Away Again" As China Inventories Soar To 20-Month Highs -- Following the crash after March/April's 'mania', Iron ore prices have resurged to 2-month highs on the heels of stimulus-hype and rampant speculation. However, this echo-bubble appears to be bursting as Macquarie sounds the alarm that prices are "getting carried away again" with fundamental support entirely lacking as China inventories soar 30% year-over-year to 20-month highs. As Bloomberg reports, iron ore was caught up in a speculative rally in China earlier this year as prices soared in April, prompting a host of banks to warn that the surge wouldn’t last, after which rates cratered. Last week, Australia cut its price outlook for 2017 by 20 percent, citing prospects for increased supply just as steel output in China shrinks further. Goldman said recent stimulus in China hadn’t brought a meaningful increase in steel demand, according to a report received on Wednesday. While speculation about stimulus in China has helped to lift prices, Macquarie said it’s skeptical about fundamental support for the recent move higher, analysts including Ian Roper wrote in a report received on Wednesday. The note asked whether iron ore was "getting carried away again?" Iron ore holdings at China’s ports just posted the longest run of gains this year, expanding for five straight weeks to 105.4 million metric tons, according to Shanghai Steelhome Information Technology Co. The swelling pile signals robust supplies, and banks including Macquarie warned this month that prices may be set to weaken after rallying 34 percent in 2016. “The rising port inventory is definitely a dark cloud looming over prices,” 

EU launches WTO challenge to Chinese raw material duties | Reuters: The European Union launched a third legal challenge to restrictions on Chinese exports of 11 key metals and minerals, joining the United States in suing Beijing for unfairly favouring Chinese industry. The bloc is seeking formal consultations with China, the first step in World Trade Organization dispute settlement procedures, over restrictions on graphite, cobalt, copper, lead, chromium, magnesia, talcum, tantalum, tin, antimony and indium. The United States on Tuesday expanded its WTO challenge filed last week against Chinese export duties on nine raw materials to match the EU complaint. Washington's trade agency added chromium and indium to its list of materials and said it will challenge China's export duties on all 11 as well as quota restrictions on five of them. The European Union said the metals and minerals are among 20 raw materials that are critical to Europe's economy. China is the biggest producer of most of the 20. Speaking to reporters in a joint conference call with U.S. Trade Representative Michael Froman, EU Trade Commissioner Cecilia Malmstrom said the restrictions enable China to unfairly influence global market prices for essential raw materials, damaging the long-term competitiveness of European industries that depend on them. The EU would "not sit on our hands seeing our producers and consumers being hit by unfair trade practices and we hope that this joint U.S.-EU action will motivate China to reconsider its current policy," she said.The EU's executive Commission said that China applied export duties to various forms of the 11 materials, with quantitative restrictions on five - antimony, indium, magnesia, talc and tin.

China's yuan slips to new 5-1/2-year low, state banks sell dollars: (Reuters) - The yuan slipped to a more than 5-1/2-year trough against the dollar on Monday, hovering within a whisker of the psychologically important threshold of 6.7 per dollar. The Chinese currency hit an intraday low of 6.6998 in the morning before state banks were suspected of selling dollars on behalf of the central bank around 6.6996, traders said, pulling the yuan back. "That bout of intervention is not heavy. It's more like a signal," said a trader at a Chinese commercial bank in Shanghai. "The market has become quite tame after last week's interventions," he added, referring to heavy state bank support in the past few sessions to bolster the yuan as the Chinese currency repeatedly broke through new 5-1/2-year lows. The spot yuan opened at 6.6955 per dollar and was changing hands at 6.6986 at midday, easing 0.15 percent from the previous close. The People's Bank of China set the midpoint rate at 6.6961 per dollar prior to market open, 0.23 percent weaker than the previous fix 6.6805, in response to the dollar's broad gains against a basket of major currencies last Friday. Net foreign exchange sales by the PBOC in June jumped to their highest in three months, as the central bank sought to shield the yuan from market volatility caused by Britain's decision to leave the European Union. The central bank was believed to have injected forex liquidity in order to stabilise market expectations in June, which confirms a Reuters report that traders suspected the PBOC of intervention after Brexit. The offshore yuan was trading 0.20 percent softer than the onshore spot at 6.712 per dollar.

It's raining helicopter money in China - China FAI growth rate continued to slow in June, with YoY growth falling from 9.6% in Jan– May to 9% in Jan–June. Calculated monthly gives a clearer picture on its trend, which shows the FAI growth rate peaked in March at 11.2% YoY, dropped dramatically in May to 7.4% YoY and further declined in June to 7.3% YoY. If we look at the breakdown of FAI, we see the March pickup in FAI growth was mainly driven by infrastructure investment, which increased from 15.7% YoY in Jan–Feb to 22% YoY, and also property investment, which jumped from 3% YoY in the first two months to 9.7% in March. Meanwhile, investment from manufacturing was in a downtrend from the start of the year, and mining sector FAI continued to contract rapidly (Fig 2).However, as property investment growth rate fell to 6.6% YoY in May, total FAI also started to fall back despite infrastructure investment holding at around 20% YoY. This divergence became more apparent in June, when we saw property investment further drop to 3.5% YoY from 6.6% YoY in May, while infrastructure growth rebounded modestly, from 19.8% YoY to 21.8% YoY. This is in line with the results from our recent steel survey, where construction orders have weakened despite infrastructure remaining strong.  A big concern is that private investment, which accounts for more than 60% of China FAI, showed no improvement in June despite government efforts to boost this sector. Indeed the growth rate of private sector FAI was calculated to be flat YoY last month, compared with the 20% YoY growth from SOE background sectors (Figs 3 and 4).

Slowing China home price rises add to doubts about economy | Reuters: Home price rises in China slowed in June for a second straight month, adding to fears that a construction-led rebound in the economy may not be sustainable. The property market is a key driver of the world's second-largest economy and a robust recovery in home prices and sales gave a stronger-than-expected boost to activity in the first half of the year. But slowing price growth in smaller cities and cooling property investment show the bounce may already be fading, raising the risk of weaker economic growth in coming months. Home prices in China's 70 major cities rose 7.3 percent in June from a year earlier, an official survey showed on Monday, accelerating from a 6.9 percent rise in May. To be sure, some of the biggest cities showed eye-popping gains on a yearly basis, with prices in the southern boomtown of Shenzhen up 46.7 percent and Shanghai up 27.7 percent. Gains on a monthly basis continued to slow, however, as cities tightened policies amid fears of a housing price bubble. The monthly rise slowed slightly to 0.8 percent in June, easing from 0.9 percent in May, according to a Reuters calculation based on data issued by the National Bureau of Statistics (NBS). "We continue to expect the property rebound to subside and property investment growth to fall in the second half of the year," economists at Nomura said in a note, predicting sales would stabilize and a large glut of unsold homes would keep pressure on prices in some areas.

PBOC continues to inject liquidity into market (Xinhua) -- The People's Bank of China (PBOC), the country's central bank, continued to pump money into the inter-bank market on Tuesday to provide more liquidity. The PBOC put 60 billion yuan (nearly 9 billion U.S. dollars) into seven-day reverse repos, a process by which central banks purchase securities from banks with an agreement to sell them back in the future. The reverse repo was priced to yield 2.25 percent, according to a PBOC statement. Given that 30 billion yuan's worth of repos matured on Tuesday, the central bank effectively injected 30 billion yuan into China's monetary market. The central bank has adopted repos and other liquidity operations to ease money shortages in the market more frequently this year, rather than cuts in interest rates or the reserve requirement ratio. On Tuesday's interbank market, the benchmark overnight Shanghai Interbank Offered Rate (Shibor) rose 0.7 basis point to 2.003 percent.

China Sold Reserves in June, Just Not Very Many: Both of the key proxies for China’s actual intervention in June are out. The PBOC’s balances sheet shows a $15 billion dollar fall in reserves. And the State Administration on Foreign Exchange (SAFE) data on foreign exchange settlement by the banking system (the PBOC is treated as part of the banks) shows $18 billion in sales from the banking system (using sales for clients, not net settlement). They paint a consistent picture. The gap between the modest sales reported in the data and the rise in headline reserves ($13.4 billlion) is almost certainly from the mark-to-market gains on a portion of SAFE’s book. The portfolio of high quality bonds should have increased in value in June.. Friends who read Chinese say SAFE has admitted as much on its website. The more interesting thing to me is how modest the sales were, at least when compared to other periods of depreciation (against the dollar) in the last two years.Either the carry trade unwind is over or the controls work. Or somehow this most recent depreciation hasn’t produced expectations for further depreciation, even though the crawl down against the basket has been pretty stable. It is a puzzle, at least to me. For the conspiratorially minded, the banks do look to have sold foreign exchange from their own accounts in June, as they did last August and this January. But the sales from their own account were modest—$5 billion versus $85 billion last August and $15 billion in January. And the settlement data for forwards also shows a modest reduction in the net forward book of the banks in June. Net of the change in forwards, total sales in the settlement data look to be just under $15 billion. Not much, in other words.

Poll: China 2016 economic growth seen slowing to 6.5 percent despite policy support | Reuters: China's economic growth is expected to cool to 6.5 percent this year - the low end of Beijing's target range - even as the government steps up spending and the central bank loosens policy further to prevent a sharper slowdown, a Reuters poll showed. Persistent pressure on the world's second-largest economy due to weak exports and massive industrial overcapacity are raising the stakes for policymakers keen on ensuring job growth while avoiding more serious fallout from China's mounting debt. "The economy still faces structural problems such as oversupply of real estate and overcapacity. Any policy stimulus on investment would not be indefinite and economic growth will eventually resume its downtrend," Nomura economists said in a recent research note. The median forecast in a Reuters survey of 60 economists taken in the past week is for 6.5 percent growth in 2016 - the weakest in a quarter of a century - with a further slowing to 6.3 percent in 2017 as a housing recovery that supported growth earlier this year loses momentum. The forecasts are unchanged from an April poll.

Central bank official says China has room to increase fiscal deficit to 5 percent of GDP: paper | Reuters: China has room to increase its fiscal deficit ratio to between 4 and 5 percent to more effectively boost the economy, official media quoted a central bank official as saying. China's current fiscal deficit target is 3 percent of gross domestic product (GDP), up from an actual 2.4 percent in 2015. But there is room for a slight increase, the Shanghai Securities News quoted Sheng Songcheng, director of the Survey and Statistics Department at the People's Bank of China (PBOC), as saying at a forum on Saturday. While monetary policy is effective, it is limited and requires coordination with a proactive fiscal policy, Sheng was quoted as saying at the forum, where he also suggested that China increase its government bond issuance. Sheng also reportedly warned that China has already fallen into a "liquidity trap", where increased money supply is being absorbed by firms that are not in turn investing the cash. Data on Friday showed that China's economy grew 6.7 percent from a year earlier in the second quarter, slightly faster than expected as higher government spending and a housing boom boosted industrial output and construction-related activity and services. But the numbers also fueled concerns that China's growth is becoming ever more dependant on government spending and debt. First-half bank lending hit a record and government spending jumped 20 percent in June.

China Warns US Patrols In South China Sea Could End In "Disaster" As It Launches Navy Drills -- Less than a week after a Hague tribunal found that China has no territorial rights in the South China Sea, contrary to Beijing's "Nine Dash Line" claims, China has made it abundantly clear that it will no comply with the ruling when overnight a senior Chinese admiral said that Freedom of navigation patrols carried out by foreign navies in the South China Sea could end "in disaster" while also announcing the unexpected start of navy drills in the contested waters, in the most direct warning to the United States yet.  According to AP, Hainan's maritime administration said an area southeast of the island province would be closed from Monday to Thursday, but gave no details about the nature of the exercises. The announcement came during a three-day visit to China by US Chief of Naval Operations Admiral John Richardson to discuss the South China Sea dispute and ways to increase interaction between the two militaries, which continue to have a tense relationship.  Further provoking a US response, Beijing also stated that it would not halt the construction on islands and reefs in the South China Sea, state news agency Xinhua reported the head of the country’s navy as saying, adding that China will not leave the outcropping that is under construction half finished. Furthermore, despite the meeting between the US and Chinese militaries, Sun Jianguo, an admiral and deputy chief of the Joint Staff Department of China’s Central Military Commission, said behind closed doors on  Saturday that freedom of navigation patrols by foreign navies in the South China Sea could end “in disaster,” according to Reuters.“When has freedom of navigation in the South China Sea ever been affected? It has not, whether in the past or now, and in the future there won’t be a problem as long as nobody plays tricks,” Sun said.

U.S. says its forces will keep operating in South China Sea | Reuters: .S. military forces will continue to operate in the South China Sea in accordance with international law, the U.S. Chief of Naval Operations John Richardson said on Wednesday during a visit to a Chinese naval base. China has refused to recognize a ruling by an arbitration court in The Hague that invalidated its vast territorial claims in the South China Sea and did not take part in the proceedings brought by the Philippines. China has repeatedly blamed the United States for stirring up trouble in the South China Sea, a strategic waterway through which more than $5 trillion of trade moves annually. China, Brunei, Malaysia, the Philippines, Taiwan and Vietnam all have rival claims, of which China's is the largest. The United States has conducted freedom of navigation patrols close to Chinese-held islands, to Beijing's anger, while China has been bolstering its military presence there. Meeting Yuan Yubai, commander of the Chinese North Sea Fleet, Richardson "underscored the importance of lawful and safe operations in the South China and elsewhere professional navies operate", the U.S. Navy said. U.S. forces would keep sailing, flying and operating wherever international law allows, Richardson added. "The U.S. Navy will continue to conduct routine and lawful operations around the world, including in the South China Sea, in order to protect the rights, freedoms and lawful uses of sea and airspace guaranteed to all. This will not change."

China woes dent Singapore exports, more stimulus may be needed | The Indian Express: Singapore’s exports skidded in June as shipments to China and Europe continued to contract, suggesting the trade-reliant economy may need more stimulus to support a fragile recovery in the face of weak global demand and concerns over Brexit. The affluent city-state’s economy grew slower-than-expected in the second quarter as underlying weakness in its key financial services industry added to the pressure on output from a depressed manufacturing sector. Non-oil domestic exports (NODX) fell 2.3 percent last month from a year earlier, the trade agency International Enterprise Singapore said in a statement on Monday.   That was slightly better than the median forecast of a 3.0 percent fall in a Reuters poll, but partially unwound an unexpected rise in May on gold and pharmaceuticals shipments. Some economists say the government may need to boost fiscal stimulus in the event of more pressure on the economy. “With MAS’ policy complicated by the strength in the S$NEER, there is still space for subsequent off-budget fiscal measures should the economic outlook deteriorate further,” said Weiwen Ng, an economist for ANZ in Singapore. The Monetary Authority of Singapore manages policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners based on its nominal effective exchange rate (NEER).

Is South Korea Regressing Into a Dictatorship? - President Park Geun-hye is squelching protests, suing journalists, and jailing opposition politicians.  The latest blow to free speech and assembly in South Korea came on July 4, when the leader of the country’s influential Korean Confederation of Trade Unions was found guilty of orchestrating an illegal demonstration. A Seoul court sentenced Han Sang-gyun to five years in prison and a $436 fine for organizing a massive Nov. 14 anti-government protest in downtown Seoul, as well as other demonstrations dating back to 2012. Amnesty International characterized the case as part of the “shrinking right to freedom of peaceful assembly in South Korea.”  Indeed, lively, and often violent, street protest has been a national sport in South Korea since the country’s founding in 1948. And until the early 1990s, when the election of opposition leader Kim Young-sam ended more than 40 years of authoritarian rule, the repression of protests was common as well. But over the last few years, the country has regressed. Since taking office on Feb. 25, 2013, South Korean President Park Geun-hye and her Saenuri Party have sued journalists, jailed labor leaders and opposition politicians, censored the press, and dissolved political parties. Aiding her has been a network of right-wing organizations, as well as the country’s intelligence agency — the National Intelligence Service (NIS) — which sent out millions of illegal tweets in favor of Park during the 2012 election.

Japan flirts with helicopter money - The yen recorded its sharpest drop in the past three decades last week, as markets sniffed the possibility of helicopter money arriving in Japan. The meetings of “Helicopter Ben” Bernanke with Bank of Japan officials, and then with Prime Minister Shinzo Abe, were the latest trigger for this speculation, but in reality the Japanese authorities have been revving up the helicopters for some while, and they seem to be running out of alternatives. Whether or not they choose to admit it – which they will probably resist very hard – the Abe government is on the verge of becoming the first government of a major developed economy to monetise its government debt on a permanent basis since 1945. Why is it opting for this macro-economic policy of the last resort, and will it work? There are many ways of defining helicopter money, but the essential feature is that it involves an increase in the budget deficit which is financed by a permanent increase in the central bank’s monetary base, not by the issuance of government debt. Although this does not literally involve dropping banknotes from the sky, its economic effects are similar. This is different from quantitative easing, since QE involves the “temporary” purchase of government debt, which is subsequently sold back into the market, at least in theory. And QE does not necessarily need to involve any increase in the budget deficit, though in some circumstances it might do so. In Japan, there are many institutional and political hurdles that stand in the way of helicopter drops. . But it seems that the government may be considering manoeuvres to get round these roadblocks. Recently, the markets have become excited about the possible issuance of zero coupon perpetual bonds that would be directly purchased by the BoJ, a charade which basically involves the central bank printing money and giving it to the government to spend as it chooses.

Fitch: Japan Post-Election Stimulus May Raise Fiscal Risks | Reuters: (Fitch) Japan is likely to enact further stimulus measures following the victory of the governing Liberal Democratic Party in the 10 July upper house elections, says Fitch Ratings. A decision to roll out a stimulus package by itself is unlikely to trigger rating action, although recurring stimulus over several years risks further undermining public finances. The government and its coalition partner have strengthened their mandate following the recent election, notably gaining a two-thirds majority in the upper house. The governing coalition now has super-majorities in both houses of the Diet. Questions remain as to how the government will use its renewed political and legislative mandate. The prospects of faster fiscal consolidation seem remote. The government had announced in the run up to the election on 1 June, it would delay a planned consumption-tax hike to 2019 from 2017, and media are already reporting that a new round of fiscal stimulus is being planned. The consumption-tax decision was a key factor contributing to Fitch's decision to revise our Outlook for Japan's 'A' sovereign rating to 'Negative' from 'Stable' on 13 June, and new stimulus would further raise questions about the government's commitment towards repairing the fiscal balance sheet in the long term. A one-off stimulus on its own is unlikely to have a significantly negative effect on Japan's credit profile. But if this is to be the start of a series of new spending programmes over several years, it would further damage Japan's fiscal position.

Yen Collapse Seen by Kuroda Critic Pitching Perpetual Bond Plan - Making the repayment of government notes open-ended and with interest rates that float is part of an unconventional plan pitched by Mitsuru Iwamura, a Waseda University professor who worked at the BOJ for over two decades until 1998. Amid growing speculation of additional bond-buying stimulus next week that could include so-called helicopter money, Iwamura says a road map for tapering is needed right away. “When the time comes to exit stimulus, yields will rise no matter what -- so if the BOJ’s bond holdings have fixed coupons, they will suffer a massive valuation loss, risking a collapse in the yen and fiscal trust,” Iwamura, 66, said in an interview Monday. “It’s like the situation in Japan in the summer of 1944. It’s too late to argue over whether it was right to start a war. What’s important now is how to end it.” Market watchers have long argued that the BOJ’s bond purchase program is unsustainable, even as Governor Haruhiko Kuroda reiterated as recently as April that monetary policy doesn’t face limits. The central bank needs to be careful when it pulls back because it now owns more than a third of outstanding sovereign debt, leading to investor complaints over poor liquidity and market functioning. Yields have dropped to records across maturities, and are below zero on four of every five securities. Prime Minister Shinzo Abe’s adviser Etsuro Honda said former Federal Reserve Chairman Ben S. Bernanke had floated the idea of helicopter money using non-marketable perpetual bonds to him at a meeting in Washington in April. Bernanke said that the framework -- in which the government issues the notes with no maturity date and the central bank directly buys them -- could work as the strongest tool to overcome deflation, according to Honda.

Japan's $190 billion stimulus: 'double your money' but less than meets the eye | Reuters: Japan is crafting a massive spending package worth about $190 billion to bolster the economy - about double the size initially floated - but a close examination shows actual public spending will be far less than the headline number suggests. Prime Minister Shinzo Abe, fresh off a big election win, last week ordered his government to create a stimulus plan to revive an economy dogged by sluggish consumption and investment, despite three years of his "Abenomics" mix of hyper-easy monetary policy, spending and promised reforms. The package will have a headline figure of at least 20 trillion yen ($186.55 billion), three government sources told Reuters on Thursday. But despite the startling headline figure - equal to more than 4 percent of gross domestic product - real government spending to boost economic growth is actually in line with or smaller than previous expectations. "Overall, it seems like a paper tiger," said Kentaro Sugiyama, senior economist at Nomura Securities. About half of the nominal 20 trillion yen is expected to come from a combination of direct spending from both national and local governments and the Fiscal Investment and Loan Programme (FILP), about 3 trillion yen and 6 trillion yen, respectively. The other half, government sources say, is expected to come from private sector firms that get state subsidies and lending from quasi-government financial institutions. The package could expand during talks with Abe's ruling coalition before his cabinet approves the measures on Aug. 2.

Helicopter money 'the obvious solution' to boost moribund economies: Citi's Willem Buiter - - A leading bank economist says helicopters would help revive the stagnating global economy, whether they are carrying money or missiles, but far preferably the former. Citi's chief global economist Willem Buiter, currently visiting Australia for a series of meetings, said urgent action is needed to short-circuit continued economic stagnation and damaging long-term unemployment. "Today's unemployment creates the future unemployables - it leads to the deskilling and it leads to the stigmatisation of the unemployed," he told a breakfast briefing of financial journalists in Sydney. Dr Buiter said governments must intervene to boost a struggling private sector, currently unwilling to invest.While quipping about military boosts to demand, Dr Buiter said there are many sensible options open to governments."Most likely by deregulation or sensible tax reforms, infrastructure spending would also help," he added.The internationally respected economist, formerly a professor at the London School of Economics before taking up his current role at Citigroup, gave an endorsement of at least one of the Australian Government's signature policies as a means to kick-start growth. "Corporate tax cuts would be an obvious example, infrastructure investment, depending on the country, likewise," he said.

More and More Investors Think Central Banks and Governments Will Bring Out the Chopper - Bloomberg: Investors are awaiting unprecedented coordination from monetary and fiscal policymakers to kick-start their economies, with Japan seen as the most likely first actor. Nearly one-third of clients and colleagues surveyed by Citigroup Inc. think that so-called helicopter money could be on its way within a fortnight, as the Bank of Japan meets at the end of July. "Among respondents, only 31 percent personally thought helicopter money was coming, while 43 percent thought the market expected some form of helicopter money," wrote strategists led by Global Head of G10 FX Strategy Steven Englander. Helicopter money was first discussed by Milton Friedman back in the 1960s, when he made the case that central banks could simply print money and have it rain down on the populace in order to boost consumer spending and inflation. It's now better understood as a central bank-financed tax cut or set of public works projects, and in many respects is virtually the same as quantitative easing if central bank asset purchases are not unwound afterwards. Suspicions that Japan might be the first economy to enact such helicopter money only rose after one of Prime Minister Shinzo Abe's advisers indicated that former Fed Chairman Ben Bernanke recommended it in April as the best way for the island nation to win its decades-long battle against deflation.  Bernanke visited Japan earlier this month to offer his advice on the possible options monetary and fiscal policymakers could pursue. Worldwide, online search interest in "helicopter money" has spiked to reach its highest level on record, according to Google Trends

China threatens reprisals on NZ dairy, wool and kiwifruit if government doesn't back off cheap steel inquiry - China has threatened "retaliatory measures" against New Zealand trade, warning it will slow the flow of dairy, wool and kiwifruit imports. The world's biggest trading nation is angry at New Zealand inquiries into a glut of Chinese steel imports flooding the market; the Chinese believe New Zealand is part of a US-led alliance to target Chinese national interests. The behind-the-scenes threat comes just days before the arrival of US Vice President Joe Biden in New Zealand, forcing government and commerce officials to scramble to open urgent talks with China. New Zealand is angry that China should take such a combative approach, and is asking that it desist.  Pacific Steel, the sister company of iron miner and processor NZ Steel, has lodged a confidential application, under local and World Trade Organisation rules, for an investigation into China dumping cut-price steel on the New Zealand market. The local industry is struggling to compete with the glut of sometimes substandard Chinese metal, which is being used in major projects like the $1.4 billion Waterview Connection and bridges on the Waikato Expressway.Right now, lawyers for the Ministry of Business, Innovation and Employment are deciding whether the investigation should proceed, which could result in punitive anti-dumping tariffs against China. But somehow, China learned of the application – and it is taking retaliatory action.

Indonesia: Sharia Penalty Given to Non-Muslim - In an unprecedented use of Shari‘a on a non-Muslim in Indonesia, a Christian woman in the conservative Aceh province has reportedly been caned for selling alcohol. The 60-year-old woman was caned 30 times in the presence of hundreds of onlookers on Tuesday, an official told Agence France-Presse (AFP). Aceh is one of the most conservative provinces of Muslim-majority Indonesia, and the only part of the country that enforces sharia law for crimes like adultery, consumption of alcohol and homosexuality. On the same day, a pair of German tourists were reportedly reprimanded by local authorities and let off with a warning for wearing bikinis at one of the province’s beaches.A Muslim couple accused of adultery received 100 lashes along with the Christian woman on Tuesday.Although the religious law was previously only applicable to Muslims, an amendment that took effect last year extended its reach to practitioners of other religions in particular cases, according to an official from the prosecutor’s office of Central Aceh.“This is the first case of a non-Muslim being punished under Islamic criminal bylaw,” the official, Lili Suparli, told AFP.Aceh has operated under Shari‘a since 2001, when it was declared

East Asia’s (Goods) Trade Surplus: European and U.S. politics have gotten a lot of attention this summer. But one of the biggest shifts in the global economy over the past two years has been the powerful return of Asia’s trade surplus. A $50 billion monthly (goods) surplus in China is quite big. China’s annual goods surplus is $600 billion, more than it has ever been as a share of world GDP.* Other major economies in northeast Asia are also running significant surpluses. Korea and Taiwan have large surpluses in goods trade, and Japan has swung back into surplus as well. The combined surplus of all of Asia now tops $700 billion. One note: In the graph, I netted Hong Kong’s deficit from China’s surplus. I suspect some goods sold to Hong Kong end up in China. If you think this is all because of lower oil prices, think again. Northeast Asia’s non-oil goods surplus is also up. The timing of the rise though is a bit different. The non-oil surplus rose in 2014, before the big move in global commodity prices.You can see the underlying sources of China’s trade surplus when it is disaggregated by region. In dollar terms, China’s bilateral surplus with its main markets for manufactures in the advanced economies (I included Hong Kong here along with the United States and the European Union because of transshipment) increased after the global crisis. The rising surplus with the large advanced economies was offset by a rising deficit with the world’s commodity exporting economies. China’s surplus with the U.S. and the EU has come down off its high just a bit recently. But, as the chart below illustrates, China’s deficit with “component” supplying parts of the world economy (the rest of East Asia) is falling just as fast. China’s aggregate surplus with the United States, European Union, and East Asia remains large. That is what drives China’s aggregate surplus in manufacturing. And obviously China’s trade balance with a proxy for the world’s commodity-exporting economies has shifted from a substantial deficit to a substantial surplus over the last two years with the fall in oil and iron prices.

Global Trade Meets Ugly Reality | Wolf Street: Something funny happened when I didn’t look: the global trade numbers were adjusted down. By a lot. The post-Financial Crisis recovery in trade is suddenly a heck of a lot less vibrant than it looked. And it has completely stalled out over the past two years. The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released its Merchandise World Trade Monitor for May. It was, in its own right, not very uplifting. World trade volume shrank 0.4% in May, after shrinking 0.3% in April. The index fell to 133.0, the lowest level since May 2015. It’s back where it had first been in September 2014. But wait…. Last time we wrote about the World Trade Monitor (WTM) was July a year ago. We’ve kept our eyes on it because it is a valuable and unique tool in trying to gauge global trade. So this time, something jarred us, and we went back to look at the data from a year ago: the entire data series going back to Adam and Eve has been adjusted downward, with the most significant adjustments kicking in after the Financial Crisis. Turns out, the recovery of global trade was a lot weaker than the original data had indicated. Today’s WTM level of 133 is where it had first been under the old data in October 2013! Two-and-a-half years of painfully slow growth wiped out in one fell swoop! So we did something vile. We overlaid the old data and the adjusted data, for all to see. This chart includes the old data released as of July 2015 (blue line) and the new adjusted data released today (red line):

Misinvoicing of commodities costs billions to developing world - Commodities from the developing world worth billions of dollars are being exported illicitly every year through misinvoicing, denying governments revenue that would in many countries exceed their inward foreign direct investment, according to research commissioned by the UN.  Experts believe the majority of misinvoicing, which is recording different values in the exporting and importing countries, is illegal activity, designed to evade tax and foreign exchange payments. The opacity of data disclosure in commodities trading centres such as Switzerland and the Netherlands, exacerbates the problem, they say.  UN officials are not yet blaming anyone for the misinvoicing, saying more work is needed to identify the culprits. The priority should be to improve transparency to prevent illicit trading and ensure developing economies earn the appropriate revenue from their natural resources, they add. However, the scale of the problem exposed by the new report should prompt governments in commodity exporting nation s to prioritise tackling misinvoicing over chasing new investment, donor funding or issuing debt, one senior UN official said.The study, launched in Nairobi on the sidelines of the four-yearly conference of Unctad, the UN trade body, focused on five countries: South Africa, Chile, Ivory Coast, Nigeria and Zambia. It used statistics that break down the data by product, exporter and importer. Previous estimates of misinvoicing have mostly used less accurate national level data from the International Monetary Fund.  Underinvoicing of gold exports from South Africa amounted to $78.2bn between 2000-2014, or 67 per cent of total gold exports, the study found. India, Germany and Italy exhibited the biggest amounts. 

Nigeria Inflation 16.5% in June, Highest in Almost 11 Years - The inflation rate in Africa’s largest economy increased to 16.5 percent from 15.6 in May, the Abuja-based National Bureau of Statistics said in an e-mailed statement on Monday. That’s the highest rate since October 2005, according to data on the Central Bank of Nigeria’s website. Prices rose 1.7 percent in the month. The median of seven economist estimates compiled by Bloomberg was for inflation to quicken to 16.2 percent. Nigeria imports at least 70 percent of its refined fuel, despite pumping 1.6 million barrels of crude a day in June according to the International Energy Agency, and faced fuel shortages as retailers struggled to get foreign currency to buy product during a 15-month naira peg that was removed last month. The currency’s official exchange rate weakened to more than 280 per dollar, compared with the fixed rate of 197-199, and the naira trades at around 360 on the black market, increasing prices for consumers.

Brazil arrests 10 for 'amateur' terror plot against Olympics | Reuters: Brazil arrested 10 people on Thursday suspected of belonging to a poorly organized group supporting Islamic State (IS) and discussing terrorist acts during the next month's Olympic Games in Rio de Janeiro. The group, described as "absolutely amateur" by Justice Minister Alexandre Moraes, were all Brazilian citizens and in contact via messaging apps such as WhatsApp and Telegram. They did not know each other personally, the minister said. The arrests came a week after a truck massacre in Nice, France, and amid growing fears of a possible attack when the first Olympics to be held in South America kicks off on Aug. 5. Some 500,000 visitors are expected to travel to Brazil for the Games, many of them from the United States. Although Brazil has no history of conflict with known militant groups, Moraes said the Games had made the Latin American country a more likely target, particularly because of participation by countries fighting IS. "Today was the first operation against a supposed terrorist cell in Brazil," he told a news conference. "Brazil was not part of the coalition against IS but, because of the upcoming Olympics and because it will receive many foreigners, Brazil has become a target." Moraes said the individuals detained on Thursday were being monitored because they had accessed websites linked to IS, but the group had "no preparation at all" and was a "disorganized cell". He said that authorities intervened when the group started planning actions including martial-arts training and the purchase of firearms.

Full Scale of Olympic Financial Disasters Revealed - When the Rio Olympics kicks off next month, the Brazilian government will have spent over $4.5 billion on new stadiums, an Olympic village, international broadcast and media centers, transportation, administration, the workforce, and so on. That’s significantly more than it planned when the games were awarded to Rio in 2009. The cost overrun is probably around 50 percent, but nobody can be certain until after the games end. Whatever the final figure, it is set to break the original budget by a substantial margin. Olympic games are well known for their breathtaking cost overruns. But are they any more profligate than other megaprojects such as the construction of new bridges, railway lines, freeways, power stations, and IT projects? The surprising answer is that nobody knows because there has never been an independent large-scale study of the costs and cost overruns associated with the Olympics. Today that changes thanks to the work of Bent Flyvbjerg, Allison Stewart, and Alexander Budzier from the University of Oxford in the U.K. They’ve carried out a detailed financial postmortem of Summer and Winter games since the Munich Olympics in 1960. The researchers reveal the scale of the financial disasters that have plagued the games for the first time. Their results reveal the cheapest and most expensive games in history and show once and for all that cost overruns at the Olympics average 156 percent, dwarfing the overruns at every other kind of megaproject.

My Venezuela Nightmare: A 30-Day Hunt for Food in a Starving Land -- The diary of a desperate mother trying to put food on the kitchen table. Editor’s note: The looting, the blackouts, the mob lynchings, the hospitals with no supplies. Venezuela’s collapse into disarray is of a scale unseen in the Western Hemisphere in decades. In an effort to illustrate what day-to-day life is like on the ground, Bloomberg reporter Fabiola Zerpa documented her efforts to secure food for her middle-class family. This is a selection of entries from her month-long chronicle.

Venezuela crisis: 123,000 cross border shopping for scarce food, medicine | The Indian Express: More than 100,000 Venezuelans, some of whom drove through the night in caravans, crossed into Colombia over the weekend to hunt for food and medicine that are in short supply at home. It was the second weekend in a row that Venezuela’s socialist government opened the long-closed border with Colombia, and by 6 am Sunday, a line of would-be shoppers snaked through the entire town of San Antonio del Tachira. Some had traveled in chartered buses from cities 10 hours away. Venezuela’s government closed all crossings a year ago to crack down on smuggling along the 1,378-mile (2,219 kilometer) border. It complained that speculators were causing shortages by buying up subsidized food and gasoline in Venezuela and taking them to Colombia, where they could be sold for far higher prices.But shortages have continued to mount in Venezuela amid triple-digit inflation, currency controls that have restricted imports and investment and the world oil price slump that caused a collapse in the oil revenues that fund government spending. Although the border was heavily patrolled by Venezuelan troops, the crowds were mostly orderly amid an atmosphere of tense excitement. A few activists handed out anti-government pamphlets, looking to galvanize the frustration that has characterized food riots and long lines outside supermarkets in recent weeks. Some of those waiting to cross made anti-government chants and sang the national anthem, but there was no appetite for confrontation. They were focused on the prospect of getting at fully stocked supermarket shelves and the opportunity to buy even non-essential indulgences like nail polish and beer before the re-closing of border crossings Sunday night.

IMF predicts 700% inflation, 10% GDP contraction in Venezuela this year - Venezuela is to greet the end of 2016 with a consumer prices increase of up to 700 percent while its GDP is set to decline by 10 percent, a new IMF report suggests. “Venezuela’s economic condition continues to deteriorate, as policy distortions and fiscal imbalances remain unaddressed,” Alejandro Werner, chief Latin America economist, said in the report titled “In Transition: The Outlook for Latin America and the Caribbean”. Despite a rough beginning to the year, external and domestic performance in Latin America and the Caribbean have been for the most part on the rise, the report notes. However, the estimations of growth and inflation levels in Venezuela are the worst in the world, the paper continues. “Economic activity is expected to contract by 10 percent in 2016, and inflation is expected to exceed 700 percent,” it says. The IMF forecasts for Venezuela have taken a turn for the worse since the last report. Previously, the organization predicted that the nation’s economy would shrink by only eight percent while inflation was not supposed to exceed 480 percent this year. Venezuela faces a deep recession and a serious supply crisis while the population struggles with food shortages and growing prices.

Venezuela top court says central bank can borrow without Congress approval | The Fiscal Times: he ruling paves the way for the government of President Nicolas Maduro to borrow from the Latin American Reserves Fund, part of the Andean Community without discussing the issues with the opposition-dominated legislature. Local media has reported that Venezuela is seeking a $1 billion loan from the group known as FLAR to boost international reserves, which have fallen to their lowest level in nearly 14 years on low oil prices and a prolonged economic crisis. In a ruling released late on Wednesday, the court argued that a potential loan agreement would be "carried out through an international agreement, and in consequence ... is not subject to the authorization of the National Assembly." The Supreme Court has routinely backed the Maduro government in disputes with Congress, which the opposition won by a wide margin in December. The opposition quickly dismissed the ruling as an effort by the court to help Maduro bypass Congress. "The FLAR argued that (Venezuela) could not access the loan without the National Assembly's approval," said opposition legislator Jose Guerra. "That's why they put out the sentence." Venezuela's government has in the past sought to bolster reserves by withdrawing from an International Monetary Fund account that holds an instrument known as Special Drawing Rights, or SDRs. It has also carried out gold swaps to increase the liquidity of its reserves as its struggles with triple-digit inflation and chronic product shortages. The Maduro government has not yet borrowed from the FLAR, where it has deposits of some $500 million, according to central bank financial statements. Heavy debt payments have forced Venezuela to imports of basic goods, leaving spending hours in line for food and medicine and helping push international reserves below $12 billion.

Venezuela’s Inflation Is Set to Top 1,600% Next Year - While most advanced economies struggle to lift inflation, none would want Venezuela‘s situation: Consumer-price inflation is forecast to hit 480% this year and top 1,640% in 2017, according to the International Monetary Fund. A shortage of medical supplies means infants and other sick patients are dying of treatable illnesses. Soldiers guard empty grocery store shelves. Inflation is so bad, the government has had to order bolivars by the planeload. As Caracas extends its declared state of economic emergency, it’s no wonder many economists say the nation will soon have to ask the IMF for a bailout. It’s gotten so bad, the government this month handed over control of food stocks to the military, ceding even more power to the armed forces. But Venezuela, whose government severed ties with the IMF nearly a decade ago under its former socialist autocratic leader, Hugo Chávez, hasn’t tried to restore relations with the world’s emergency lender. “There has been no change in Venezuela’s relationship with the fund,” IMF spokesman Gerry Rice said Thursday. While the IMF has urged Caracas to reestablish a relationship, “the Venezuelan authorities have not contacted us,” he said. China, seeking to take advantage of poor political relations that many African and Latin American nations have with the U.S. and Western-based institutions like the IMF, has been giving Venezuela and other commodity exporters cheap loans to help tide them through the commodity slump. Last year, the country supposedly secured $10 billion in cheap credit to help keep it afloat.

As Rates Sink, Housing Bubbles Rise - WSJ: —Low interest rates around the world are fueling a familiar threat of housing bubbles, and central bankers in a number of key economies feel powerless to stop them. The problem is being acutely felt in Canada, where home prices are soaring even as the country’s energy- and mining-dependent economy slows. Sweden and Australia are dealing with similar surges in the value of homes, leading officials in all three countries to worry about the risk of a destabilizing bust. In Canada’s hottest market, Vancouver, British Columbia, the benchmark home price rose 32% over the 12 months ended in June, with a typical detached home now costing 1.56 million Canadian dollars (US$1.2 million), according to a Canadian Real Estate Association index. In Toronto, home prices were up 16% during the same period. Those price gains in two of the country’s biggest cities are likely unsustainable, the Bank of Canada warned in June. Yet even as central bank Gov. Stephen Poloz worries about a potential bust, he said in an interview last week that rising home prices wouldn’t prevent him from driving rates even lower if he believed that was needed to stimulate the economy. But Mr. Poloz, whose bank has cut interest rates twice since January 2015, also acknowledged that Canada’s ultralow-rate environment is helping to fuel rising house prices and household debt. “The risks are clearly rising,” Mr. Poloz said, when asked whether the housing markets in Vancouver and Toronto are in a bubble. “I just don’t know how big the risks are.” Canadian housing officials have said foreign buyers are likely playing a significant role in the housing price increases, while real estate industry officials point to Chinese buyers in particular.  Mr. Poloz is among the central bankers who are increasingly caught between supporting their economies and addressing financial threats.

Canada's Oil Heartland Is In the Midst of its Worst Recession on Record -  Alberta, the home of Canada's oil sands, is going through its worst downturn in activity on record as a prolonged period of low oil prices and the wildfires earlier this year buffet the provincial economy. According to Toronto-Dominion Bank's economics team, the cumulative annual percentage contraction in real output projected for 2015 to 2016 exceeds even the financial crisis, as well as the last supply-side driven crash in oil prices in the mid-1980s, in magnitude:  While the recent episode seems poised to be the worst single recession on record, the two recessions in the 1980s mean that stretch "is still likely to be regarded as the most challeng­ing period in the post-war period in Alberta," says a TD team led by Deputy Chief Economist Derek Burelton. However, TD's team notes that labor market indicators point to a more mild downturn. "Periods of boom followed by bust are no strangers to an econ­omy that is tied to the vagaries of the global oil market," write the economists. "The current recession is expected to yield a cumulative annual decline in real GDP of around 6.5 percent, which is more than twice that of the average of past downturns."While economic activity appeared to be picking up earlier this year, the wildfires that wreaked havoc in the region and disrupted oil operations threw a wrench in the province's nascent comeback story.  The economists note that the softness in the Canadian dollar and low interest rates helped Alberta's economy escape an even worse fate.

Up to 70% of people in developed countries 'have seen incomes stagnate' - Half a billion people in 25 of the west’s richest countries suffered from flat or falling pay packets in the decade covering the financial and economic crisis of 2008-09, according to a report highlighting the impact of the Great Recession on household incomes. Research by the McKinsey Global Institute found that between 65% and 70% of people in 25 advanced countries saw no increase in their earnings between 2005 and 2014. The report found there had been a dramatic increase in the number of households affected by flat or falling incomes and that today’s younger generation was at risk of ending up poorer than their parents. Only 2% of households, 10 million people, lived through the period from 1993 to 2005 – a time of strong growth and falling unemployment – without seeing their incomes rise. The MGI said governments had mitigated the impact of the squeeze on incomes through tax cuts and welfare spending, but that even when these were taken into account 20-25% of households were no better off in 2014 than they were in 2005. It noted that people who had seen no increase in their incomes tended to be pessimistic about the future both of themselves and their children, and were likely to be more negative about removing barriers to trade or migration. “Our survey also found that those who were not advancing and not hopeful about the future were more likely than those who were advancing to support nationalist political parties such as France’s National Front or, in the United Kingdom, to support the move to leave the European Union.”  We have to wait until p. 36 before we see what the Republican platform has to say about the ACA.  No surprise here:  Obamacare’s “dead hand of the past” that weighs down American medicine would be repealed, along with the taxes that were imposed to help fund the new insurance subsidies.  The document reminds us that a Republican president would have the authority to “halt [ACA’s] advance” on his first day in office.  That clearly signals an understanding that rolling back subsidies to millions of people who enrolled on the insurance exchanges is neither practical nor politically smart.

IMF lowers global economic outlook after Brexit vote -  The International Monetary Fund on Tuesday lowered its global economic outlook, citing the increased uncertainty caused by Britain’s vote to leave the European Union. The latest IMF world economic outlook trims its 2016 and 2017 global growth forecast by a tenth each year, compared to the agency’s outlook in April. Of the advanced economies, the U.K. sees the biggest reduction, of two-tenths in 2016 and 0.9 percentage points in 2017. Maurice Obstfeld, the IMF economic counsellor, said the agency had prepared to upgrade its global growth assessment before the so-called Brexit vote, because of better-than-forecast eurozone and Japan growth, and a recovery in commodity prices. “It is therefore important to underscore that the real effects of Brexit will play out gradually over time, adding elements of economic and political uncertainty that could be resolved only after many months. This overlay of extra uncertainty, in turn, may open the door to an amplified response of financial markets to negative shocks,” he said. The IMF cut its U.S. outlook slightly in 2016, to 2.2% this year from 2.4%. That’s still a touch more optimistic than the Federal Reserve’s projection of 2% growth for the U.S. in 2016.

Bullish Economists Are So Yesterday - From Peter Martin: Brexit has forced the International Monetary Fund to abandon plans to lift its forecasts for global economic growth, forcing a downgrade with more to come if its “benign” assumptions don’t hold. “The Brexit vote implies a substantial increase in economic, political and institutional uncertainty, which is projected to have negative macro-economic consequences, especially in advanced European economies,” it said in its economic update released in Washington on Tuesday.The fund’s chief economist Maury Obstfeld said Brexit had “thrown a spanner in the works”.The new forecasts downgrade this year’s global growth from 3.2 per cent to 3.1 per cent and next year’s from 3.5 per cent to 3.4 per cent and slices 0.9 points off next year’s forecast for Britain, cutting it from 2.2 per cent to 1.3 per cent.Yeh, it’s Brexit’s fault. Not.This global business cycle stinks and the downgrades were coming anyway as China slowed again and the US tightened. Fact is, the only thing keeping the cycle going at all is stimulus of all varieties so why do these folk keep upgrading growth outlooks as if some wonderful private sector virtuous cycle will magically appear? The answer of course is that if they don’t then the headwinds will get even worse via the crashing confidence fairy.The world is undergoing a secular deleveraging coupled with a demographic accident that has years, probably decades, to run. Get over it!

IMF Called "Clowns" After Admitting They Fabricated Brexit Doom And Gloom - "The IMF has serious credibility problems. It has been seriously wrong for years. I hope that one of the things that the new government does is push to have some credible people running this institution... rather than the clowns currently running it," exclaimed UKIP MP Douglas Carswell, pointing out Lagarde's legion of fools flip-flop that the British economy will grow faster than Germany and France in the next two years - only weeks after its doom-laden warnings about Brexit. As The Daily Mail reports, after saying that leaving the European Union could trigger a UK recession, the International Monetary Fund now expects the British economy to grow by 1.7 per cent this year and 1.3 per cent next year. That is weaker than the 1.9 and 2.2 per cent growth forecasts before the referendum, but the UK is still set to be the second-fastest growing economy in the Group of Seven industrialised nations this year – behind the United States – and third-fastest next year, behind the US and Canada.  Of course, this is not the first time The IMF has unleashed comedic genius on the world...But the new UK forecasts represent a climbdown for the global financial watchdog after it issued a string of doom-laden warnings over the damage Brexit would do. Ahead of the referendum, IMF managing director Christine Lagarde, an ally of former chancellor George Osborne, said Brexit would be ‘pretty bad, to very, very bad’ for the UK. But the latest forecasts – and an admission that a recession is now unlikely – suggest the outlook is not as bleak as the watchdog claimed.

Why Central Banks and Markets Are Getting Out of Sync - WSJ: The world’s central banks have a wealth of concerns to address in the coming months. A new item on the list: their own actions, which are increasingly surprising markets, causing rather than easing volatility. With bond and stock valuations stretched, and policy perhaps becoming even more creative, that is a worrying development. There have been a string of misjudgments by markets lately. Take last week’s decision by the Bank of England to leave rates on hold at 0.5%. Investors had expected a quarter-point cut. When the BOE didn’t deliver, markets were volatile: the pound swung in a 3.7 cent range against the dollar over the day, according to FactSet, a big move. U.K. markets aren’t alone. The Bank of Japan 8301 -2.70 % shocked investors by introducing negative rates in January, and then shocked them again by standing pat in April. The European Central Bank last December failed to deliver on admittedly sky-high expectations for an easing package, sending the euro up 2.9% against the dollar in its biggest one-day move in the last year. The U.S. Federal Reserve hasn’t delivered a real shock decision, but market expectations of action have moved sharply to and fro; investors have been unsettled by relatively rapid changes in tone, as well as the Fed’s shifting attitude to global risks. Assumptions that the Fed is on hold could yet be tested, especially after Friday’s strong consumer spending data. More vital decisions lie ahead for all four central banks, and the potential for gaps between market expectations and central bank reality appears high. Past misreadings carry a cost, as they may color investors’ interpretation of future actions. Policy options seem to be becoming extreme after a long period postcrisis in which they were more incremental: witness the debate about helicopter money in Japan.

How Many Reserves Does Turkey Need? Some Thoughts on the IMF’s Reserve Metric -- Turkey has long ranked at the top of most lists of financially vulnerable emerging economies, at least lists based on conventional vulnerability measures. Thanks to its combination of a large current account deficit and modest foreign exchange reserves, Turkey has many of the vulnerabilities that gave rise to 1990s-style emerging market crises. Turkey’s external funding need—counting external debts that need to be rolled over—is about 25 percent of GDP, largely because Turkey’s banks have a sizable stock of short-term external debt. At the same time, these vulnerabilities are not new. Turkey has long reminded us that underlying vulnerability doesn’t equal a crisis. For whatever reason, the short-term external debts of Turkey’s banks have tended to be rolled over during times of stress.* And, fortunately, those vulnerabilities have even come down just a bit over the last year or so. After the taper tantrum, Turkey’s banks even have been able to term out some of their external funding by issuing bonds to a yield-starved world in 2014, and by shifting toward slightly longer-term cross-border bank lending in 2015 and 2016 (See figure 4 on pg. 35 of the IMF’s April 2016 Article IV Consultation with Turkey) And while the recent fall in Turkey’s tourism revenue doesn’t look good, Turkey also is a large oil and gas importer. Its external deficit looks significantly better now than it did when oil was above a hundred and Russian gas was more expensive.Turkey doesn’t have many obvious fiscal vulnerabilities; public debt is only about 30 percent of GDP. Its vulnerabilities come from the foreign currency borrowing of its banks and firms.There is one more strange thing about Turkey. Its banks have increased their borrowing from abroad in foreign currency after the global financial crisis, but there hasn’t been comparable growth in domestic foreign currency lending. Rather, the rapid growth has come in lending in Turkish lira, especially to households. So the banks appear to have borrowed abroad and in foreign currency to fund domestic lending in Turkish lira.

The Counter-Coup Begins: Erdogan Purges 2,745 Judges, Prosecutors; Arrests Hundreds -- When we described the aftermath of Turkey's failed, and painfully disorganized military coup attempt, we asked rhetorically, "Who wins?" To which we answered: "Why Erdogan of course. As he said during a press conference upon his arrival back in Istanbul in the early Saturday morning hours, the coup is an opportunity to "to purge the military." Erdogan also vowed to exact "the highest price" from the perpetrators. Or, to summarize, the military said Erdogan's power consolidation justifies the attempted coup; Erdogan said the coup justifies further consolidation of power." Overnight, when analyzing the market's take of the coup, Renaissance Capital's Michael Harris said that "for markets to respond positively, we think Erdogan must go the reconciliation route, pledging not to hold elections for the coming year and committing to a consensus approach to constitutional change. More likely, though, Erdogan will seek to leverage this into a constitutional super-majority via a snap election." Their conclusion: "A military coup has failed, but if Erdogan responds to this historic moment the wrong way, a democratic coup could be the result." Not surprisingly, as of this morning, Erdogan is indeed responding to this historic moment the "wrong way."  But before we get to that point, there are questions whether this coup was even that. As a NYT analyst on the ground pointed out, confirming what we said last night, the planning, organization and implementation of the attempted military overthrow were suspect at best and outright laughable at worst: Major point people are missing. Very few tanks out there compared to a full military chain-of-command coup.

Erdogan Arrests 6,000 In Historic "Systemic Purge", Incirlik Airbase Commander Detained --Perhaps the most surprising consequence from Friday's failed Turkish coup, was the Turkish government's cutting electricity and suspending operations at the giant US airbase at Incirlik, which not only serves as the focal point of many US anti-ISIS missions, but also houses at least 50 B61 nuclear bombs. However, a piece of the puzzle was revealed today when a Turkish government official said the Turkish commander of the Incirlik air base has been detained. The official said Sunday that Gen. Bekir Ercan Van, 10 other soldiers and one police officer from the Incirlik base are arrested for their role in the botched Friday coup attempt. The Turkish private DHA news agency showed footage of Van handcuffed and pushed into a van outside a courthouse. DHA: #Adana'da #?ncirlikÜssü komutan? Tu?general Bekir Ercan Van ile 10 asker ve bir emniyet müdürü tutukland?. Meanwhile, the counter-coup, this time with the implicit blessing of all western powers, is picking up speed.  Earlier today, according to AP reports, Turkish President Erdogan vowed to "systemically purge" all state institutions of supporters of an Islamist cleric his government blames for Friday's failed coup attempt. Speaking at a funeral in Istanbul on Sunday, Erdogan vowed to "clean all state institutions of the virus" of Fethullah Gulen supporters.  he also promised a purge of the armed forces even before the coup attempt was over. "They will pay a heavy price for this," he said. "This uprising is a gift from God to us because this will be a reason to cleanse our army."

The Turkish Witch-Hunt Begins: Erdogan Begins Arresting Government Criticsm --Having arrested those who were supposedly directly involved in the attempted coup, which at last count this morning amounted to over 6,000 individuals of which 3,000 members of the army (or less than 1% of Turkey's 315,000-strong forces) and the Turkish legal system, including judges and prosecutors. That Erdogan was so quick in assembling a list of enemies in the judicial branch, whose arrests started early on Saturday even before the coup was fully doused, is the clearest indication that Erdogan was not only prepared for the "coup", but its inevitable outcome. The video below released by the government Anadolu Agency, shows Turkish police interrogate senior army officers allegedly involved in the failed coup. [Video] Eski Hava Kuvvetleri Komutan? Öztürk ve di?er darbeci askerlerin sorgusu sürüyor   However, it was the next step that was the critical one: the one where Erdogan - having cracked down on his immediate military and legal opponents - took his crusade against everyone else, including the press and the educational system. The first inkling of the upcoming "witch hunt" took place earlier today, when the Turkish police asked "citizens" to report those who support terrorism and crime. In other words, McCarthyism reborn, only this time the bogeyman is not communism. Witch hunt galore. Turkish police asks “citizens” to report those who support terrorism & crime.

Turkey coup attempt: World leaders warn President Erdogan not to use uprising as excuse for crackdown as more than 6,000 arrested -  Turkish president Recep Tayyip Erdogan was warned by world leaders on Sunday not to use the attempted coup as “carte blanche to do whatever he wants," amid concerns the putsch has become a pretext for him to consolidate power.Mr Erdogan moved rapidly over the weekend to round up his adversaries, arresting more than 6,000 soldiers, including senior military leaders, and judges, suspected of involvement.  So many soldiers have been detained that the lower ranked conscripts have been locked in schools and gymnasiums in the capital, Ankara, Turkey coup. With expectations growing of heavy measures against dissent, European politicians warned Mr Erdogan that the coup attempt did not give him a “blank cheque” to disregard the rule of law.Mr Erdogan has hinted he may reintroduce the death penalty, which the country abolished in 2004 in line with its bid to join the European Union. Guenther Oettinger, the European Commissioner, said Mr Erdogan would move Turkey away from the core values represented by the EU and the Nato defence alliance, of which Turkey has been a crucial member in the fight against Isil, if he decided to use the attempted coup to restrict basic democratic rights further. "He would strengthen his position domestically, but he would isolate himself internationally,” he warned

Turkish soliders say they did not know they were involved in coup plot – report - Amid the spate of arrests and interrogations following the 15 July failed coup in Turkey, some soldiers have claimed that they initially had no idea that they were taking part in a plan to overthrow the government. According to a report in Turkish newspaper Hurriyet, several soldiers have said that they had been told that they would be taking part in a military drill, and that it was only when people began to climb onto the tanks that they realised they were involved in a coup attempt. The Hurriyet article, published on the newspaper’s English-language website on 17 July, read: “Student soldiers in Istanbul’s Kuleli Military High School were also reportedly taken to streets by their commanders, who claimed it was for a drill. They seized weapons of police officers in the Cengelkoy police station. An armed conflict erupted and 10 people were killed. Special operations police officers later raided the school and detained many students. “In addition, soldiers at Istanbul’s Ataturk Airport said in their initial testimonies that they thought they were on a drill, but later realised it was a coup when people climbed onto their tanks.”.

Erdogan's Arch-Enemy Accuses Turkish President Of Staging Coup, Compares Him To Hitler -- Long before Turkey's president Recep Tayyip Erdogan accused Fethullah Gulen, a Turkish cleric who lives in self-imposed exile on 1857, Mt.Eaton Road in  Saylorsburg, Pennsylvania, last night and again today of being the "terrorist" mastermind behind Friday's failed coup attempt and demanding - unofficially, on prime time TV but not via diplomatic channels - that the US extradite the 77 year old, he was doing precisely that. For years, Erdogan had used the cleric as a scapegoat punching bag, who had somehow managed to create an entire "parallel state" in Turkey which was just waiting for its opportunity to pounce and snatch Turkey from Erdogan. Hence the perpetual (fake) fear of coups. Hence the public displays of (fake) paranoia. Hence the relentless - and all too real - concentration of power. And as many expected, Erdogan once again accused Gulen of being responsible for the Friday coup, no matter how ridiculous such an allegation sounded. This time Turkey went so far asaccusing the US of being "behind the coup" for harboring Gulen.  “Today, after this coup attempt, I’m once again calling on you, I’m saying: Extradite this man in Pennsylvania to Turkey now,” Erdogan said on Saturday in televised remarks from Istanbul in a personal appeal to President Barack Obama. Turkey's secretary of labor, Suleyman Soylu, went one better and told TV channel Haberturk: "The US is behind this coup." As for Gulen's position, he had denied as recently as yesterday, the accusations and said Saturday morning in an emailed statement through a spokeswoman that he denounced the overnight coup attempt. In a video released by the New York Times, a man appearing to be a doctor measured Mr. Gulen’s blood pressure, possibly to point out the cleric’s ailing health.

John Kerry Blasts Turkey For Accusing US Of Orchestrating Failed Coup, Admits US Had No Idea It Was Coming -- In a confirmation that either the NSA remains painfully confused about global geopolitical developments (one can't help but wonder if instead of surveilling the world for dangerous developments, the US "superspy" agency remains mostly focused on local eavesdropping), or that indeed the Turkish "coup" was staged as there was no actual preparation for it, earlier today John Kerry once again repeated that "US intelligence had no infromation" about the upcoming coup. While this was hardly surprising, a more notable development following Turkey accusing the US of being "behind the Turkish coup", was the US expressing concern that their longtime NATO ally and critical regional partner believed that Washington would try to overthrow their government calling the claims "harmful to bilateral relations." As Reuters reports, John Kerry urged Turkey on Saturday to exercise restraint after a failed military coup sparked a government crackdown, and warned its NATO ally that public suggestions of a U.S. role in the plot were "utterly false" and harmful to relations. Kerry also said that authorities should respect the rule of law during their probe of the coup. Suggesting that US diplomatic relations with Turkey are deteriorating rapidly, Kerry added that "public insinuations or claims about any role by the United States in the failed coup attempt are utterly false and harmful to our bilateral relations," the State Department said.

"This Is Going To Get Very Ugly" - Former Top CIA Officer Says "Obama Has Lost Control Of The Middle East" -- With Thursday's tragic mass killing by a resclusive, truck-driving Tunisian maniac in Nice having been violently drowned out by the frentic late Friday news of a failed (and perhaps staged) coup in Turkey, the news cycle has once again shifted its attention away from a far greater threat to the global economy than whether Erdogan can concentrate even more power in his grasp. Namely, both lone-wolf and organized terrorism in Europe (and elsewhere). And according to at least one CIA field commander, Gary Bernsten, it is all Obama's fault. As the Hill reports, the decorated former CIA career officer who served in the Directorate of Operations between October 1982 and June 2005, said on Friday that Obama has lost control of the Middle East following attacks in France that left at least 84 dead.  "This is going to get very, very ugly," Gary Bernsten said on Fox & Friends Friday. "The president of the United States, as Newt Gingrich has stated, has failed in his responsibilities to defend the United States. He has lost control of the Middle East. It is in flames, and that is what he will leave when he leaves office."  One can also make the argument that it is not so much Obama, as his first secretary of state, the person who in less than 4 months may be America's next president.  We wonder what Bernsten would add after last night's even more disturbing events in Turkey. As we just witnessed over the past 24 hours, the Middle East is indeed in flames, and what's worse, the US has zero control. As Ali Watkins reported overnight,  US officials were caught completely off guard by Friday's attempted Turkish coup.

Turkey government seemed to have list of arrests prepared: EU's Hahn -- The swift rounding up of judges and others after a failed coup in Turkey indicated the government had prepared a list beforehand, the EU commissioner dealing with Turkey's membership bid, Johannes Hahn, said on Monday. Following a failed coup attempt on Saturday, Turkish authorities on Sunday rounded up nearly 3,000 suspected military plotters, ranging from top commanders to foot soldiers, and the same number of judges and prosecutors. "It looks at least as if something has been prepared. The lists are available, which indicates it was prepared and to be used at a certain stage," Hahn said. "I'm very concerned. It is exactly what we feared."

Erdogan Purges 8,000 Cops As Europe Voices Concern Coup Was Staged With "Prepared Arrest Lists" -- Overnight Turkish president Erdogan's counter-coup witch hunt continued, when thousands of police officers were suspended on Monday, widening a systemic purge of Erdogan's enemies first in the armed forces and then judiciary after a failed military coup, now focusing on the interior police force, and raising concern among European allies that it was abandoning the rule of law. Reuters reports that at least 8,000 police officers have been removed from their posts, in addition to 1,500 at the ministry of finance, on suspicion of links to Friday's coup. Thirty regional governors and more than 50 high-ranking civil servants have also been dismissed, CNN Turk said. Thousands of members of the armed forces, from foot soldiers to commanders, were rounded up on Sunday, some shown in photographs stripped to their underpants and handcuffed on the floors of police buses and a sports hall. Several thousand prosecutors and judges have also been removed. At the same time speculation that the terribly planned "coup" was anything but came from the European Commission itself. As Reuters adds, the swift rounding up of judges and others after a failed coup in Turkey indicated the government had prepared a list beforehand,according to EU commissioner dealing with Turkey's membership bid, Johannes Hahn, said on Monday.  "It looks at least as if something has been prepared. The lists are available, which indicates it was prepared and to be used at a certain stage," Hahn said. "I'm very concerned. It is exactly what we feared."

John Kerry Threatens Turkey With NATO Expulsion --While the experts debate if Turkey's flash coup was staged or merely grossly incompetent, a rather theatrical fallout is taking place between Turkey and the US. Recall that on Saturday, as part of its populist campaign to blame the coup on the US-based cleric Fethullah Gulen, Turkey accused the US of being "behind the military coup", to which John Kerry promptly responded that such allegations are "utterly false" and harmful to relations. Kerry also said that authorities should respect the rule of law during their probe of the coup. This however did not lead to any moderation in Turkish rhetoric, and yesterday, Prime Minister Binali Yildirim threated to go to war with any country that would "stand by" the exiled Fethullah Gulen; this would naturally imply the US which is where Gulen is currently located."The US is behind the coup attempt. A few journals that are published there [in the US] have been conducting activites for several months. For many months we have sent requests to the US concerning Fethullah Gulen. The US must extradite him," said the Labor Minister in a statement. Curiously, despite all the posturing, Turkey has yet to send out a formal extradition request. However, the tensions between Turkey and US appear to have spilled over this morning, when moments ago John Kerry threatened Turkey that it could lose its NATO membership "if it fails to uphold the principles of democracy in the wake of an attempted coup" the US has warned.  “NATO also has a requirement with respect to democracy and NATO will indeed measure very carefully what is happening,” Kerry tells reporters in Brussels after attending a meeting of European Union foreign ministers “My hope is that Turkey is going to move in ways that do respect what they have said to me many times is the bedrock of their country,” he says.  Kerry adds: “I spoke with the foreign minister three times in the last days and he assured me that they fully intended to respect the democratic process and the law; now obviously a lot of people have been arrested and arrested very quickly” and “the level of vigilance and scrutiny is obviously going to be significant in the days ahead."

Turkish Prosecutors Raid Incirlik Airbase Housing US Warplanes And 50 Nuclear Bombs --The saga surrounding the Turkish Incirlik air base, which is not only the headquarters to the US 39th Air Base Wing but also vaults over 50 B1 nuclear bombs, and is critical to all US missions not only against ISIS but the entire middle east continues. Moments ago, Turkey's state-run news agency says seven prosecutors, charged with investigating a foiled coup, have entered the Incirlik Air Base. A Turkish brigadier general at the base has already been detained for his alleged role in Friday's uprising. On Saturday, Turkish Prime Minister Binali Yildirim said that Turkish airspace was closed due to the coup attempt in the country. US media reported that the Incirlik base in southern Turkey has been left without electricity and local authorities prevented movement to and from the base. Air operations from the base have also been suspended. On Sunday, the US-led coalition resumed flights from the Incirlik airbase. The former commander of the base was accused by Ankara of involvement in the attempted coup. The United States rejected asylum application of Gen. Bekir Ercan Van. In July 2015, Turkey agreed to open up Incirlik to US manned and unmanned aircraft to conduct anti-terror operations in Syria against Daesh. It is unclear as of this moment, what the Turkish "probe" is seeking.

The H-Bombs in Turkey - The New Yorker: Among the many questions still unanswered following Friday’s coup attempt in Turkey is one that has national-security implications for the United States and for the rest of the world: How secure are the American hydrogen bombs stored at a Turkish airbase?The Incirlik Airbase, in southeast Turkey, houses NATO’s largest nuclear-weapons storage facility. On Saturday morning, the American Embassy in Ankara issued an “Emergency Message for U.S. Citizens,” warning that power had been cut to Incirlik and that “local authorities are denying movements on to and off of” the base. Incirlik was forced to rely on backup generators; U.S. Air Force planes stationed there were prohibited from taking off or landing; and the security-threat level was raised to FPCON Delta, the highest state of alert, declared when a terrorist attack has occurred or may be imminent. On Sunday, the base commander, General Bekir Ercan Van, and nine other Turkish officers at Incirlik were detained for allegedly supporting the coup. As of this writing, American flights have resumed at the base, but the power is still cut off. Incirlik was built by the U.S. Army Corps of Engineers in the wake of the Second World War; when Turkey joined NATO, in 1952, it became a crucial American base during the Cold War.  According to Hans M. Kristensen, the director of the Nuclear Information Project at the Federation of American Scientists, underground vaults at Incirlik hold about fifty B-61 hydrogen bombs—more than twenty-five per cent of the nuclear weapons in the NATO stockpile. The nuclear yield of the B-61 can be adjusted to suit a particular mission. The bomb that destroyed Hiroshima had an explosive force equivalent to about fifteen kilotons of TNT. In comparison, the “dial-a-yield” of the B-61 bombs at Incirlik can be adjusted from 0.3 kilotons to as many as a hundred and seventy kilotons.

Turkey says no return to past repression despite state of emergency | Reuters: Turkey tried to assure its citizens and the outside world on Thursday that there will be no return to the deep repression of the past even though President Tayyip Erdogan has imposed the first nationwide state of emergency since the 1980s. With Erdogan cracking down on thousands of people in the judiciary, education, military and civil service after last weekend's failed military coup, a lawmaker from the main opposition party said the state of emergency created "a way of ruling that paves the way for abuse". An international lawyers' group warned Turkey against using the state of emergency to subvert the rule of law and human rights, pointing to allegations of torture and ill-treatment of people held in the mass roundup. Announcing the state of emergency late on Wednesday, Erdogan said it would last at least three months and allow his government to take swift measures against supporters of the coup, in which 246 people were killed and hundreds wounded. It will permit the president and cabinet to bypass parliament in enacting new laws and to limit or suspend rights and freedoms as they deem necessary. For some Turks, the move raised fears of a return to the days of martial law after a 1980 military coup, or the height of a Kurdish insurgency in the 1990s when much of the largely Kurdish southeast was under a state of emergency declared by the previous government. About 60,000 soldiers, police, judges, civil servants and teachers have been suspended, detained or have been placed under investigation since the coup was put down.

Top Turkish Official In Charge Of Campaign Against ISIS Found Dead, Shot In The Neck -- By now only the most naive believe the official narrative behind Turkey's Friday coup. We say that for two reasons: first, as even the EU commissioner dealing with Turkey's membership bid, Johannes Hahn, said when discussing the unprecedented arrest purge in Turkey, "it looks at least as if something has been prepared. The lists are available, which indicates it was prepared and to be used at a certain stage. I'm very concerned. It is exactly what we feared."  He did not exlaborate what exactly he had feared, but one can infer; second,as we caught Turkey's press openly changing the narrative, Erdogan was not even able to figure out who to blame for the "coup attempt" until this afternoon, first accusing the US, then the former Turkish air force chief, before finally deciding on accusing the 77-year-old Pennsylvania resident, Fethullah Gulen, of being the frail mastermind behind it all. To be sure, the western media was happy to glance over these "changeovers" and to spoonfeed a false story to the masses just to maintain the illusion of the official Turkish narrative. An example of this is when Erdogan told CNN earlier today that "he escaped death by only a few minutes before coup plotters stormed the resort in southwest Turkey where he was vacationing last weekend. Erdogan's interview was broadcast late Monday. He told CNN that soldiers supporting the coup killed two of his bodyguards when they stormed the resort early Saturday. "Had I stayed 10, 15 additional minutes, I would have been killed or I would have been taken," he told CNN through a translator provided by the presidency." And yet, less than a day earlier we wrote that even though "Coup Pilots Had Erdogan's Plane In Their Sights" they did nothing, prompting a former military officer "with knowledge of the events" to ask "why they didn't fire is a mystery." So just hours before two F-16 had radar lock on Erdogan and decided not to kill the dictator, troops from the same alleged "coup" were scrambling to get to Erdogan - many hours after the so-called coup had already started - in his resort hotel, and where they would have killed him... had he stayed "10, 15 additional minutes." We can see why not even the Europeans believe this any more.

The Purge Begins In Turkey - The coup in Turkey is over, and now the purge begins.On Saturday, Turkish soldiers and police—those who had remained loyal to President Recep Tayyip Erdoğan during the uncertain hours of the previous day—were rounding up their enemies across the security services, reportedly arresting thousands. There will be thousands more. In the high-stakes world of Turkish politics—nominally democratic but played with authoritarian ferocity—justice for the losers will be swift and brutal.The remarkable thing about Friday’s coup attempt is not that it failed but that, after years of Erdoğan’s relentless purging of his opposition, there was a faction inside the Turkish military strong enough to mount one at all.The confrontation was a long time coming. When Erdoğan first became Prime Minister, in 2003, he was the Islamic world’s great democratic hope, a leader of enormous vitality who would show the world that an avowedly Islamist politician could lead a stable democracy and carry on as a member of NATO, too.Those hopes evaporated quickly. Erdoğan, who was elected Turkey’s president in 2014, has taken a page from Vladimir Putin’s playbook, using democratic institutions to legitimize his rule while crushing his opponents, with an eye to ultimately smothering democracy itself. Over the past decade, Erdoğan has silenced, marginalized, or crushed nearly anyone in the country who might oppose him, including newspaper editors, university professors, aid workers, and dissident politicians. (What an irony that Erdoğan, who has imprisoned so many journalists, and gone to great lengths to censor Twitter, Facebook and YouTube, may have saved his Presidency by using FaceTime to make an early Saturday appearance on a Turkish television news channel.) President Obama and other Western leaders, seeing Erdoğan as a bulwark against chaos, largely gave him a pass. In his most recent grab for authoritarian powers, Erdoğan pushed throug

Turkey Latest: Tens Of Thousands Purged; "Gulenist Media" Shut Down; Pilots Behind Russian Jet Downing Arrested Turkish president Erdogan continues his witch hunt purge for the third day, and as of this morning the office of the Turkish prime minister removed from duty 257 staff suspected of being linked to the failed coup Reuters cites a source in the PM’s team as saying Tuesday. The number of those suspended from duty in the PM’s office has reached 10 percent of the estimated 2,600 total personnel of Prime Minister Binali Yildirim’s staff. The crackdown is also impacting the army, where the state-run Anadolu news agency reported that President Recep Tayyip Erdogan's Air Force adviser, Lt. Col. Erkan Kivrak, has been detained at a hotel in the Serik district of Turkey's southern province of Antalya. It says Kivrak was detained while on vacation. Following processing by the Antalya police, he has been transferred to Ankara. Additionally courts have ordered 85 generals and admirals jailed pending trial over their roles in a botched coup attempt. Dozens of others were still being questioned.Additionally, about 100 employees of Turkey’s National Intelligence Organization have been suspended from work over alleged ties to the coup of July 15, reports Haber Turk newspaper. Anadolu Agency said Tuesday that those formally arrested include former air force commander Gen. Akin Ozturk, alleged to be the ringleader of the July 15 uprising (we documented the surprising flip-flop in his narrative yesterday) as well as Gen. Adem Hududi, commander of Turkey's 2nd Army, which is charge of countering possible threats to Turkey from Syria, Iran and Iraq. And then there are the teachers: moments ago Anadolu also reported that the Turkey education ministry has suspended 15,200 staff without providing further details.

Erdogan Unleashes Unprecedented Crackdown: Fires All University Deans; Suspends 21,000 Private School Teachers --Over the weekend, after the initial reports of the purge unleashed by Erdogan against Turkey's public, we previewed the upcoming, far more dangerous counter-coup as follows: "it was the next step that is the critical one: the one where Erdogan - having cracked down on his immediate military and legal opponents - took his crusade against everyone else, including the press and the educational system." But while Turkey's press is already mostly under Erdogan's control, it is the educational witch hunt fallout that is far more troubling, and just as expected over the past hour we have gotten a glimpse of just how extensive the Turkish's president cleansing of secular society will be, when the state-run Anadolu news agency reported that Turkey's ministry of education has sacked 15,200 personnel for alleged involvement with a group the government claims is responsible for Friday's failed coup. Even more shocking, Anadolu reports that Turkey's Board of Higher Education has requested the resignations of all 1,577 university deans, effectively dismissing them.  Of the deans dismissed, 1,176 worked in public universities and 401 in private institutions. The National Education Ministry said Tuesday that the staff are in both urban and rural establishments, and that an investigation has been launched against them. It didn't stop there, and as Turkey's Ysafak reports, the country has just canceled the license of some 21,000 private school teachers. And just like that, In one move, Turkey's authoritarian ruler just eliminated both the middle and higher educational system of the country.

Turkey coup attempt: Crackdown toll passes 50,000 - BBC News: More than 50,000 people have been rounded up, sacked or suspended from their jobs by Turkey's government in the wake of last week's failed coup. The purge of those deemed disloyal to President Recep Tayyip Erdogan widened on Tuesday to include teachers, university deans and the media. The government says they are allied to US-based cleric Fethullah Gulen, who denies claims he directed the uprising. PM Binali Yildirim said the preacher led a "terrorist organisation". "We will dig them up by their roots," he told parliament. Turkey is pressing the US to extradite Mr Gulen and the issue was raised during a phone call between US President Barack Obama and President Erdogan on Tuesday, the White House said. Spokesman Josh Earnest said a decision on whether or not to extradite would be made under a treaty between the two countries.A Turkish government spokesman suggested that the US should be able to extradite the cleric "on grounds of suspicion" rather than requiring facts of the case against him. "There is very strong suspicion for his [Gulen's] involvement in this coup attempt. So this is sufficient grounds," said spokesman Ibrahim Kalin. For his part, Mr Gulen says claims he was behind the coup attempt are "ridiculous".

15,000 Education Staff Suspended in Turkey Post-Coup Purge: urkey widened its massive post-coup purge to the state education sector on Tuesday after vowing to root out supporters of an exiled cleric it accuses of orchestrating the attempted power grab. In the latest action by authorities, Turkey's education ministry said more than 15,000 state education employees had been suspended. The days since the failed coup last Friday have seen a massive crackdown on the military, police and judiciary. All medical personnel at state-run health facilities and civil servants have had their annual leave cancelled. Around 9,000 people including police and government officials have been sacked and 7,500 people detained including top generals accused of masterminding the plot. In addition, a plethora of media outlets had their licenses revoked on Tuesday, including several TV channels which had already been taken into administration by the government. STV, Samanyolu Haber, Samanyolu Haber Radyo, Can Erzincan TV, Kanal 124, Yumurcak TV, Hira TV, MC TV, Dünya TV, Kanal Türk, Bugün TV, Mehtap TV, Berfin FM and Kanal Türk were among those who had their licenses revoked over allegations of involvement in the coup attempt. Prime Minister Binali Yildirim told the country's parliament earlier on Tuesday that the country had sent four dossiers to the US to back up its demand for the extradition of Islamic preacher Fethullah Gulen, President Recep Tayyip Erdogan's sworn enemy who lives in exile in Pennsylvania. "We will pull them (Gulen supporters) out by the roots like a razor blade," he said.

WikiLeaks Will Review 300,000 Emails and 500,000 Documents from Erdoğan’s AKP - WikiLeaks claims to have over 300,000 emails from Erdoğan’s AKP party.AKP stands for “Adalet ve Kalkınma Partisi” (Justice and Development Party).Erdoghan claims the AK Party’s agenda is limited to “conservative democracy”. The irony is obvious.Coming Tuesday: The #ErdoganEmails: 300 thousand internal emails from Erdoğan's AKP – through to July 7, 2016.— WikiLeaks (@wikileaks) July 18, 2016 More Wiki Tweets: We are unsure of the true origin of the attack. The timing suggests a Turkish state power faction or its allies. We will prevail & publish. — WikiLeaks (@wikileaks) July 18, 2016

Wikileaks Is About To Expose The Turkish ‘Coup’, But Someone Is Trying To Silence Them - Wikileaks claimed Monday it was under attack after it announced it would release hundreds of thousands of documents related to Turkey and the failed military coup attempted Friday, CNET reported. The organization, which has released information on everything from war crimes to Hillary Clinton’s email scandal, announced Sunday it would be releasing 100,000 documents related to Turkey’s “political power structure,” some of which detail the “leadup” to the coup. Wikileaks anticipated the release would be censored in Turkey, cautioning in a three-part tweet posted Monday: “Turks will likely be censored to prevent them reading our pending release of 100k+ docs on politics leading up to the coup. We ask that Turks are ready with censorship bypassing systems such as TorBrowser and uTorrent and that everyone else is ready to help them bypass censorship and push our links through the censorship to come.Turks will likely be censored to prevent them reading our pending release of 100k+ docs on politics leading up to the coup. (1/3) We ask that Turks are ready with censorship bypassing systems such as TorBrowser and uTorrent (2/3) And that everyone else is ready to help them bypass censorship and push our links through the censorship to come. (3/3) — WikiLeaks (@wikileaks) July 18, 2016 The Turkish government, headed by President Recep Tayyip Erdogan, has increasingly ramped up censorship efforts against journalists, lending credibility to Wikileaks suspicions their release may not fully reach Turkish citizens—especially considering the latest leak concerns his ruling party, AKP.

Turkish government blocks access to WikiLeaks - (Reuters) - Turkey has blocked access to the WikiLeaks website, the telecoms watchdog said on Wednesday, hours after it leaked thousands of ruling party emails just as Ankara grapples with the aftermath of a failed military coup. Around 50,000 soldiers, police, judges and teachers have been suspended or detained since the attempted coup on the weekend, and Turkey's Western allies have expressed concern over the crackdown's reach. WikiLeaks on Tuesday released nearly 300,000 emails from the AK Party dating from 2010 to July 6 this year. Obtained before the attempted coup, the date of their publication was brought forward "in response to the government's post-coup purges", WikiLeaks said on its website. The source of the emails was not connected to the coup plotters or to a rival political party or state, WikiLeaks said. Founded by Julian Assange, WikiLeaks publishes leaked material, mostly from governments. In 2010, the organization published classified U.S. military and diplomatic documents in one of the largest information leaks in U.S. history.

Turkey attempted coup: EU says measures 'unacceptable' - BBC News: The European Union says Turkey's measures against the education system, the judiciary and the media following the failed coup are "unacceptable". In a statement, High Representative Federica Mogherini and Commissioner Johannes Hahn said they were "concerned" by Turkey's decision to declare a state of emergency. The move gives Turkey's leaders "far-reaching powers to govern by decree". Thousands of people have been sacked or arrested following the failed coup. The two senior EU officials urged President Recep Tayyip Erdogan to respect the rule of law, rights and freedoms. And they also warned Turkey over its decision to suspend the European Convention on Human Rights, saying it must stick to the conditions by which a suspension is permitted. Turkey is a candidate to join the EU, but its accession talks have progressed extremely slowly.Earlier, German Foreign Minister Frank-Walter Steinmeier urged Turkey to maintain a sense of proportion in its response to the coup attempt. The human rights organisation Amnesty International has described the authorities' actions as "a crackdown of exceptional proportions".

Turkey to temporarily suspend European rights convention -  (Reuters) - Turkey will follow France's example in suspending temporarily the European Convention on Human Rights following its declaration of a state of emergency, Deputy Prime Minister Numan Kurtulmus said on Thursday, according to broadcaster NTV. President Tayyip Erdogan announced a three-month state of emergency late on Wednesday after last weekend's failed military coup, saying it would enable the authorities to act more efficiently to bring those responsible to justice. France declared its own state of emergency following last November's attacks by Islamist militants in Paris. In comments quoted by NTV, Kurtulmus also said Turkey's state of emergency could end within one to one and a half months. He identified "structural and individual" intelligence failures during the coup attempt and also said that work was underway to restructure the army, NTV reported.

The Crisis in Turkey Could Swallow Us All -- Turkey has been in a growing crisis for years, and the end seems nowhere in sight. In the wake of the failed military coup, Turkish officials and civilians are pointing the finger at the U.S. for instigating it. “America is behind the coup,” said Turkey’s Labor Minister Suleyman Solyu. Solyu is a close ally of Turkey’s President Recip Tayyip Erdogan, who also blames the U.S. for harboring the Islamic cleric he says was behind the coup. Officially, the U.S. says that speculation that the U.S. supported the coup is “categorically untrue.” Officially, the U.S. says it is “factually incorrect” to say it is harboring the cleric, Fethullah Gulen, who lives in a secluded, 26-acre gated compound in Saylorsville (pop. 1,126 in 2010) in rural, northeastern Pennsylvania. From there, at the Golden Generation Worship and Retreat Center, Gulen, 75, reportedly runs a murky, billion-dollar global program of Islamic education and proselytizing called the Gulen Movement, also known as Hizmet (“service”) and Cemaat (“community”). And the Gulen people have contributed substantially to the Clinton Foundation and Hillary Clinton’s campaign. Gulen has denied any involvement with the attempted coup, although it appears to have involved Gulen Movement officers in the Turkish military. Gulen followers generally do not identify themselves as such. Gulen told the Associated Press: “In brief, I don’t even know who my followers are. You can think about many motivations of people who staged this coup.” A Turkish court issued an arrest warrant for Gulen in December 2014 that is still outstanding. Another Turkish court issued an arrest warrant for Gulen in November 2015, based on a 10,529-page indictment. In April 2016, Turkish police rounded up some 2,261 people accused of being Gulen followers creating a “parallel” state in Turkey. Erdogan and Gulen have been fighting for years, after even more years as allies. Now the U.S. finds itself, innocently or not (Gulen had CIA help to get his green card), in what amounts to a high stakes lovers’ quarrel. Whatever the U.S. ends up deciding is likely to prolong the chain reaction of critical events set off by the coup, with national, regional, and potentially global impact.

Michael Hudson: US-NATO Border Confrontation with Russia Risks Nuclear War and Loss of European Partners --naked capitalism. Yves here. The US press tries to create the impression that our political and trade partners in Europe are all in for our increasingly aggressive confrontation with Russia. This Real News Network segment challenges that simplistic view. One point that Hudson does not make clear is that it is actually a requirement of NATO that members spend 2% of GDP supporting the alliance. But it hasn’t been observed. The country that pretends to meet its 2% obligation is the UK, but it does that by classifying defense expenditures it would have made regardless as part of its NATO commitment. If I read Hudson correctly, the US is starting to ask NATO members to ante up. Ironically, that’s not that different than the position that Donald Trump is taking (as in his objection to NATO is not the organization per se but the degree to which the US is shouldering the costs).(Real News video & transcript)

Russian Consumers Still in Shock as They Cut Back on Food and Medicine - -  With stores from near the Arctic to the foothills of the Caucasus Mountains, Magnit PJSC would be the first to know when the Russian consumer is back. Instead, the nation’s largest supermarket chain has just come across something it’s never seen. Billionaire Sergey Galitskiy’s retailer, which operates almost 13,000 outlets in Russia, said the average purchase has fallen for the first time since it began disclosing the figures a decade ago, dropping 1.5 percent in the first half of 2016 from a year earlier. Retail sales in June shrank for a record 18th month, plunging 5.9 percent from a year earlier, the Federal Statistics Service in Moscow said on Tuesday. “It’s not possible for consumption to expand,” said Dmitry Polevoy, chief economist for Russia at ING Groep NV in Moscow. “Salaries aren’t growing or are growing much more moderately than they used to, lending is declining.” As Russia pivots from a consumer-driven growth model after the crash in oil prices, the crisis is decimating the middle class and millions are sinking into poverty. Not even better consumer confidence and stabilizing inflation are translating into stronger demand. Rather, households are hunkering down. Almost a third of Russians now buy less food than before, while 49 percent admit they save on medicine by ignoring doctor prescriptions if the treatment is too expensive, recent surveys found. Some two-thirds say prices of goods and services bought by their families are rising at double the pace of officially reported inflation if not faster.

Emigration Slows Eastern Europe’s Catch Up With the West - The opening up of Eastern Europe to the rest of the world in the early 1990s brought about tremendous benefits. The inflow of capital and innovation has led to better institutions, better economic management, and higher efficiency. On the flip side, it has also led to sizable and persistent outflow of people. Close to 20 million, mostly young and skilled Eastern Europeans—equal to the combined population of the Czech Republic and Hungary—left their countries over the past 25 years to seek better opportunities abroad (Chart 1). And even as they have contributed to the riches of the receiving countries and the EU as a whole, their departure has slowed growth and convergence of their home countries to the living standards of advanced Europe. A study by IMF staff proposes policy options to balance the scales.  Economic migration is driven by personal choices. For Eastern Europeans, the motivation to leave is mainly better jobs and higher pay (Chart 2). Many of these economic migrants are highly skilled (e.g., doctors, architects, engineers) and younger than the average person at home. The less effective the government and the weaker the institutions (guarding the rule of law, upholding accountability and fighting corruption) in their home countries, the more likely the young and educated are to seek better opportunities abroad. While emigrants themselves tend to be better off and their families back home often benefit from remittances, their departure weakens the economic potential of their home countries

Nice attacks: French MP Jacques Myard urges Francois Hollande to tighten terror measures - Republican Jacques Myard said only “radical measures” can prevent future attacks like the horror in Nice, and called for France to extend its ban on the burka in public places to include private properties as well. Myard, the député for Maisons-Laffitte in northern Paris, also urged the Government to automatically deport everyone who follows Sharia law, describing such people as “barbarians”.  His controversial remarks come after terrorist gunman Mohamed Lahouaiej Bouhlel killed at least 84 people and seriously injured scores more when he drove a lorry into crowds out celebrating Bastille Day. It has since emerged that the 31-year-old Tunisian national never went to mosque or prayed, and ate pork and drank alcohol on a daily basis.

Hollande's promise to respond militarily to the Nice attack just continues the West's vicious circle of terror and war - At some point, we in the West are going to have to learn that if we intervene militarily in Mali or Iraq or Libya or Syria or interfere in Turkey, or Egypt, or the Gulf, or the Maghreb – then we will not be safe 'at home'  The act was obscene. President Hollande’s description – “monstrous” – was adequate so far as it went, but created the old problem. What happens when three or four hundred innocents are killed by a murderer? Or five hundred? Does that become “really monstrous” or “very monstrous indeed”? But the political reaction to this crime against humanity in Nice was mundane to the point of lunacy. Hollande – or “General Hollande” as the French press dubbed him when he sent his legionnaires to fight against Islamists in Mali – announced that France would “reinforce our action in Syria and Iraq.”  Sure, I get the point. If Mohamed Lahouaiej Bouhlel of Tunisia had anything to do with Isis or Nusrah (and when he spoke, Hollande would not have known if this was true), then firing more French missiles into the burned sands of Mesopotamia or the desert around Raqqa in the hope of striking Isis would have no effect other than to reinforce the old “feel good” factor of biffing “world terror” for the sake of it.  Tunisia, of course, is well over a thousand miles from Syria, let alone Iraq, but one bunch of murderous Arabs is much like another to our foreign ministries and if Bouhlel turns out to have “Isis roots” – no matter how self-declared – then the bigger the bombs the better.

French Prime Minister Booed At Moment Of Silence In Nice --In the aftermath of last Thursday's tragic truck attack in Nice, France which killed 84 and injured hundreds, public opinion turned even more sour on the country's increasingly unpopular Prime Minister Manuel Valls, who said that "times have changed, and France is going to have to live with terrorism, and we must face this together and show our collective sang-froid", a statement which many took as an admission of defeat toward the terrorist threat sweeping across France in particular, and Europe in general. The French resentment toward its Prime Minister was on full display again today, when Valls was loudly booed at memorial service to remember the victims of the Nice terror attack. The prime minister attended the service alongside the Mayor of Nice, Philippe Pradal, the regional president Christian Estrosi and the reigning prince of nearby Monaco, Prince Albert. Valls was booed as he went to sign the book of condolence at the memorial service on the Promenade des Anglais. “Resignation!” “Murderers” was shouted by the crowds before and after the ceremony. While the crowd was furious with Valls, it cheered to celebrate the work of the emergency services, who were applauded with shouts of “Thank you firefighters!” They broke in applause and raised their fists in the air when they heard the French national anthem.

France orders inquiry into policing on night of Nice attack | Reuters: France's government said on Thursday it had ordered an inquiry into policing on the night of last week's deadly truck attack in Nice in a bid to dispel mounting criticism of security arrangements. President Francois Hollande, whose personal ratings have plunged since the attack, said the investigation by the national police inspectorate and its report due next week would clear the air after days of accusations from local politicians. "We will see proof that the preparations were from the start of the required serious standard," the Socialist leader, who is facing elections next year, said during a visit to Ireland. "If there were any shortcomings they will come to light." Tunisian delivery man Mohamed Lahouaiej Bouhlel was able to drive a 19-tonne truck along a packed sea-front promenade that was cordoned off and mow down dozens of locals and foreigners, killing at least 84 people before police shot him dead. Much of the criticism, beyond the system of road blocks easily breached by the truck, centers a complex command structure where some units of police answer to local government and others to central government. The inquiry will look into the detail of how the area was cordoned off for the traditional Bastille Day festivities and how the area was patrolled.

The Misguided Logic of Keeping Calm in the Face of Terror | Foreign Policy: On Thursday, at about 11 p.m., as friends and families reveled in the fireworks on the glorious Mediterranean seafront in Nice, a man drove a truck through them for more than a mile. The carnage killed 84 people, including many children, and left dozens of others gravely injured.At this point, as we have become bitterly accustomed, political leaders and commentators have already begun rolling out the standard liturgy through which society absorbs the shock of these horrors. In the first part of the ritual, we will hear that this was a tragedy. . Commentators will delight in finding comparisons that capture the apparent absurdity of being frightened by terrorism — perhaps telling us that more people are killed by bee stings than terrorism, or that there is more chance of being killed in a car crash than having your kids crushed by a terrorist-driven truck, or such like. Be resilient, they’ll say. Statistically speaking, we’re good here. Statistically speaking, we should all calm down, keep cool heads, and celebrate peace in the West. But the statistical approach utterly misses the point. The essence of terrorism is that it is not just any sort of crime. It is a crime against the very fabric of the state, as the timing of the attack on Bastille Day was perhaps intended to emphasize. To view terrorism through the lens of the personal risk of death implies an impoverished, almost nonexistent, view of the state — that is, the community of citizens that is the basis of all political life. In the statistical view, the state evaporates into a collection of atomized individuals who care only about themselves. A peace that requires — even applauds — a sort of numb, cold acceptance in the face of events like Thursday’s and calls it resilience is a rather pathetic peace to celebrate. Peace depends on the stability of the political order. That political order has an identity in its own right. There is, in other words, a nation behind the state; when the state is attacked, the nation is attacked. Responding to terror with a cold, individualized, statistical message only opens the doors to Europe’s populists, who then appear the only ones not allergic to the recognition that the nation, a body with its own history, culture, and identity, has been wounded.

Swedish Women Urged to Wear Headscarf – Or Be Raped -- The rise of radical Islamism throughout Europe has left no exceptions. Notoriously tolerant Sweden has found itself on the receiving end of multiculturalism, with religious extremism steadily gaining ground. Recently, a small town in southern Sweden was shocked by extremist stickers advocating violence toward non-Muslim women. Following the unhindered influx of migrants, which was heavily advertised by media and the majority of the political establishment, Sweden has seen an equally unhindered wave of sexual attacks. To add insult to injury, blatantly non-PC stickers advocating violence against women were spotted in the town of Nybro in Sweden's southern province of Småland, the local news outlet 24Nybro reported."Women who do not wear the veil are asking to be raped," one of the stickers said in English. Another one had "No democracy. We just want Islam" written over an image of radical Islamists. Earlier, the police admitted to being virtually helpless in as many as 65 blighted ghetto areas, commonly referred to as "no-go zones." These are regarded as a hotbed of crime and Islamism and have been recognized as chief "suppliers" of terrorists for the numerous conflicts in the Middle East. According to Swedish Security Police SÄPO, at least 300 Swedish nationals have left the country to join Daesh alone.  The problem of harassment and sexual violence against women has also been a tender spot for traditionally feminist Sweden. Swedish public baths continue to be afflicted by obnoxious groping incidents, despite efforts from female vigilantes. Most recently, Swedish summer festivals were plagued by a wave of sexual assaults, notwithstanding efforts by the Swedish police, who are considering establishing women-only zones as the only viable solution against violence.

Doubt cast on German train attacker's nationality - German authorities have cast doubt on whether a teenager who went on an axe rampage on a Bavarian train was really an Afghan refugee, saying Wednesday he might have been from Pakistan. The Islamic State group released a video on Tuesday purportedly featuring the 17-year-old, who was shot dead by police following the train attack in which he injured five people, two of them critically. However, sources close to the German security services now think he might have pretended to be Afghan on arrival in Germany in 2015 in order to have a better chance at securing asylum, television station ZDF reported. In the IS video the youth uses phrases of a dialect of Pashto spoken in Pakistan and not Afghanistan and experts have indicated that his accent is also clearly Pakistani, ZDF said. A Pakistani document was also found in his room. The name he used in the video, "Mohammed Riyadh", does not match the name under which he registered in Germany, Riaz Kahn, the station added. German authorities said they had authenticated the video. On Tuesday, authorities said they had found a hand-painted IS flag and what they called a suicide letter among the attacker's belongings. "The perpetrator of the stabbing attack in Germany was one of the fighters of the Islamic State," the IS-linked Amaq news agency said.  Locals described the assailant, identified in media reports as Riaz A., as "calm and even-keeled" and a "devout Muslim who did not appear to be radical or a fanatic", according to Joachim Herrmann, interior minister of Bavaria state.

Price-Fixing Truck Makers Get Record E.U. Fine: $3.2 Billion - The New York Times: — The European Union’s antitrust chief imposed a record fine of 2.9 billion euros, or $3.2 billion, on a group of truck makers on Tuesday, part of a trend toward steeper penalties for competition violations in the 28-nation bloc.The fine was for price-fixing and operating a secretive system aimed at delaying the installation of pollution-curbing exhaust pipes and engines. Less than a week ago, the European Commission, the bloc’s executive arm, announced a new round of antitrust charges against Google, on suspicion that some of the company’s advertising products had restricted consumer choice. “We have, today, put down a marker by imposing record fines for a serious infringement,” Margrethe Vestager, the European Union’s competition commissioner, said in a statement. “For 14 years, they colluded on the pricing and on passing on the costs for meeting environmental standards to customers. This is also a clear message to companies that cartels are not accepted.”The announcement brings more bad news for Volkswagen, which has been embroiled in a diesel emissions scandal that began in the United States, and which recently set aside $14.7 billion to compensate customers there for having installed software that made its vehicles seem less polluting than they were.Among the companies cited in the statement for having broken antitrust rules is the truck maker MAN, which is owned by Volkswagen.  The truck makers being fined are DAF, Daimler, Iveco and Volvo-Renault. Daimler faces the largest single fine, and it must pay slightly more than €1 billion, also a record.  Together, the five companies account for about nine in 10 medium and heavy trucks produced in Europe, the commission said.

Will Italian Banks Tear Down Europe? -- naked capitalism. Yves here. The updates in this MacroBusiness report are consistent with our reading on the arm-wrestling between Matteo Renzi versus the ECB and other Eurocrats. Short version: since early this year, Renzi has been trying to get what has widely been described as a “bail out” for sick Italian banks, of which there are many. The term “bail out” makes Renzi’s plan seem more generous than it is, since he is not proposing to prop up diseased banks, but to have them spin out their bad assets into a “bad bank”. This is similar to the approach used in the US savings & loan crisis and in Sweden’s widely praised early 1990s bank rescues. A good bank/ bad bank approach leave the cleaned up banks considerably smaller. Some banks may have so many bad loans that there is no or pretty much no “good bank” left, so you can expect this approach to lead to some consolidation too. I have to confess that am not clear as to how Renzi proposes to change the operations of the “good banks” that needed state intervention to survive. It would seem to make eminent good sense to give Renzi the waivers he needs to rescue the banks since:If Italian banks start falling over, the dominoes will quickly reach Deutsche BankAs the article below points out (and we’ve stressed earlier), if Renzi is forced to do bail-ins, small Italian savers will take a big hit. Many were fraudulently sold subordinated bonds and told they were the same as deposits. That’s not true, since they will be next in line after bank equity to be wiped out in a bail-in. Any meaningful losses to these small savers would both further damage Italy’s already weak economy, and boost the Five Star movement, which already has good odds of winning in elections this fall. Five Star has promised a referendum on exiting the Eurozone. The UK leaving the EU would be very damaging economically but it’s remotely possible that it might not be a total disaster. By contrast, Italy leaving the Eurozone would be cataclysmic.So with the stakes so high, one would think the ECB and Eurocrats would relent, since they have a perfectly good face-saving excuse for retreating from their barmy bail-in scheme: with Brexit in play, banks are already looking wobbly, and the new bail-in rules allow for rescues under extraordinary circumstances. But Renzi tried that argument, as well as another escape hatch, public interest, and was told “Nein” both times.

Why Italy's banking crisis will shake the eurozone to its core: They call them le sofferenze – the suffering. The imagery is striking, the thousands of sofferenze across Italy, unwanted and ignored, a problem unsolved. But despite the emotional name, these are not people. They are loans. Bad debts, draining banks of profits and undermining economic growth. The name is less clinical than the English term “non-performing loans”, a reflection of the Italian authorities’ emotional rather than business-like approach to the problem. None the less, the loans are indeed causing real suffering. The €360bn (£300bn) of sofferenze from Italian banks show borrowers are weighed down with debts they cannot afford, while the banks are struggling to offer new credit to the households and firms that need them. When other countries such as the UK, Ireland and Spain ran into trouble, they bit the bullet and cleaned up their banks quickly. Italy did not.  Now they have spread to the wider economy, and are morphing into a political crisis with implications across the EU. It could bring down Italy’s government.If no compromise is reached between Rome, which wants to protect bondholders, and the EU, which wants to enforce the rules, it could even bring down the eurozone.“This could be a bigger risk than Brexit,” says a lawyer who is close to the situation.“The Greeks are desperate to be anchored into Europe, they are willing to suffer and suffer and suffer to stay in – I am not sure that Italy is willing to suffer.” The stakes are that high, and nobody knows whether the EU can muddle through another crisis, or if shock waves from Italy will split the union. Long nights and fraught nerves lie ahead. This is just the latest phase of the eurozone’s seemingly never-ending crisis, and the International Monetary Fund’s latest assessment of the currency area’s third-largest economy shows why Italy is the latest focal point

EU Approves $166 Billion Liquidity Guarantee for Italy Banks - Liquidity support for solvent banks is a “precautionary measure” requested by Italy, the EU said in an e-mailed statement. The guarantees of senior debt allow lenders to maintain access to financing, often at a better price.“There is no expectation that the need to use this” should arise, the commission said. The support was approved on June 26, the EU official said on condition of anonymity, and wasn’t made public before now. Saddled with some 360 billion euros in soured loans and a sputtering economy, Italy’s lenders have been sliding toward the type of crisis that other European countries dealt with years ago. The government’s latest effort -- getting the biggest banks to back a fund to rescue the weakest -- failed to convince investors.  Italy asked for liquidity support that the EU has approved for countries including Greece, Cyprus, Portugal and Poland. The financial backstop is provided under EU state-aid rules, usually for six months. The country is separately weighing a plan to provide as much as 40 billion euros to recapitalize troubled lenders after banking shares were hammered following the U.K.’s vote to secede from the bloc, according to a person with knowledge of the plan. Italy’s recapitalization efforts ran into a roadblock this week, as Germany opposed allowing Prime Minister Matteo Renzi to shield investors from losses in the plan. Italian media have reported that the government is pursuing a six-month waiver of EU state-aid rules, allowing it to shore up banks without forcing investors to share losses.

Did the European Court of Justice Just Rescue Italy’s Banks? --  Yves Smith - As readers may recall, Italy has been trying with no success to get the ECB and European banking authorities to allow it to rescue its banks. Unlike banks in most other European countries, Italy’s got sick the old fashioned way: by lending to businesses in its own market, and then having the loans go bad, in large measure to how lousy the post-crisis economy has been.  New Euronzone-wide banking rules took effect in January. They require bank bail-ins as the remedy for sick banks, with only narrow exceptions. “Bail-in” means wiping out shareholders, and then wiping out bondholders and converting bondholders to equity holders to the degree that you now have a bank with a decent equity cushion. That might sound sensible, except in Italy, many banks defrauded depositors by persuading them to buy bonds that are junior enough to put them first in line in a bail-in, by telling them those bonds were just as good as deposits. So bail-ins would hurt and potentially wipe out a lot of retail savers. That would not only damage the economy in a serious way, but it would also create political havoc. Premier Matteo Renzi is already at risk of losing to Beppe Grillo’s Five Star movement in elections this fall. Bail-ins would seal his fate.  One would think the foregoing would motivate the Eurocrats to cut Italy some slack, and Renzi has made several cases as to why Italy should get a waiver. Commentators at the Financial Times are sympathetic. Yet the authorities have ignored Renzi’s pleas. But has the European Court of Justice given Italy a reprieve? From Reuters: European Union member states are not obliged to make shareholders and junior creditors pay before intervening to rescue a bank, the EU top court said on Tuesday. EU rules imposing losses on bank creditors before a bank bailout were considered legal by the Luxembourg-based European Court of Justice in its ruling over a Slovenian banking rescue. However, the rules are not binding on member states, the court said in its ruling that slightly limits the European Commission’s antitrust powers amid talks for an Italian banking bailout. The court said that burden-sharing by shareholders and subordinated debt holders was not a precondition for granting state aid to a troubled lender.

Draghi Supports Bailout of Italy’s Banks - Yves Smith - The Eurocrats who were insisting on using their bright shiny bail-in toy are now meeting some real oppositon. On the one hand, it seems inconceivable that the Europeans would let the Italian banks go under, since Deutsche Bank would be next in line, plus bail-ins would greatly strengthen the hand of the Five Star Movement, which has said it will have a referendum on leaving the Eurozone if it were to come into power. However, bail-ins would also put even more attention, not just in Italy and abroad, on the fact that small savers were snookered into buying bonds that put them close to the front of the line as bail-in cannon fodder. These retail customers were told, as happened in Spain, that these instruments were just like deposits. Italian sources believe this abuse started when Draghi was the head of the Bank of Italy, so the blowback could implicate him. Italy have been left to twist in the breeze despite the idiocy of the bail-in rules (we’ve always said that bail-ins can be a good implement in a regulator’s toolbox, but the new Eurzone “one size fits all” framework is widely considered to be disastrously unworkable even by bank critics). Its prime minister Matteo Renzi has specifically argued for the “exceptional circumstances” exception shortly after Brexit, and had been rebuffed, and had tried for another loophole, public interest (meaning presumably the expected shellacking of hapless small savers) and was told “no” on that too. So it is a significant development that Draghi is now backing Renzi, but as we’ll see below, he is not calling the shots.From the Financial TimesMario Draghi backed a public bailout of Italy’s troubled banks “in exceptional circumstances”, even as he hailed the eurozone for its resilience in the aftermath of Britain’s decision to quit the EU and left interest rates on hold… To date, however, EU officials and Italian prime minister Matteo Renzi have failed to reach a deal on state help for the country’s lenders — notably for Monte dei Paschi di Siena, the country’s third-largest bank.

How Trichet threatened to cut Greece off - The European Central Bank’s vehement opposition to any restructuring of Greek debt, even a haircut, can now be revealed by Sunday’s Kathimerini via a letter sent on April 7, 2011 by then ECB President Jean-Claude Trichet to Greece’s prime minister at the time, George Papandreou. The secret letter was sent just one day after then Finance Minister Giorgos Papaconstantinou had informed members of the troika of Greece’s intention to ask for a rescheduling. Klaus Masuch, the ECB’s representative, expressed the central bank’s opposition and left the meeting in Athens to phone the lender’s headquarters in Frankfurt. Trichet’s emphatically negative response is evident in a letter that is in Kathimerini’s possession. Its language is far from diplomatic. “I am writing to inform you about the grave risks that the Greek government would take if it were to pursue at this juncture a rescheduling of its debt, even on a voluntary basis [...] Pursuing such a strategy would put Greece's refinancing in euro at major risk,” wrote the French central banker. He then becomes more specific. “The ECB Governing Council's decision to suspend the rating requirement for securities issued or guaranteed by the Greek government was based on the current programme, and the current programme being on track. No debt rescheduling is compatible with the current programme. Therefore the suspension would no longer apply.” He adds that “even a voluntary debt rescheduling could lead to considerable downgrades of all other paper in Greece,” as a result of which the country would be “at immediate risk of losing the bulk of its collateral for monetary policy transactions.”

The EU Is Not About Free Trade——It’s About Building A Superstate -  David Stockman  - All major political parties in Western Europe, regardless of their different names and party programs, are nowadays committed to the same fundamental idea of democratic socialism. They use democratic elections to legitimize the taxing of productive people for the benefit of unproductive people. They tax people, who have earned their income and accumulated their wealth by producing goods or services purchased voluntarily by consumers (and of course especially the ‘rich’ among those), and they then re-distribute the confiscated loot to themselves, i.e., the democratic State that they control or hope to control, and their various political friends, supporters, and potential voters. They do not call this policy by its right name: punishing the productive and rewarding the unproductive, of course. That doesn’t sound particularly attractive. Instead, they tap into the always popular sentiment of envy and claim to tax the few ‘rich’ to support the many ‘poor.’ In truth, however, with their policy they make more and more productive people poor and a steadily increasing number of unproductive people. Looking at the EU, the picture becomes even worse. The EU is the first step on the way toward the creation of a European Super-State, and ultimately of a one-world government, dominated by the USA and its central bank, the FED. From its very beginnings, and despite all high-sounding political proclamations to the contrary, the EU was never about free trade and free competition. For that, you don’t need tens of thousands of pages of rules and regulations! Rather, the central purpose of the EU, supported all-along by the USA, was always the weakening in particular of Germany as Europe’s economic powerhouse. To facilitate this, Germany was sent on a seemingly never-ending ‘guilt trip’ and thus pressured to transfer increasingly larger parts of its already limited (vis-à-vis the USA) sovereignty to the EU in Brussels. Especially noteworthy in this regard: Germany’s giving up its monetary sovereignty and abandoning its traditionally ‘strong’ currency, the DM, in favor of a ‘weak’ Euro, issued by a European Central Bank (ECB) composed overwhelmingly of politically connected central bankers from traditionally ‘weak’ currency countries.

Christine Lagarde to stand trial over Tapie affair after appeal fails - Christine Lagarde, the head of the International Monetary Fund, has failed in her attempt to avoid trial for alleged negligence over a long-disputed multimillion-euro government payout to a French tycoon. After eight years of legal wrangling, court rulings made then overturned, accusations and denials, France’s cour de cassation threw out Lagarde’s appeal to have the case dropped. Friday’s decision came just a fortnight after the French former finance minister began her second term running the Washington-based IMF. In December last year, Lagarde, 60, was ordered to appear in court over the decision in 2008 to award more than €400m (then £290m) to Bernard Tapie in his case against the French public bank Crédit Lyonnais. He supported the former rightwing president Nicolas Sarkozy in whose government Lagarde served. After a long investigation, judges decided she should face accusations of “negligence by a person in a position of public authority”.  Lagarde’s lawyer, Patrick Maisonneuve, expressed disappointment at the decision, but told the Associated Press he expected the trial to show she did nothing wrong. The complex and drawn-out case centres on whether Tapie was offered a deal in return for supporting Sarkozy in the 2007 presidential election, and whether Lagarde was acting on the orders of the Elysée Palace – specifically Sarkozy – by referring the case to private arbitration rather than allowing it to take its course through the normal courts.

Deutsche Bank Loves Helicopter Money: Why "Big Inflation Is Coming... But Will First Require A Crisis" --Just over a month ago, Deutsche Bank's chief economist David Folkerts-Landau, unleashed an epic rant against the ECB, warning of social unrest and another great depression unless the ECB changes its ways. Some thought that DB was genuinely concerned about central planning, and was urging the ECB to stop all intervention altogether, but that naive read was quickly stomped out just one week ago when it emerged that the Deutsche Bank economist was merely acting out of purely selfish reasons when he called for a €150 billion bailout of Europe's banks, with the unspoken demand that Deutsche Bank should be on the very top.Finally, any doubt was squashed this weekend, when DB's macro strategist Alan Ruskin issued a positively glowing review of Helicopter Money, barely stopping short of demanding it be unleashed immediately. To wit: Because Helicopter money is less directed at using currency weakness as a core transmission mechanism than QE or particularly negative rates, Helicopter money should be more, rather than less acceptable to an international community worried about currency wars What was less emphasized is that unlike NIRP, "helicopter money", if it works, pushes the long end of the yield curve higher ahead (after all the endgame is soaring, if not hyper, inflation), something the global banking sector cripped by trillions in debt,desperately needs, and thus is precisely what Deutsce Bank needs, whose stock continues to trade just barely off all time lows.

ECB Fast Exhausting German Bonds for QE Buying as Yields Tumble -   The securities that yield less than the ECB’s minus 0.4 deposit rate have grown to more than 60 percent, based on a $1.13 trillion Bloomberg German bond index. That means they’re ineligible for the purchases. Analysts from UBS Group AG and SEB AB are estimating the central bank may run out of German targets within six months, and as soon as August, unless the rules are broadened. Reaching the precipice would affect a broad range of investors, because a decision by the ECB to open up new groups of bonds for its quantitative-easing program may support their prices even more, helping extend this year’s rally. It’s also significant because German debt is Europe’s benchmark, and it must be bought in a greater proportion than securities from the other euro nations included in the QE program, under current rules. Euro-area debt has earned more than 5 percent this year, and yields were driven to record lows across the region in recent weeks by investors seeking the safest assets after the U.K. voted on June 23 to break away from the European Union. That sparked market turmoil and renewed concern about the outlook of the global growth.  Interest rates already were depressed by the central bank’s 80 billion euros ($89 billion) of monthly asset purchases. The 1.7 trillion-euro program, due to run until at least March 2017, has also eaten into the pool of sovereign debt available to private investors. “Based on current yield levels we estimate that the ECB could hit the issuer limit for all German debt within the next 6 months,” said Nishay Patel, a London-based fixed-income strategist at UBS. The earliest time could be “around one to two months.”

Debt Issuance Can't Keep Up With the ECB's Hunger for Bonds - Bloomberg: According to a study by JPMorgan Chase & Co., net issuance of new debt this year will fall well short of the ECB's appetite, which runs at a monthly clip of 80 billion euros ($88 billion). While that's just a drop in the ocean compared with the total "eligible universe," the data illustrate the speed with which the central bank is eating up the market. The ECB's demand for bonds this year was in fact about three times of what governments will put on the market. Government-bond net issuance in 2016 will total 214 billion euros -- compared with the total of 6.9 trillion euros of bonds nominally eligible. Of those, according to an July 12 estimate by Societe Generale's Anatoli Annenkov, 5.4 trillion euros were above the ECB deposit rate and thus actually available for purchase. On the one hand, this is a sign of the magnitude of the easing that central banks around the world have embarked upon. In Japan, where entrenched deflation has pushed the Bank of Japan to deploy stimulus on an even grander scale, the central bank buys at more than twice the pace of issuance. Yet, the data also show that fiscal discipline still means something in the euro area, despite record-low yields. European Union budget rules, even if they're not perfectly adhered to, are a barrier to states just binging on borrowed cash at a time of very low financing costs. That also plays a role in preventing the kind of demand-focused fiscal stimulus that some monetary policy makers have called for. “While more issuance is where the ECB could get some help in finding bonds, no country is really planning any major fiscal stimulus,” Annenkov says. “The main problem is the combination of already historically high public debt ratios and the EUs fiscal rules.”

German central bank: Economy should grow despite Brexit: (AP) — Germany's central bank says the country's economy, Europe's largest, should continue to grow in the third quarter despite Britain's decision to leave the European Union. The Bundesbank said in its monthly report Monday that a robust labor market, higher wages and the European Central Bank's loose monetary policy should help the country offset the possible adverse effects stemming from Britain's vote to leave the EU, so-called Brexit. It says "the underlying economic trend is still quite strong, and a significant increase in economic output can be expected for the summer quarter." It added that while the effects of the upcoming British departure were difficult to estimate, it "could remain limited, at least in the short-term."

Confidential briefing shows where Deutsche Bank thinks banks will go post-Brexit - London is likely to lose its financial services passport, and investment banks that shift operations abroad quickly will benefit from a "first-mover advantage," according to a confidential Deutsche Bank briefing seen by Business Insider. The internal note, titled "Brexit Briefing" and prepared for a July 5 board meeting, said the bank's competitors would most likely ramp up non-London operations in Ireland, France, Germany, and Luxembourg, where they have existing subsidiaries. A spokesman for Deutsche Bank declined to comment. Barclays and Bank of America Merrill Lynch could shift their markets business to Dublin, while Goldman Sachs has subsidiaries in Paris and Frankfurt, Germany, that it could use to keep its access to the 27-member single market once the UK officially leaves the European Union, according to the note. JPMorgan could shift resources to Luxembourg, where it has a subsidiary. Here's the breakdown, according to Deutsche Bank:

EU Said to Eye ‘Nuclear Option’ to Force May’s Hand on Exit -  As the new British prime minister pushes back talks on leaving the European Union, officials on the continent have begun to float what they call “the nuclear option” to bring her to table: suspending Britain’s voting rights in EU institutions. Several member states have started looking at whether that would be feasible by invoking Article 7 of the Lisbon Treaty, according to two European officials who spoke on condition of anonymity. That would mean arguing that the U.K. is no longer cooperating in good faith with the bloc in order to pressure May into ending the post-referendum limbo. The EU’s harshest sanctioning procedure has never been deployed before and three other officials in Brussels said it was too heavy-handed to even be considered. Twitter: No. 10 Press Office on TwitterWhile May took office on Wednesday promising that “Brexit means Brexit,” her government is already sending out mixed signals on how long that might take. Trade Secretary Liam Fox is working on the basis that the two-year negotiating period could begin around the end of the year, but May on Friday said she won’t start the process of leaving the EU until she’s got Scotland’s backing. With Scottish First Minister Nicola Sturgeon adamant that her country won’t be leaving at all, that pledge opens up the prospect of extensive delays. European leaders including German Chancellor Angela Merkel have acknowledged that the government in London will need time to envisage its future relationship with the EU. But with May installed sooner-than-expected at 10 Downing Street, European officials have called for her to accelerate the exit process.

Draghi to ask governments to chip in to counter Brexit fallout | Reuters: European Central Bank President Mario Draghi is likely to plead for governments to do more to boost the euro zone's economy in the coming week as the fallout of Britain's vote to leave the EU and weaker global growth threaten the bloc's fragile recovery. Governments in China, Japan and Britain have already started easing their fiscal stance or hinted at plans to do so as sub-par global growth and inflation show that central banks' ultra-easy monetary policy has run up against its limit. The ECB is not expected to change its monetary stance on Thursday, its last meeting before an eight-week summer break. But a reiteration of Draghi's long-standing call on governments to spend more where possible and speed up growth-boosting reforms is once again likely to fall on deaf ears. The only country with significant fiscal firepower, Germany, is reluctant to give up its budget surplus and has resisted any attempt to pool more money at the European level in the absence of greater power-sharing. "We fear, therefore, that Mr Draghi’s calls for a loosening of the purse strings will go unheard, at least for now," economists at BNP Paribas said. "As things stand, then, the burden of responding to the Brexit shock will remain with the ECB, which is all too aware that it has fewer and fewer tools with which to respond."

IMF Head Calls for Quick End to Brexit Uncertainty: (AP) — The head of the International Monetary Fund called Friday for quick action to end uncertainty over Britain’s vote to leave the European Union, which she said is dampening global economic growth.The IMF cut this year’s global growth forecast by 0.1 percentage points to 3.1 percent in a report released this week due to the shockwaves of the British vote, said Christine Lagarde.Lagarde spoke after meeting with the Chinese premier, Li Keqiang, and leaders of the World Bank, the World Trade Organization and other bodies ahead of this weekend’s gathering of finance officials of the Group of 20 major economies. “Our first and immediate recommendation is for this uncertainty surrounding the terms of Brexit to be removed as quickly as possible so that we know the terms of trade and the ways in which the United Kingdom will continue to operate in the global economy,” said Lagarde at a news conference.Lagarde said that before the British vote, the IMF had been preparing to raise its global growth forecast by 0.1 percentage points due to improvement in Japan, China and the 17-country euro zone.“Unfortunately, the United Kingdom decided to go for Brexit,” said Lagarde, a former French finance minister. “This is disappointing.”Investors are watching the G20 meeting for any sign the United States, Germany, China and other major economies may agree on joint action to accelerate a weak global economic recovery.A similar meeting in February in Shanghai ended with a joint statement that said coordinated action was impossible because major countries were at different points in their economic cycles. Some investors believe envoys in Shanghai agreed secretly to weaken the dollar to spur trade but there has been no official confirmation of that.

How the IMF Sees Brexit Hitting Global Economic Growth -- The International Monetary Fund trimmed its outlook for the global economy on Tuesday, citing Britain’s decision to leave the European Union. But the fund warned Brexit could make the outlook far worse. Here’s how. The Brexit referendum already roiled markets and is weighing on consumer sentiment and investor confidence. That’s the central reason the IMF cut its growth projection by 0.1 percentage point this year and next.An acrimonious and drawn-out negotiation between the U.K. and the EU could fuel further uncertainty about the future of the political, trade and finance relationship. And it’s not clear when the negotiations will start in earnest, nor is there clarity on the direction. Under the IMF’s “downside” scenario, financial conditions tighten while business and consumer confidence fall more than expected in the baseline. That undermines consumption and investment. A portion of the U.K.’s hefty financial services industry moves out of London onto the continent. The fund’s less probable, but more “severe” scenario imagines the financial stress ripping through Europe, leading to a sharp tightening of financial conditions and larger confidence effects. Negotiations between the U.K. and Europe are troubled and the trade relationship reverts back to basic WTO tariff rules. More of London’s financial industry moves offshore, pitching the U.K. economy into recession. Those scenarios envision a drag on the global economy, with the most pronounced impacts on advanced economies. The IMF said its baseline is founded on a “benign assumption” that most of the key trade and financial relationships between the U.K. and Europe are preserved and central banks are able to ensure financial stability.

Ireland Hits Brexit Alarm in Biggest Foreign Crisis in 50 Years - Bloomberg: The prime minister is under pressure, economists are slashing growth forecasts and companies are warning of Brexit’s dire consequences. London? No, Dublin. The intertwining of trade and finance means no other country is feeling the fallout from the U.K.’s vote to leave the European Union more than Ireland. In the year the Irish marked the centenary of their uprising against British rule, the country remains at the mercy of the unfolding drama in its closest neighbor. “It’s the most serious, difficult issue facing the country for 50 years,” said John Bruton, 69, who was Irish prime minister between 1994 and 1997 and later served as the EU’s ambassador to the U.S. Exporters have warned the plummeting pound will erode earnings and economic growth, just as a recovery had taken hold after the 2010 international bailout that followed the banking meltdown. Irish shares have declined, not least because the U.K. is the top destination for the country’s exports after the U.S. and the biggest for its services. Meantime, Prime Minister Enda Kenny is fending off demands by Northern Irish nationalists for a reunification poll as he comes to terms with the loss of a key EU ally and plotters from his own party try to topple him. Then there’s the future of the U.K.’s only land border with the EU.

Moody’s warns on Bank of Ireland’s pension deficit: Moody’s said Bank of Ireland’s widening pension deficit is negative for its debt dynamics as it probably will exceed the amount of capital generated by the lender during the first half of the year. The bank said last week that the impact of the Brexit vote on foreign exchange rates and interest rates had pushed the deficit for its defined benefit pension scheme from €740 million in December last year to €1.2 billion at the end of June.   Moody’s said in a note on Monday that the widening pension gap will negatively affect the bank’s regulatory capital metrics. Separately, Davy estimates that the pension deficit will result in Bank of Ireland’s common equity Tier 1 capital ratio, a key gauge of a bank’s financial stability, falling to 10.8 per cent at the end of June from 11.3 per cent in December. Davy analysts Diarmaid Sheridan and Emer Lang expect that Bank of Ireland’s net profits will fall 36 per cent to €399 million in the first half compared to the year-earlier period, impacted by a weaker sterling and lower levels of on-off gains from bond sales.

Brexit 'worse than Lehman Brothers' for U.K. finance chiefs - The finance chiefs of Britain's biggest companies are feeling very gloomy. A new survey by Deloitte found that about 80% of CFOs expect hiring and spending to slow over the year following Britain's vote to leave the European Union. And more than two-thirds think leaving the EU will lead to a deterioration in the U.K. business environment in the long term. The consultancy said the slump in confidence was worse than during the financial crisis. "The spike in uncertainty has had a toxic effect on business sentiment with optimism dropping to the lowest level since the survey started in 2007, lower than in the wake of the failure of Lehman Brothers in late 2008," said the authors of the quarterly survey."The referendum vote has triggered a strong, negative reaction from the U.K. corporate sector," the consultancy said. The survey of 132 top finance executives from FTSE 350 companies was taken between June 28 and July 11, the two weeks following the Brexit vote.  Britain's decision to leave the EU initially sparked a wave of global market turmoil. The pound plunged to a 31-year low against the dollar, and is still trading 12% below pre-referendum levels.  The Bank of England said last week that some businesses are already delaying investment projects and postponing hiring decisions because of the Brexit uncertainty.

Morgan Stanley's CEO on Brexit: We’ll have to open a new European headquarters: Morgan Stanley CEO James Gorman on Wednesday suggested that his firm would have to launch a new headquarters in Europe. Speaking with CNBC's David Faber about the UK's decision to leave the European Union, Gorman said he recently cut a trip to Germany short to spend time with his employees in London. "Clearly we and other banks will have to have a European-style headquarters in one of the major markets, whether it's Frankfurt or one of the other cities there," Gorman said. He said the firm would have to move some people there but emphasized that the UK would remain an important part of the firm's global presence. The CEO also said he met with government figures in the UK and thought the full impact of the decision would unfold over the next five to 10 years. For now his message to UK employees is simple: "Cool your jets, just settle down," Gorman said. Morgan Stanley was forced to deny that it had begun moving 2,000 investment banking employees out of London in the immediate aftermath of the Brexit vote after the BBC reported that the firm started the relocation process.  Morgan Stanley on Wednesday reported second-quarter earnings that beat expectations on the top and bottom lines.

UK offered Brexit free trade deal with Australia -  Australia has called for a free trade deal with Britain following its exit from the European Union. Theresa May described the move as "very encouraging" and insisted it showed Brexit could work for Britain. In a phone call to the new PM, her Australian counterpart Malcolm Turnbull said he urgently wanted to open up trading between the two countries. Liam Fox, the new international trade secretary, said he was already "scoping about a dozen free trade deals". But the UK cannot sign any deals while it is still an EU member - and experts warned trade deals take a long time to negotiate. Live updates: Sunday politics May's cabinet: Who's in, who's out? What happens next: May's to-do list Mrs May said: "I have been very clear that this government will make a success of our exit from the European Union. "One of the ways we will do this is by embracing the opportunities to strike free trade deals with our partners across the globe. It is very encouraging that one of our closest international partners is already seeking to establish just such a deal." "This shows that we can make Brexit work for Britain," she added.

Why Britain’s Path to Free Trade Won’t Be Smooth - The U.K. hasn’t handled its own trade negotiations for more than four decades. Now, having decided to leave the European Union, it has a lot to learn, quickly. A few days before his appointment, David Davis, the new minister responsible for negotiating Britain’s exit from the EU, suggested that forging Britain’s new trading relationships would be relatively simple. A new prime minister, he wrote, “would immediately trigger a large round of global trade deals with all our most-favored trade partners. I would expect that the negotiation phase of most of them to be concluded within between 12 and 24 months.” Within two years, he added, “we can negotiate a free-trade area massively larger than the EU.” But for a host of reasons, trade experts view this as unrealistic—even if the U.K. could quickly muster at short notice the hundreds of trade negotiators needed to make it happen.  The first is a legal obstacle. According to the EU treaties, trade negotiations are an “EU competence.” Given the U.K. won’t have formally left the bloc until it has triggered Article 50 of the treaties and launched two years of negotiation, it won’t be able to negotiate trade deals with other countries until around 2019. It could ignore this constraint and do it anyway, or have the EU agree to turn a blind eye. But unless it gets the nod from other countries in the bloc, the U.K. is unlikely to ignore its treaty obligations. Even if Britain got a legal go-ahead, there are questions about whether it is practically worthwhile to do more than sound out other potential trade partners before leaving the EU. That is because the U.K.’s trade relations with others will greatly depend on what it negotiates with the EU.

The economic fallout from the Brexit vote - - It is bad: The UK economy has suffered a “dramatic deterioration” since Britain’s vote to leave the EU, according to a closely-watched survey of activity, which has slumped to a seven-year low. A special edition of purchasing managers’ index (PMI) – a well-regarded survey of activity produced by research group Markit – has been published to provide a picture of how the UK economy has fared after the referendum. The picture is not pretty. The PMI survey for Britain’s powerhouse services sector – which accounts for nearly 80 per cent of the economy – has dropped to a seven year low of 47.4 for July from 52.3 at the June survey. Any reading below 50 indicates contraction. The outcome was far lower than economists’ forecast of a reading of 48.8. The manufacturing PMI has also dropped to 49.1 from 52.1 in June. The July reading is a 41-month low although economists had expected a slightly worse reading of 48.7. The composite PMI – combining both manufacturing and services readings – also fell dramatically to 47.7 from 52.4 previously against a forecast of 49. This is the lowest reading since April 2009, when the UK was struggling through the financial crisis. Here is the Fast FT piece.

Pound plunges as ‘dramatic deterioration’ in UK economy stokes Brexit recession fears: The UK economy contracted at its steepest pace this month since 2009, data from Markit showed. An early edition of Markit's purchasing managers' indices showed the services sector suffered its biggest drop in its 20-year history in the wake of the Brexit vote. The PMI for the services sector fell to 47.4 in July from 52.3 in June, the lowest reading since March 2009, around the nadir of the global economic recession. The manufacturing PMI fell to 49.1 from 52.1 in June, the lowest since February 2013. The composite index, which combines services and manufacturing, slumped to 47.7 from 52.4, the weakest reading since April 2009. The pound fell by around 1.5pc from its intraday high against the dollar after UK PMIs revealed a 'dramatic deterioration' in the UK economy post-Brexit. The disappointing data stoked Brexit recession fears and raised hopes the Bank of England will have to act next month to stimulate growth. On the day, the pound fell 0.95pc to $1.3086 against the dollar.  The FTSE 100 closed at its highest level in almost a year amid hopes of stimulus from the Bank of England at its next meeting in two weeks time after disappointing PMI data stoked Brexit recession fears.

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