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

Saturday, July 9, 2016

week ending Jul 9

FOMC Minutes: Concerns about slowing Labor Market, Brexit -- From the Fed: Minutes of the Federal Open Market Committee, June 14-15, 2016. Excerpts: Almost all participants judged that the surprisingly weak May employment report increased their uncertainty about the outlook for the labor market. Even so, many remarked that they were reluctant to change their outlook materially based on one economic data release. Most participants noted that the upcoming British referendum on membership in the European Union could generate financial market turbulence that could adversely affect domestic economic performance. Some also noted that continued uncertainty regarding the outlook for China's foreign exchange policy and the relatively high levels of debt in China and some other EMEs represented appreciable risks to global financial stability and economic performance. In light of participants' updates to their economic projections, they discussed their current assessments of the appropriate trajectory of monetary policy over the medium term. Most still expected that the appropriate target range for the federal funds rate associated with their projections of further progress toward the Committee's statutory objectives would rise gradually in coming years. However, some noted that their forecasts were now consistent with a shallower path than they had expected at the time of the March meeting. Many participants commented that the level of the federal funds rate consistent with maintaining trend economic growth--the so-called neutral rate--appeared to be lower currently or was likely to be lower in the longer run than they had estimated earlier. While recognizing that the longer-run neutral rate was highly uncertain, many judged that it would likely remain low relative to historical standards, held down by factors such as slow productivity growth and demographic trends.

Fed minutes suggest rate hikes on hold until Brexit impact clearer -  Federal Reserve policymakers decided in June that interest rate hikes should stay on hold until they have a handle on the consequences of Britain's vote on EU membership, according to the minutes of the Fed's June policy meeting released on Wednesday. The minutes of the June 14-15 meeting, which took place ahead of the June 23 referendum in which Britons voted to leave the European Union, showed widespread unease over the so-called "Brexit" vote, including among voting members on the rate-setting Federal Open Market Committee. "Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the UK vote," according to the minutes. Worries have only intensified since the vote and Fed Governor Daniel Tarullo cited the rise in uncertainty on Wednesday when he argued for holding off on rate hikes until inflation had turned decisively higher. At the June policy meeting, policymakers also cited a severe slowdown in hiring by U.S. employers as a reason for leaving interest rates steady last month, the minutes showed. The Brexit vote, which shocked investors and politicians, has raised anxiety in financial markets around the world, in part because it could take years before Britain and the EU agree to new rules on finance, trade and immigration.

Minutes show more vocal doves at the Fed - Dovish Federal Reserve policymakers are growing more vocal, pushing a divided committee firmly on the side of taking no action, a close reading of the June meeting minutes released Wednesday reveal. When the central bank met in mid-June, an abysmal May jobs report had just startled markets, and the upcoming British referendum on European Union membership loomed large. But familiar refrains are sprinkled throughout the meeting minutes, signaling that the same old fears still linger for some members.   In a discussion about the May payroll report, for example, the minutes reveal that “many” members thought the report might be an aberration, and “some” thought other indicators showed a stronger labor market. “In contrast, some noted that the lower rate of payroll gains could instead be indicative of a broader slowdown in growth of economic activity that was also evidenced by other downbeat labor market indicators,” the minutes went on. During the same discussion, policymakers acknowledged that the job market was tightening enough that employers might be having trouble finding workers. The same participants saw economic bogeymen in almost every topic the committee discussed. Even though retail sales were strong in April and May, “a few participants expressed caution,” noting that if job gains slowed down and energy prices moved up, consumers might curtail spending. Business investment, which most analysts had expected would rebound as the oil price shock faded, has instead stayed muted.

Bill Gross Says Yellen "Worships Falls Idols" So "Worry About The Return Of Your Money, Not On It" -In his latest just released monthly letter, Bill Gross does not break any new ground, but merely once again reiterates that in a world without any new exogenous money creation (the endogenous money created by central bankers has been stuck in liquidity traps like capital markets) and thus without any pick up in the velocity of money - a key component of GDP - economic growth is limited at best, and stagnant or negative in practice.  As he puts it, "with yields at near zero and negative on $10 trillion of global government credit, the contribution of velocity to GDP growth is coming to an end and may even be creating negative growth as I've argued for the last several years. Our credit-based financial system is sputtering, and risk assets are reflecting that reality even if most players (including central banks) have little clue as to how the game is played." He lays out the global economy as an analogy to Monopoly where the narrative only works if everyone gets $200 in cash on every rotation around the board: it’s the $200 of cash (which in the economic scheme of things represents new “credit”) that is responsible for the ongoing health of our finance-based economy. Without new credit, economic growth moves in reverse and individual player “bankruptcies” become more probable. And without banks creating new loans and injecting money into the broader economy, economic activity grinds to a halt. In Monopoly, the $200 of credit creation never changes. It’s always $200. If the rules or the system allowed for an increase to $400 or say $1,000, then players could keep on building and the economy keep growing without the possibility of a cash or credit squeeze. But it doesn’t. The rules which fix the passing “Go” amount at $200 ensure at some point the breakdown of a player who hasn’t purchased “well” or reserved enough cash. Bankruptcies begin. The Monopoly game, which at the start was so exciting as $1,500 and $200 a pass made for asset accumulation and economic growth, now turns sullen and competitive: Dog eat dog with the survival of many of the players on the board at risk. What happens when the $200 in "new money" stops? "Ask Janet Yellen for instance what affects the velocity of credit or even how much credit there is in the system and her hesitant answer may not satisfy you. They don't believe in Monopoly as the functional model for the modern day financial system. They believe in Taylor and Phillips and warn of future inflation as we approach "full employment". They worship false idols."

Estimation of Historical Inflation Expectations - Carola Binder - The final version of my paper "Estimation of Historical Inflation Expectations" is now available online in the journal Explorations in Economic History. (Ungated version here.) Abstract: Expected inflation is a central variable in economic theory. Economic historians have estimated historical inflation expectations for a variety of purposes, including studies of the Fisher effect, the debt deflation hypothesis, central bank credibility, and expectations formation. I survey the statistical, narrative, and market-based approaches that have been used to estimate inflation expectations in historical eras, including the classical gold standard era, the hyperinflations of the 1920s, and the Great Depression, highlighting key methodological considerations and identifying areas that warrant further research. A meta-analysis of inflation expectations at the onset of the Great Depression reveals that the deflation of the early 1930s was mostly unanticipated, supporting the debt deflation hypothesis, and shows how these results are sensitive to estimation methodology.

This Is "Worrisome": The Probability Of A US Recession Surges To 60%, Deutsche Calculates -- Ever since the US manufacturing economy entered a recession over half a year ago as a result of the collapse in capex spending in the energy sector and the soaring layoffs in shale, the strawman used by the economic apologists to "justify" that the broader economy has not followed in such recessionary footsteps, has been the frequent trotting out of the yield curve, which simply because it is still curved upward in nominal terms (if flattening recently to levels not seen since 2007), is presented as "evidence" that the US is still growing. Just one problem: as Bank of America first explained in February, when one adjusts the curve to account for trillions in unprecedented liquidity support by the Fed which is skewing the message sent by the 2s10s (for example by looking at the 3m5s OIS adjusted curve), the curve is already inverted. Over the weekend, following the latest collapse in long-term yields to new all time lows, Deutsche Bank looked at what implied recession odds are if one once-again adjust for Fed intervention. What it found, in the words of Deutsche Bank's Dominic Konstam, is "worrisome." From Deutsche Bank: Since the UK referendum the US yield curve has flattened to new post-crisis lows. The 3m10y spread is now 115 bps compared to 210 bps at the start of the year, and the 2y10y spread is just 85 bps versus 120 bps on January 1.  This relentless flattening of the curve is worrisome. Given the historical tendency of a very flat or inverted yield curve to precede a US recession, the odds of the next economic downturn are rising.  In our probit model, the probability of a recession within the next 12 months has jumped to 60 percent, the highest it's been since August 2008.The model adjusts the 3m10y spread by the historically low level of short rates and it suggests that on an adjusted basis the curve has already appeared to be inverted for some time. The yield curve had successfully signaled the last two recessions when the model output rose above 70 percent. If 10y yields rally to 1.00 percent and the 3m rate is unchanged, the implied recession probability from our model will reach that number. At current market levels, the market is just 40 bps from that distinct possibility.

Treasuries Rally to Record as Global Negative-Yield Pool Deepens - Treasuries rallied, with yields resuming a descent to record lows, as the growing pool of negative-yielding debt worldwide boosted the appeal of U.S. securities. Benchmark 10- and 30-year yields fell to unprecedented levels, extending gains in Treasuries for a third trading session, as signs of slowing growth in Europe ended a five-day rally in global stocks. A U.S. jobs report July 8 may offer clues to the direction of the Federal Reserve’s next interest-rate move. The probability in futures markets of tighter U.S. policy this year plunged after the U.K. vote last month to leave the European Union clouded the outlook for global growth. The dimming prospect of a Fed hike has spurred a torrent of demand for Treasuries, with almost $10 trillion of securities in the Bloomberg Global Developed Sovereign Bond Index yielding less than zero, up from about $9 trillion a week ago. In addition to experimenting with negative rates, some monetary authorities abroad are buying government debt, reducing the supply for investors who count on fixed-income assets. “When you look at pension liabilities, insurance, where are you going to get a positive yield?” . The yield on U.S. Treasuries “is not a lot relative to history, but at this point, it’s the best the market can do.” The benchmark Treasury 10-year note yield dropped six basis points, or 0.06 percentage point, to 1.39 percent as of 9:48 a.m. New York time, after reaching a record-low 1.375 percent. The price of the 1.625 percent security due in May 2026 rose to 102 6/32.

As Interest Rates Again Reach Record Lows, Watch Out for the Yield Curve -- Every recession since at least 1976 has been closely preceded by a negative yield curve. The functional reason for this is that the smaller the spread between long-term and short-term rates, the less money banks can make by borrowing short and lending long, which is basically the entire business model of the entire global banking system. When the curve goes negative, it means banks are paying more to borrow than they earn to lend, which obviously discourages banks from lending money and this slows down monetary expansion, leading to business cycle crashes. This is why the yield curve rarely fails to predict an imminent recession. The yield curve has trended downward for over five years now, since February 4, 2011, when it hit a record high of 2.91. We are in an era of continuous record-breaking it seems, and the yield curve is no exception. Another ominous record since 1976 and possibly longer is the amount of time the curve has remained positive. The last time we had a negative yield curve was in May 2007, about five months before the Great Recession began. The economy has effectively enjoyed a positive yield curve for over nine years now. The last time it was negative before 2007 was in March 2000, when the Nasdaq bubble popped. Bond investors may be celebrating now, but the lower long-term rates go without bringing short-term rates with them, the closer the yield curve gets to negative territory, and the closer we are to a major recession.

A Remarkable Financial Moment: Larry Summers -- The US 10 and 30 year interest rates today reached all time low levels of 1.32 percent and 2.10 percent. Record low 10 year interest rate were also registered in Germany, France, Switzerland and Australia. Notably Swiss 50 year interest rates are now for the first time negative.  Rates out 15 years are negative in Germany and 9 years in France. Such rates would have seemed inconceivable a decade ago and very unlikely even a couple of years ago.  I remember my parents paying off their 30 year mortgage on the house I grew up in during 1991 and thinking that the 4.5 percent rate they paid was some kind of antique the likes of which would never be seen again.  At the beginning of this year US 10 year rates were 2.27 percent and there was a general view that they would rise sharply to perhaps 3 as the Fed began to tighten. As Table 1 makes clear extraordinarily low rates reflect both subtarget expected inflation even over long horizons and very low real interest rates.   I believe that these developments all reflect a growing awareness of the importance of the secular stagnation risks that I have highlighted over the last several years.  There is a growing sense that the world is demand short—that the real interest rates necessary to equate investment and saving at full employment are very low and may be often unattainable given the bounds on nominal interest rate reductions.  The result is very low long term real rates, sluggish growth expectations, concerns about the ability even over the fairly long term to get inflation to average 2 percent, and a sense that the Fed and the world’s major central banks will not be able to normalize financial conditions in the foreseeable future.

Bond yields are just so damn low…what is that telling us? -- Jared Bernstein - I pour the morning cup of mud, schlep out to the stoop to get my paper, and open my WSJ to learn that the yield curve is awfully flat (i.e., the difference between the interest rates of bonds of different maturities is low). In fact, the yield on the 10-yr–1.367% yesterday–is the lowest on record. And the difference between the 10 and 2-yr Treasury yields, at about 0.8, is the same as it was in November, 2007. Not good, and very much worth noticing. There are those who will tell you the yield curve is a telling recession indicator and that 10/2 year narrow spread is flashing red. But now isn’t late 2007. Most importantly, of course, the housing bubble was imploding back then, whacking bank portfolios, wiping out trillions in wealth, and generating both a credit freeze and a demand-killing negative wealth effect. Also, the Fed funds rate has been at or near zero since around 2009, so that’s also very much in the mix here, holding down Treas yields.  One must be steely-eyed in these circs and avoid any bedwetting. On the negative side, along with the flat yield curve, we have:

  • –the strong dollar: it hurts our trade competitiveness and puts downward pressure on inflation and thus the real interest rate;
  • –volatile markets/uncertainty: surely a bigger problem for the UK than us/US, but watch our equity markets for wealth effects; still, credit flows here seem largely untouched;
  • –possible weakening job growth: that’s a big one of which I’ll have more to say later this week.
  • On the plus side:
  • –low unemployment, a bit a wage growth, and that low inflation, while a problem re propping up real interest rates, is  helping paychecks go further;
  • –growth: kind of the bottom line here, and while it’s been bumpy, we’re basically posting growth rates of around 2%, yr/yr, which ain’t great (and reflects a nasty downshift in productivity growth) but is actually the envy of most other advanced economies right now.

Taking Refuge in Dollar Could Expose World Economy to New Perils - It is known as the flight to safety, yet it may be leading the global economy toward fresh danger. In the week since Britain stunned the world with its vote to quit the European Union, coloring markets in uncertainty, investors have dumped much that seems risky — the pound, the euro and shares on stock exchanges around the world. They have entrusted the proceeds to that rare sure thing, United States Treasury bills.  Too much money may now be sloshing toward the dollar.  For the United States, a stronger currency makes exports more expensive on world markets, complicating an already halting economic expansion. For emerging markets, the move into the dollar could presage a tide of investment flowing out, imperiling economies from Brazil to Indonesia. For Europe, a weaker euro underscores fundamental doubts about whether leaders can finally muster a formula for economic vibrancy after years of disappointment and recrimination. When economies function in healthy fashion, money flows across investments in pursuit of rewards that are supposed to be correlated to risks. But when a shock hits and fear takes hold, investors tend to trust only storehouses with one key trait — the certainty of survival. Since Britain’s vote to leave the European Union, or “Brexit,” the dollar has gained nearly 3 percent compared with a broad basket of currencies, about 2.5 percent against the euro, and nearly 12 percent against the pound. The latest surge came on Thursday, when Mark J. Carney, governor of the Bank of England, said the central bank would probably have to lower interest rates to support the economy. That sent the pound hurtling downward anew. On Friday, the yield on 10-year United States Treasury notes dipped to a record low, 1.385 percent, reflecting the eagerness of investors to lock their money in a safe place even for minuscule returns.

US Debt Jumps Almost $100 Billion In One Day -- The Drudge Report -- July 2, 2016 - If one wants to "hide" some really unpleasant news, releasing it on the 4th of July weekend can hardly be better timing: US Debt Jumps Almost $100 Billion In One Day From The Washington Examiner: Total government debt hit a record $19.38 trillion on Thursday, up nearly $98 billion from the day before. It's the first time it has ever exceeded $19.3 trillion.  The debt will soar higher still in the coming months, and is expected to approach $20 trillion by the time President Obama leaves office. If Paul Krugman and Elizabeth Warren are not concerned, I am not concerned. Unlike Great Britain, Fitch still has a AAA rating for US credit. Great Britain: AA. There only a handful of countries with a Fitch rating higher than the US (97), including Germany (100).

Imperialism Obama Style: 800 Military Bases Around the World - Sec. of State Kerry brags we are "involved" in more countries than ever, as Obama becomes first president to serve two terms always at war. Speaking at the Aspen Ideas Festival on June 28, Secretary of State John Kerry sought to ease anxiety over an ever-rising global "turmoil and strife" by pointing to an eyebrow-raising fact. "I state unabashedly to every single one of you: The United States of America is more engaged in more places with greater impact today than at any time in American history," he reassured the audience. "And that is simply documentable and undeniable." Kerry made it clear that when he talks about "engagement," war is a key part of the equation. "We've been working with countries to support a new Government of National Accord in Libya," he said, referencing a dubious state that the U.S. is moving to heavily arm. "I was recently in the United Arab Emirates. I think we've come to a common understanding of how to strengthen that government and go after Daesh in Libya. We're supporting Afghanistan in its fight against extremists and support a sovereign and democratic Ukraine." Kerry's observation of unprecedented engagement may, in fact, be an understatement. As David Vine, the author of the book Base Nation: How U.S. Military Bases Abroad Harm America and the World, noted in 2015, the United States "probably has more foreign military bases than any other people, nation, or empire in history." The roughly 800 U.S. military bases around the world compare to a grand total of zero free-standing foreign bases on U.S. soil, Vine reported.

Paul Ryan’s tax reform is an even worse giveaway on the corporate side -- In a couple of previous posts, I outlined some clear problems with Paul Ryan’s recent tax plan. The final major pieces of Speaker Ryan’s House GOP tax reform are the changes to the corporate income tax. The headline here is bad enough, cutting the top corporate income tax rate from 35 to 20 percent. But it gets worse, and as with the rest of this tax plan, it does so in a way that clouds how much of a giveaway Paul Ryan and the House GOP actually intend.The corporate income tax is steeply progressive, because the vast majority of the incidence of the corporate income tax falls on the owners of capital, with capital income heavily concentrated at the very top of the income distribution. And taxes on capital income are eroding. Foreigners and retirement plans now hold 63 percent of U.S. stock and are nontaxable. So that erosion at the shareholder level has made the corporate income tax the main way through which shareholders are taxed, either explicitly or implicitly. Despite its progressivity, and despite the erosion of other taxes on capital income, the corporate income tax base has also eroded substantially in recent decades. Since 2010 after-tax corporate profits have averaged 9.1 percent of GDP, while corporate income tax revenues have averaged 1.6 percent of GDP. Driving this erosion are business reclassification and income shifting, points we will make more detailed and visual in an upcoming joint Americans for Tax Fairness/EPI chart book. The most damaging part of Ryan’s corporate tax reform isn’t the stark cut in the headline rate—it’s the much less obvious change towards a territorial system of taxation. Territorial taxation gives multinational firms a quick and easy way to avoid all the taxes they owe on their U.S. profits, further eroding the corporate tax base.

Labor chief: 'I'm proud of the work' done on TPP | TheHill: Labor Secretary Tom Perez in an interview Sunday touted his work as part of the Obama administration on the Trans-Pacific Partnership (TPP) but avoided saying directly whether or not he personally supported the agreement. "This is what the president tasked me with doing, Chuck, and I was proud to do it," he said on NBC's "Meet the Press" with Chuck Todd.  "Which is we want to go to school on the mistakes and the lessons of past trade agreements. We want to build a trade regime that, again, the North Star is the American worker, protecting the American worker." Perez said the U.S. needs to make sure it has "the strongest protections for the workers that we've ever had" when it negotiates with other countries such as Mexico and Vietnam. "And that's what we've set out to do, and that's what I believe we have done. The president and [presumptive Democratic presidential nominee Hillary] Clinton have a disagreement on whether TPP has gone that far. This is not the first time in the history of the Democratic Party that there have been differences of opinion," he said. "Where they are totally in lockstep is their belief that we have to put the American worker first. And we have to go to school on the lessons of history. And that's exactly what we're doing in the work that we've been doing on trade." Still, Perez dodged pointed questions about whether or not he personally supports the TPP. He called what the country has done with Mexico and Vietnam some of the "most far-reaching protections that we've seen in a labor agreement," and again reiterated that President Obama and Clinton disagree on whether the agreement is "tough enough."

Trump returns to D.C. after trashing NAFTA : Donald Trump, who spent much of last week trashing the North American Free Trade Agreement as the “worst trade deal ever negotiated,” returns to Washington on Thursday to meet with fellow Republicans, including some who helped approve NAFTA. Recall that the deal completed negotiations and was ceremonially signed by Republican President George H.W. Bush in 1992, thought it was not ratified by Congress until 1993 during President Bill Clinton’s first year in office. Story Continued Below For the first time, Trump will meet with rank-and-file Republican members of both the House and the Senate. Those who voted for NAFTA 13 years ago include Senate Majority Leader Mitch McConnell, Finance Committee Chairman Orrin Hatch, Judiciary Committee Chairman Chuck Grassley and Armed Services Committee Chairman John McCain. “The strategy of meeting with Senate Republicans is unclear at this point because he’s running a populist campaign against Washington, and on trade many of his viewpoints are counter to what Senate Republicans believe in,” said Ron Bonjean, a Republican strategist at Rokk Solutions. “This issue is going to come up, and some Senate Republicans could let him know they object to his proposals, especially those whose states benefit from trade.” House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady are both proponents of NAFTA, but weren’t members of Congress when it came up for a vote. Brady, in particular, has been increasingly vocal about the value of free trade agreements at a time when few other Republicans politicians are defending trade deals.

What Sanders wants on trade - Sen. Bernie Sanders' campaign on Tuesday shared the specific language he wants inserted in the Democratic Party platform concerning the Trans-Pacific Partnership trade deal. In a fundraising email sent days before the Democratic National Committee's full platform committee votes on the 2016 draft in Orlando, Sanders campaign manager Jeff Weaver shared the specific language of the amendment he would like to see inserted. The amendment reads, "It is the policy of the Democratic Party that the Trans-Pacific Partnership must not get a vote in this Congress or in future sessions of Congress." "If we succeed, we will be in a very strong position to stop a vote on the TPP and to fundamentally rewrite our trade agreements to end the race to the bottom and lift up the living standards of people in this country and throughout the world," Weaver continued. The email is the latest signal Sanders' team has put out that it plans to continue to push for changes to the Democratic Party platform even after picking up a number of wins in the drafting process so far: language calling for abolishing the death penalty, raising the minimum wage, and supporting legislation breaking up the country's biggest banks, similar to the Glass-Steagall Act. In a separate fundraising email last week, Sanders vowed that if unsuccessful in inserting anti-TPP language, "we are going to take this fight to the floor of the Democratic Party convention in Philadelphia next month."

Elizabeth Warren Lanches Campaign Against the TPP -- Yves Smith - Vanity Fair tisk tisks that Elizabeth Warren has mounted two attacks against major Clinton supporters in the last week. Surely the Massachusetts senator must know this is not the way to curry favor? And gah, Warren sounds, um, like Trump! Well not really except she actually does once say “rigged system” if you listen to the video.  From Vanity Fair’s article, Elizabeth Warren Just Made Hillary Clinton Look Bad – Again: Warren has a problematic habit of criticizing Clinton’s most loyal donors, a fact that has not been overlooked by the Wall Street moneymen bankrolling her campaign. As if that were not enough to dampen the veepstakes buzz…she is embarking on a major nationwide campaign to derail a major trade deal being pushed by the White House and that Clinton supported as secretary of state…  Warren, in other words, is not the first Democrat (or Republican) to attack the T.P.P., highlighting Clinton’s flip-flop. But it’s not the first time the fiery politician has taken a stance that clashes with Clinton’s policy platform, either. Just last week, Warren unloaded on Silicon Valley for what she claimed are anti-competitive practices, and singled out a handful of the same tech titans that Clinton had been busy currying favor with less than 24 hours earlier. If the senator is still in the running for Clinton’s ticket, her anti-T.P.P. tirade won’t do the presidential hopeful any favors. It also doesn’t inspire confidence in her ability to help Clinton build a unified front in the battle against Trump, no matter how much she inspires the Sanders wing of the party. The last thing any presidential nominee needs is a No. 2 who doesn’t know how to fall in line. We’ve deemed the rumors that Warren was as serious vice presidential candidate for Clinton as ludicrous. Yes, the Clinton campaign may have gone through the motions of vetting her, but planting the story that Warren was under consideration was merely to burnish Clinton’s image with progressives and Sanders voters.

Media Gets Facts Wrong on Loretta Lynch/Bill Clinton Tarmac Meeting – Pam Martens - The well worn media narrative has now evolved that both Clinton and Lynch were in Phoenix on the same day for scheduled events. That’s wrong. Bill Clinton was in Phoenix on Monday, June 27, to meet with real-estate developer Jim Pederson and others. (Pederson was Chair of the Arizona Democratic Party from 2001 to 2005. According to Federal Election Commission records, Pederson gave nearly $7.3 million to the Arizona State Democratic Central Committee from 2001 to 2006.) While Clinton was in Phoenix on Monday, Loretta Lynch was giving a speech in Baltimore, Maryland at a National Summit on Youth Violence Prevention, according to her public schedule and a news report in the Baltimore Sun. Loretta Lynch flew into the Phoenix Sky Harbor International Airport on Monday evening after her Baltimore speech and the evening before she was to meet with local Phoenix officials on community policing on Tuesday, June 28. The fact that Lynch arrived the night before she was actually due in Phoenix, then held a private meeting on her plane with Bill Clinton, while his wife is under an active Justice Department criminal investigation for her use of a private email server that transmitted classified material while she served as Secretary of State, raises more questions.  To fly to a city the evening before your event costs the taxpayer. Your entourage has to be put up in a hotel and fed. In addition, for reasons that are yet to be explained, the Attorney General was traveling with her husband while she was on official business scheduled for a regular day of the workweek. Christopher Sign, a reporter for a local affiliate of ABC News, ABC15 in Phoenix, was the first to break the story of the meeting between Lynch and Bill Clinton. In a subsequent interview on Fox News, Sign stated: “The FBI there, on the tarmac, instructing everybody around no photos, no pictures, no cell phones…” That raises another serious question that has gone unanswered: who exactly gave the order to the FBI to obstruct the public’s right to know about this meeting? If the order came from Loretta Lynch, that raises further, deeply troubling questions.

Senator Admits The FBI Is "About To Ask Putin For His Copies Of Hillary's Emails" -- It is well known that the FBI still does not have roughly 30,000 emails that Hillary Clinton deleted from her private server due to Clinton categorizing them as personal and not work related. We have also reported that Russia may be in possession of those emails, and according to Judge Andrew Napolitano, there is a debate going on in the Kremlin about whether or not to release them.  Given that the FBI still doesn't have the emails, Arkansas Republican Senator Tom Cotton (of the US is "under-incarcerated" fame), who is a Trump supporter and also serves on the Senate Intelligence Committee, has become so frustrated that Cotton suggests the FBI is about to ask Putin for his copies. Cotton also took a jab at Bill Clinton's meeting with Loretta Lynch, saying that his plane was also on the tarmac, and he thought Bill Clinton may be waiting to climb on board to talk with him as well. As Breitbart reports: Cotton said it was shocking, but not shocking to him, that the former president would meet with Attorney General Loretta Lynch - whose department is investigating both his wife and himself for his handling of the Clinton Foundation.Clinton's decision to conduct all her official business on her own private email account on her own private server and the way she has handled official and media inquires about it was just teaser of how her administration will approach transparency and national security, Cotton said. The FBI still does not have 30,000 emails the expected Democratic nominee for president claimed to have deleted."It has gotten so bad, the FBI is on the verge of asking Vladimir Putin for his copies of Hillary's emails," Cotton said.

Clinton 'extremely careless' with emails, but FBI recommends no charges | Reuters: The FBI recommended on Tuesday that no criminal charges be filed over Hillary Clinton's use of private email servers while she was secretary of state, but rebuked the Democratic U.S. presidential candidate for "extremely careless" handling of classified information. While FBI Director James Comey's announcement lifted a cloud of uncertainty that had loomed over Clinton's White House campaign, his strong criticism of her judgment ignited a new attack on her over the email issue by Donald Trump, her likely Republican opponent in the Nov. 8 election. Comey's comments are likely to reinforce what polls show are widespread public concerns about Clinton's honesty and trustworthiness. Republicans have pointed to the controversy as evidence that she considered herself above the law. House of Representatives Speaker Paul Ryan, the highest- ranking elected U.S. Republican, said in a statement that Comey's announcement "defies explanation." Ryan called on the FBI to release all of its findings in the case and said Comey would be called to testify before the House Oversight Committee. "We need to know more," Ryan told Fox News. In a lengthy statement on the Federal Bureau of Investigation's conclusions from its yearlong investigation, Comey directly contradicted statements Clinton has made while defending her use of the private email setup. He said, for example, that the FBI found at least 110 emails that contained classified information when they were sent, although Clinton has repeatedly said she never sent or received classified information on her private servers. "Although we did not find clear evidence that Secretary Clinton or her colleagues intended to violate laws governing the handling of the classified information, there is evidence that they were extremely careless in their handling of very sensitive, highly classified information,"

Judicial Watch: "FBI's Comey Is Complicit In Clinton Email Scandal" - Should James B. Comey, Jr. continue as Director of the Federal Bureau of Investigation? Is he professionally compromised? Does Mr. Comey continue to enjoy the “special trust and confidence” of the American people, the rank-and-file of the FBI, and the thousands of government employees holding security clearances and access to classified information? On Tuesday, July 5, 2016, Mr. Comey conducted a fifteen-minute press briefing detailing the elements of the crime of mishandling national defense information, specifically Title 18 U.S.C. §793(f) and the FBI’s investigation of former Secretary of State Hillary Rodham Clinton’s use of an outlaw email server.  Unbelievably, having defined the elements of a national security crime and given specific examples of Mrs. Clinton’s reckless, dangerous conduct in each case, Mr. Comey concluded that “no charges are appropriate in this case” and that “no reasonable prosecutor would bring such a case.” Mr. Comey did not tell the truth.  Many people, in and out of government, know Mr. Comey’s blatant falsehood.  The public’s faith in the fair administration of justice was damaged by Attorney General Lynch’s meeting with President Clinton on the tarmac in Phoenix. It was further damaged by the apparent sweetheart “voluntary interview” of Mrs. Clinton by the FBI on the Saturday of the July 4th weekend. Then just over 48 hours later (no doubt Mr. Comey spent the weekend carefully examining a year’s worth of interview transcripts), the proverbial stake was driven through the heart of any remaining faith and confidence in the public’s concept of “equal justice under law” or in Mr. Comey’s professional integrity by his nonsensical, contradictory, and insulting decision to let Mrs. Clinton “walk” on her national security crimes. No other federal government employee would have received the extraordinary, exceptional treatment Mr. Comey conferred on Mrs. Clinton. Government employees with security clearances and access to classified information – especially in law enforcement, the intelligence community, and the armed forces – are shaking their heads in disgust, disappointment, and disbelief. They now know the truth. No other cabinet secretary has ever broken the law so flagrantly or endangered national security so gravely. Mr. Comey is now complicit in Mrs. Clinton’s reckless conduct.

Almost Nothing Hillary Clinton Told the American People About Her Emails Was True - Pam Martens - Two scathing reports have now been issued by separate investigators into Democratic Presidential candidate Hillary Clinton’s handling of classified national security matters over a non-government, private computer server located in the basement of her home. The first was issued by the State Department’s Inspector General at the end of May. It found that Clinton had told multiple untruths in the matter. The second report followed a criminal investigation and was delivered verbally yesterday by FBI Director James Comey. It also eviscerated multiple falsehoods Clinton has told the American people for more than a year. Clinton has repeatedly stated to the public that nothing she transmitted on her private server was classified at the time it was sent or received but that some emails simply got an up-classification after further review. At her press conference on March 10 of last year, Clinton stated: “I did not email any classified material to anyone on my email. There is no classified material. So I’m certainly well-aware of the classification requirements and did not send classified material.” The FBI Director indicated yesterday that his agency’s many months of investigation proved that statement by Clinton to be false. Comey stated at his 11:00 a.m. press conference that out of the 30,000 emails that Clinton handed over to the State Department from her private server, the following were classified: “…110 emails in 52 email chains have been determined by the owning agency to contain classified information at the time they were sent or received. Eight of those chains contained information that was Top Secret at the time they were sent; 36 chains contained Secret information at the time; and eight contained Confidential information, which is the lowest level of classification. Separate from those, about 2,000 additional e-mails were ‘up-classified’ to make them Confidential; the information in those had not been classified at the time the e-mails were sent.” Clinton had also told the public repeatedly that none of the emails carried classified markings. FBI Director ruled that statement to be false as well, stating that some of Clinton’s emails “containing classified information bore markings indicating the presence of classified information.”

Clinton’s Web of Deceit: She Lied and Lied Again: Clinton lied in March 2015 when she declared in one of her rare news conferences, “I did not email any classified material to anyone on my email. There is no classified material.”But as Comey reports, she did. Quite often in fact. The FBI in its exhaustive investigation found at least 113 email chains –some of which had to be uncovered after they had been erased by Clinton’s private lawyers — contained material that was classified at the time of sending, including some that were classified Top Secret and that referred to a “highly classified special-access program.”She lied again at that same press conference when she asserted, “I responded right away and provided all my emails that could possibly be work related” to the State Department. Not true, according to the FBI, and also, of course, to the Inspector General of the State Department, with whose own investigation of her actions, Clinton simply refused to cooperate. Clinton lied when she said earlier this month, in an NBC interview, “I never received nor sent any material that was market classified.” Comey says that in fact her system did handle emails that bore specific markings indicating they were classified. Clinton lied when she tried, as she explained more than once, including in that same March 15 news conference addressing the issue, to claim that she had used her own Blackberry phone rather than a State Department secure phone, simply because she “thought it would be easier to carry just one device for my work and for personal emails instead of two.” In fact, Comey said his agents determined that Clinton had “used numerous mobil devices to view and send email,” all using her personal account. So much for wanting to use “just one device”! Comey said she also had used different non-government servers, all of them vulnerable to hacking. Clinton lied again when she claimed that her private server was on “property guarded by the Secret Service and there were no security breaches.” She lied again when she added, “The use of that server, which started with my husband, certainly proved to be effective and secure.”  Her campaign website adds the equally false assertion that “There is no evidence there was ever a breach.”

House will ask FBI to investigate if Clinton lied to Congress | TheHill:  In a dramatic exchange Thursday between Rep. Jason Chaffetz (R-Utah) and FBI Director James Comey, the House Oversight Committee chairman announced he will formally request the FBI to investigate whether Hillary Clinton lied under oath to Congress.  Comey was testifying before the committee regarding his agency’s investigation into Clinton’s use of a private email server during her time as secretary of State. Chaffetz asked him if the FBI had determined in its investigation that Clinton had lied. “We have no basis to conclude that she lied to the FBI,” Comey said. “Did she lie to the public?” Chaffetz asked. “That’s a question I’m not qualified to answer. I can speak about what she said to the FBI,” Comey responded. The Utah Republican then asked if the FBI had investigated whether Clinton perjured herself when addressing the server while testifying to Congress. “Not to my knowledge. I don’t think there’s been a referral from Congress,” Comey responded. “Do you need a referral from Congress to investigate her statements under oath?” Chaffetz asked. “We sure do,” Comey shot back. “You’ll have one,” Chaffetz said with a laugh. “You’ll have one in the next few hours.” The move could open a new legal vulnerability for Clinton, who in recent weeks escaped both the threat of a federal indictment and severe reprimand from the House Select Committee on Benghazi, which found no evidence of wrongdoing in the handling of the 2012 terror attack on the Libyan city on Clinton's part.

Comey testifies Clinton email claims ‘not true’ at heated Hill hearing | Fox News: FBI Director James Comey testified Thursday that Hillary Clinton’s claims -- some made under oath -- about her use of a private email server were “not true,” fueling Republican questions about whether in doing so she committed a felony. In a wide-ranging appearance before the House oversight committee, Comey also said Clinton’s email practices put America’s secrets at risk and her actions constituted the “definition of carelessness.” At the same time, Comey staunchly defended the bureau’s decision not to pursue charges. He also said, “We have no basis to conclude that [Clinton] lied to the FBI.”Yet he acknowledged that lying under oath is a felony, as some Republicans point to statements she made last October before the House Benghazi committee -- and plan to request an investigation. At that hearing, Clinton had claimed that nothing she sent or received was marked classified. Comey was asked about such claims, which she also made publicly, in a pointed exchange with Rep. Trey Gowdy, R-S.C. “That’s not true. … There was classified material emailed,” Comey said.

Clinton email decision seen as lifeline for those facing similar charges - Lawyers who specialize in representing government and military officials who’ve had security clearances revoked said Comey’s recommendation offered them a new tactic in seeking to rehabilitate their clients, especially if Clinton is elected president in November.  “I intend to use the Hillary defense,” said Sean M. Bigley, a lawyer whose firm handles dozens of cases a year involving national security clearances. “I really question how any agency can say someone is a security risk if the president of the United States did something similar.”  He added, “We’ve had people lose 20-year careers for doing less than what she did.”  Mark F. Riley, a former military intelligence officer who became a lawyer defending those accused of national security violations, said he, too, would invoke the Clinton recommendation. “I’m going to use it every chance I get, particularly in oral arguments. I’m going to bring it up over and over and over,” Riley said, adding that he thinks Clinton and her team engaged in “an egregious, egregious security violation.” “Any other person would have had their security clearance revoked,” he said.

GOP Puts Pressure on Clinton, FBI After Lynch Closes Email Probe —Republicans moved Wednesday to keep alive a controversy they hope will work to their advantage in the presidential campaign a day after FBI Director James Comey accused Hillary Clinton of being “extremely careless” with national secrets. They called Mr. Comey to testify Thursday before a House panel about his probe of the presumptive Democratic nominee’s email practices. Senate Majority Leader Mitch McConnell urged the FBI to release the full transcript of its questioning of Mrs. Clinton. Mrs. Clinton has yet to address publicly Mr. Comey’s findings, but her campaign is hoping that voters will see Republicans as overreaching, giving her leeway to step up her attacks on Donald Trump’s fitness to be president.  Attorney General Loretta Lynch announced late Wednesday that she is officially closing the email investigation with no charges being brought against any individual, bolstering the Clinton campaign’s argument that it is time to move on and focus on picking the next president. “For weeks Republicans have said they trusted Mr. Comey to lead an independent review into Secretary Clinton’s emails, but now they are second-guessing his judgment because his findings do not align with their conspiracy theories,” Clinton spokesman Brian Fallon said Wednesday. Mrs. Clinton has made her professionalism and judgment defining credentials. She talks about her “responsibility gene” and serious-minded approach to governing. It is an argument that her campaign sees as especially potent given that it sets up a contrast with Mr. Trump, a businessman who has never held public office.

House Delivers Clinton a Day from Hell: State Department Reopens Investigation -  Pam Martens - Just 18 days before the Democratic National Convention is set to convene in Philadelphia, the House Oversight and Government Reform Committee delivered Hillary Clinton’s campaign a day from hell yesterday.  On hand to raise alarming questions about Clinton’s fitness to handle classified national security material was FBI Director James Comey, State Department Inspector General Steve Linick and Charles McCullough, the Inspector General of the Intelligence Community. Here’s a cursory rundown of statements from the hearing that you are likely to see very shortly popping up in PAC ads for Donald Trump: FBI Director Comey added the word “negligent” to his previous assessment of “extremely careless” in describing how Clinton handled Top Secret material. Comey also revealed that two to ten people with no security clearance at all were given access by Clinton to her private basement server in her New York home that stored the Top Secret material in a non secure manner. When quizzed by Congressmen on how he would deal with an FBI agent who behaved in such a negligent manner, Comey said the matter would be adjudicated and could result in termination and/or a loss of security clearance. Inspector General McCullough dropped his own bombshell during the hearing. McCullough revealed that Clinton or one of her aides placed tens of thousands of emails, some containing Top Secret material, on a thumb drive and handed it to Clinton’s attorneys to decide what emails should be turned over to the State Department. (Clinton left the State Department without turning over the government records for more than a year, in violation of the Federal Records Act and potentially obstructing Freedom of Information Act requests from being filled.) The tiny thumb drive, called that because it’s about the size of one’s thumb and thus easily stolen or lost, was then housed in Clinton’s attorneys’ office – which lacked government security features for holding classified material according to McCullough. During the hearing, Comey also emphatically, and without hesitation, stated that Clinton’s attorneys did not have the requisite security clearance to handle and view the emails. Clinton’s campaign spokesman, Brian Fallon, told CNN yesterday that the attorneys did have security clearance. The most devastating moment for Clinton came when Trey Gowdy, a Republican Congressman from South Carolina and a former Federal prosecutor himself, conducted a blistering examination of FBI Director Comey’s premise that no reasonable prosecutor would bring criminal charges against Clinton because there was not a showing of criminal intent.

Why Hillary Clinton is doomed, even if she wins | Fusion: Eight years ago, in the U.S., Barack Obama became president by campaigning on a platform of hope, intelligence, and competence. This year, Donald Trump became the Republican nominee by campaigning on a platform of grunts and dog-whistles. Similarly, six years ago, in the U.K., the prime minister of Great Britain was Gordon Brown, a man who once waxed lyrical about “post neo-classical endogenous growth theory.” Today, one of the two front-runners for the post is Michael Gove, a man who told a television interviewer that “people in this country have had enough of experts.” That transition, from the intellectual to the anti-intellectual, is a global phenomenon: to use James Traub’s terms, fist-shakers around the world are enjoying a moment of supremacy over the pragmatists. There is no greater fist-shaker than Donald Trump: America can do impulsive and pugnacious better than anyone, when it wants to. The good news is that Donald Trump is probably not going to be America’s next president. But the bad news is that he’s a harbinger of things to come, a true and terrifying sign of the times. In other words: Hillary Clinton is going to win the battle, but her side is losing the war. As Josh Barro says, the scariest thing about the prospect of another Clinton presidency is that, in a tumultuous world of rising inequality, Hillary’s technocratic bona fides will be seen as being the problem, rather than the solution. When things go wrong—and things will go wrong, as they do in any presidency—it’s not just Hillary who will be blamed; it’s everything she stands for.

Green Party’s Jill Stein Urges Bernie Sanders to Run Rogue for White House: The Green Party’s Jill Stein has offered Vermont Senator Bernie Sanders top billing on her party’s ticket, should he choose to leave the Democrats, the party that has, by all appearances, resisted him throughout his wildly popular campaign.  While Sanders is still technically a Democratic Party presidential candidate, he has yet to endorse frontrunner Hillary Clinton, though he has ceased campaigning for delegates and appears to be winding down his efforts. Stein, however, is urging him to continue his political movement within her party. “I’ve invited Bernie to sit down explore collaboration – everything is on the table,” Stein told the Guardian. “If he saw that you can’t have a revolutionary campaign in a counter-revolutionary party, he’d be welcomed to the Green Party. He could lead the ticket and build a political movement.” She further stated that Sanders would be disappointed “if he continues to declare his full faith in the Democratic Party.”  Recent polls have shown that only 55% of Sanders supporters will vote for Clinton if she is the nominee. Out of the 45% remaining, 22% of Sanders supporters plan to vote for Donald Trump if Clinton is the nominee, 18% have vowed to vote for Libertarian Candidate Gary Johnson — another 5% said they will either vote for Stein or stay home in November.

In Response to Trump, Another Dangerous Movement Appears - Matt Taibbi - The "too much democracy" train rolls on.  Last week's Brexit vote prompted pundits and social media mavens to wonder aloud if allowing dumb people to vote is a good thing. Now, the cover story in The Atlantic magazine features the most aggressive offering yet in an alarming series of intellectual-class jeremiads against the dangers of democracy. In "How American Politics Went Insane," Brookings Institute Fellow Jonathan Rauch spends many thousands of words arguing for the reinvigoration of political machines, as a means of keeping the ape-citizen further from power. He portrays the public as a gang of nihilistic loonies determined to play mailbox baseball with the gears of state."Neurotic hatred of the political class is the country's last universally acceptable form of bigotry," he writes, before concluding:"Our most pressing political problem today is that the country abandoned the establishment, not the other way around." Rauch's audacious piece, much like Andrew Sullivan's clarion call for a less-democratic future in New York magazine ("Democracies end when they are too democratic"), is not merely a warning about the threat posed to civilization by demagogues like Donald Trump. It's a sweeping argument against a whole host of democratic initiatives, from increased transparency to reducing money in politics to the phasing out of bagmen and ward-heelers at the local level. These things have all destabilized America, Rauch insists.

Quelle Surprise! SEC’s “Make the World Safer for Fraudsters” JOBS Act Does Little to Help Companies Raise Money  -Yves Smith - Despite considerable weakening of disclosure and various “fairness” rules, America’s love affair with stocks remains intact, so much so that the SEC decided that the stock market was the answer to what was never demonstrated to be a problem: the idea that promising companies were having trouble getting capital. Nevertheless, in 2012, the Administration pressed for the passage of the JOBS Act. From our write-up: We and numerous others have railed about how absolutely awful the JOBS Act is. It’s going to do perilous little to help small businesses raise dough; in fact, the number of frauds that will arise will almost certainly raise the cost of capital for small ventures over time. The JOBS Act was a wet dream for bucket shop operators. And indeed, as the Wall Street Journal reports today, very little has in fact been raised by companies using the new filings established by the JOBS Act. It’s not hard to imagine that one big deterrent is the fact that these firms are exempt from having their financial statements audited. Honestly, you need to have your head examined if you are going to make an investment to people you do not know personally and would not (from a practical standpoint) be able to sue if you suspected misconduct. From the Journal: Roughly a year after the passage of new rules making it easier for fledgling businesses to tap U.S. capital markets, just a handful of them have succeeded in doing so…The new rules, known as Reg A+, reduce the legal and reporting requirements for making these offerings. The rules, which took effect last June, grew out of the 2012 Jumpstart Our Business Startups Act, or JOBS Act, aimed at spurring business growth and employment…. According to the Securities and Exchange Commission, 94 companies had filed to raise a total of $1.7 billion under Reg A+ as of early June. Of those, 45 offerings seeking to raise a total of $785 million have qualified to raise funds, and just a few have actually completed their offerings… . “There has been some level of magical thinking,” said Ron Miller, chief executive of StartEngine, an online platform that hosts Reg A+ offerings. “Founders have perceived that there is this pent-up demand for investment in startup and tech companies” and that investors “would come out of the woodwork.”…

 An $8 billion hedge fund suddenly imploded - here's how it played out -  Visium Asset Management, a one-time rising hedge fund, is shutting down after its former employees were charged with insider trading and fraud.  It's a quick turnaround since the New York hedge fund managed $7.8 billion at the start of the year. The fund had been amassing assets for years, as per Hedge Fund Intelligence data. Much of that money came from public funds, such as university endowments and pensions that invest on behalf of teachers, firefighters and police.  That's even as some on Wall Street were backing away from Visium. Morgan Stanley disinvited Visium's founder from a marquee "Breakers" conference, and Steve Cohen, the billionaire hedge funder put a ban on hiring people who had worked at Visium before Visium told its investors it was under investigation. Here's how things played out:

31 Year Old Hedge Funder Trashes $20 Million Hamptons Mansion In Wild Midget-Tossing Party -- In another reminder just why most of the population is increasingly furious at the elites, over the holiday weekend a 31-year-old portfolio manager for Moore Capital, Brett Barna, threw a wild “Wolf of Wall Street”-style Hamptons party, complete with Champagne, scores of bikini-clad women and costumed gun-toting midgets, and allegedly trashed a $20 million mansion.  According to Page Six, Barna, "a portfolio manager at Louis Bacon’s Moore Capital Management, hosted the all-day “#Sprayathon” pool party on Sunday, where 1,000 people doused themselves in bubbly as rapper Ace Hood performed."  Making things more complicated is that Barna is not the owner of the 9-bedroom, 8 acre Hamptons mansion which "comes with tennis court, gym, outdoor pool & jacuzzi" where he celebrated US Independence Day in decadent style, and instead rented it from "Tommy" for $29,000 on AirBNB, a fee he is now disputing.  And now Tommy is angry: "the furious owner of the 14-bedroom estate in Bridgehampton plans to sue Barna, 31, for $1 million, saying the Wall Street hot shot had claimed the party would be a fundraiser for an animal charity for a mere 50 guests."  The videos and photos below, capturing the festivities, will surely be Exhibit A-X in the upcoming lawsuit.

Wolf Richter: The Big Unravel – US Commercial Bankruptcies Skyrocket -- This year through June, there have been 91 corporate defaults globally, the highest first-half total since 2009, according to Standard and Poor’s. Of them, 60 occurred in the US. Some of them are going to end up in bankruptcy. Others are restructuring their debts outside of bankruptcy court by holding the bankruptcy gun to creditors’ heads. In the process, stockholders will often get wiped out. These are credit fiascos at larger corporations – those that pay Standard and Poor’s to rate their credit so that they can sell bonds in the credit markets. But in the vast universe of 19 million American businesses, there are only about 3,025 companies, or 0.02% of the total, with annual revenues over $1 billion; they’re big enough to pay Standard & Poor’s for a credit rating. About 183,000 businesses, or less than 1% of the total, are medium-size with sales between $10 million and $1 billion. . About 99% of all businesses in the US are small, with less than $10 million a year in revenues. None of them are S&P rated and none of them figure into S&P’s default measurements.So how are these small and medium-size businesses doing – the core or American enterprise?Total US commercial bankruptcy filings in June soared 35% from a year ago, to 3,294, the eighth month in a row of year-over-year increases, the American Bankruptcy Institute (in partnership with Epiq Systems) reported today. During the first half, commercial bankruptcy filings soared 29% to 19,470. Among the various filing categories: Chapter 11 filings (company “restructures” its debt at the expense of stockholders and unsecured creditors by shifting ownership to creditors, but continues to operate) soared 36% to 499 in June and 25% in the first half to 3,220. Chapter 7 filings (company throws in the towel and “liquidates” by selling its assets and distributing the proceeds to creditors) jumped 28% in June to 1,909, and 25% in the first half to 11,211. This chart shows the seasonality and how bankruptcies have fallen since the Financial Crisis, until they hit the low point in September 2015. In June, the worst June since 2014, bankruptcy filings were up 49% from September: 

U.S. Dividend Cuts Outnumber Dividend Increases in June 2016 -- Despite having provided the mainstream financial media with a sporting chance, we find ourselves in the position of breaking news this morning with respect to an event that happened last week. Specifically, through the end of June 2016, the number of U.S. firms that announced they were cutting their dividends during the month was greater than the number of firms announcing they were increasing their dividend payments to investors.  Unless Standard and Poor revises its monthly dividend report (Excel Spreadsheet), what just happened in June 2016 will be the first time that situation has occurred since the official end of the Great Recession in June 2009.  For June 2016, S&P indicates that 75 U.S. firms declared that they were cutting their dividend payments to their shareholders and also that only 70 U.S. firms declared that they would be increasing their dividends.  Going back to January 2004, the earliest month in S&P's historical dividend declaration data, the only time that situation previously occurred was during the months of March 2009 through June 2009, which marked the bottom of the Great Recession.  The following chart zooms in on just the number of dividend cuts announced in each month from January 2004 through June 2016.  Two factors have largely combined to produce this result. First, distress in the U.S. oil and gas industry from falling global oil prices have led many of these firms to announce dividend cuts, although that number has declined in recent months as oil prices have risen from their early 2016 lows.  The other factor may largely be attributed to the U.S. Federal Reserve's threats to hike short-term interest rates in the U.S. over much of the past year, which has negatively impacted financial industry firms and other interest rate sensitive firms, such as mortgage-related Real Estate Investment Trusts.

New York Times Series on Private Equity Misses the Mark -- Yves Smith - Thanks to the press of Brexit, I’m late to comment on a series on private equity that the New York Times ran last week.   They are reminiscent of a McKinsey progress review where the team got a ton of data but didn’t figure out the “so what’s” so they instead dumped a ton of slides in a semi-organized manner on the client to show they had done a lot of digging and initial analysis. You might call this the “Here is a lot of shit, I am sure you can find a pony” school of journalism.   The worst of this is that the fact that the Times appears to regard these pieces as impressive (among other things, they created custom graphics for each, as well as giving them lots of real estate) when the basic issues are all old news. One of the stories, When You Dial 911 and Wall Street Answers, follows two companies that went bankrupt. One, TransCare, was purchased out of bankruptcy but later failed. And it didn’t go into Chapter 11, but a Chapter 7 liquidation, which left its customers stranded, with no emergency service provider. The authors fail to explain how unusual a Chapter 7 failure for a business of reasonable size is. The most likely explanation is that the business was so mired in suits over patient injuries and deaths that no one would touch it. The second, Rural/Metro, had a disastrous run under its first private equity owner, Warburg Pincus. Although the Times tried getting metrics across five customers, their methods differed, but four showed serious declines in performance to patient-endangering substandard levels. Bondholders sued for fraud because Warburg Pincus overstated its likely revenues. Investors who bought the falling safe of the company’s falling bonds didn’t expect the bankruptcy filing. OakTree Capital Management decided to take over the company but it did not halt the decay. Because the Rural/Metro also had ran outsourced fire fighting, the article has a long section on that that comes off as not integrated (and the story was already disjointed).  Despite all the spade work (and the authors mention the use of FOIAs and the analysis of lawsuits), this blog post from Managing Healthcare Costs provided more insight:

Private Equity Funds Balk at Disclosure, and Public Risk Grows - Gretchen Morgenson -- It began last year as a promising push by a few states to require private equity firms that invest on behalf of public pension funds and university endowments to be more forthcoming. But the effort has hit a wall as bills in California and Kentucky intended to shed light on fees and practices at these powerful firms have been either killed or watered down.  One of the bills proposed in California would have required only modest disclosures: the publication of a handful of pages from confidential limited partnership agreements. It was shot down. Even worse, another private equity transparency bill in the state was recently amended to eliminate disclosures about related-party transactions between private equity firms and the portfolio companies they oversee. Fees paid by portfolio companies to private equity funds ultimately come out of the pockets of fund investors, so more sunlight in this area would have been beneficial. "The net effect is that a California public fund would receive much less than a full picture of the related-party transactions," "The missing part of the picture would be the portion of the fees that the private equity firms get to pocket in full." Not to be outdone, some lawmakers in the nation's capital are trying to roll back newer regulations that have given the Securities and Exchange Commission a window onto private equity practices.  This fight against transparency, it's worth noting, coincides with a series of S.E.C. enforcement actions against private equity firms. Stated simply, these cases prove that investors need more, not less, information about what their managers are up to. "Just when they lift the hood on private equity and find some mechanical problems, they want to slam it shut again," said Jennifer Taub, a professor at Vermont Law School. "Having a whole big pot of money in the shadows is not a good idea if you're trying to prevent systemic risk."

New York Times’ Gretchen Morgenson: Private Equity Transparency Bills, Including California Treasurer Chiang’s AB 2833 “Hit a Wall” --Yves Smith - Last fall, California Treasurer John Chiang said he would sponsor private equity legislation that would provide investors in private equity like the giant public pension funds CalPERS and CalSTRS, on whose boards he sits, to combat the problem that, in his words, “Investors pay excessive fees to private equity firms and do not have sufficient visibility into the nature and amount of those fees.” While Chiang backed the Institutional Limited Partners Association effort to increase and standardize fee disclosure, he said more needed to be done. While the initial version of his bill, AB 2833, did a good job of delivering on his promise, subsequent amendments have weakened it so much that we have urged California readers to contact their state Senators and Assemblymen to oppose the bill in its current form as being an empty gesture as opposed to real reform. As we wrote shortly thereafter, one of the experts who provided some of the text of the original bill and was curiously frozen out of the drafting process, Michael Flaherman, in his written testimony to the chairman of the Senate Committee on Public Employment and Retirement, Richard Pan, stated that “….it would set back the cause of private equity transparency for the bill to be enacted as currently written.” Over the weekend, Gretchen Morgenson of the New York Times confirmed these readings of the sorry state of AB 2833 in a broader article on stymied private equity reform efforts. From her column:It began last year as a promising push by a few states to require private equity firms that invest on behalf of public pension funds and university endowments to be more forthcoming. But the effort has hit a wall as bills in California and Kentucky intended to shed light on fees and practices at these powerful firms have been either killed or watered down.One of the bills proposed in California would have required only modest disclosures: the publication of a handful of pages from confidential limited partnership agreements. It was shot down. Even worse, another private equity transparency bill in the state was recently amended to eliminate disclosures about related-party transactions between private equity firms and the portfolio companies they oversee. Fees paid by portfolio companies to private equity funds ultimately come out of the pockets of fund investors, so more sunlight in this area would have been beneficial.

Los Angeles Times: Treasurer Chiang’s Private Equity “Transparency” Bill Fails to Deliver, To Be Weakened Further --  Yves Smith - The Los Angeles Times weighed in on how the Calfornia private equity fee transparency legislation sponsored by Treasurer John Chiang, who sits on the boards of CalPERS and CalSTRS, has had one of its initial supporters, himself a former head of CalPERS Investment Committee, go into opposition against the bill. We wrote earlier about how Michael Flaherman, who has also been a private equity executive and now is a visiting scholar at UC Berkeley, who not only backed the bill but actually provided some of its original language, is campaigning actively against the bill, AB 2833. As much as it is gratifying to see the Los Angeles Times take up the controversy, it is also frustrating to see it miss or mischaracterize some of the underlying issues. The reason legislation like this is so important is that the SEC described the private equity industry as engaging in widespread abuses, including what amounted to embezzlement, in a landmark 2014 speech. Note that we had written about private equity abuses the year before. In addition, the agency made clear that investors like CalPERS and CalSTRS enabled these violations by entering into agreements that did a poor job of protecting their interests.  Shortly after the SEC revelations, major stories in the New York Times and Wall Street Journal described a wide range of misconduct in detail, implicating major firms like KKR, Blackstone, Apollo, Carlyle, and TPG. The SEC has entered into settlements with some of these players and has said more enforcement actions are coming. This is weak tea compared to the scale of the grifting, but at least one can no longer deny that there is gambling in Casablanca.

Exploring Regulatory Capture's Unanswered Questions - RegBlog - Regulatory capture is a problem. This is a point on which there is broad, bipartisan agreement, as demonstrated by a recent nonpartisan forum organized by the Administrative Conference of the United States as well as by this very RegBlog series on this issue. But the answers to several critical questions remain up for debate. For one, what, precisely, is regulatory capture? Further, why is capture a problem? Finally, what can be done about it? To answer these questions, it is worth reviewing the insights of George Stigler, the Nobel Prize-winning economist who is most associated with the concept of regulatory capture. Stigler's economic theory of regulation observed that the government's special resource-which private entities do not possess-is the power to coerce. Interest groups that can convince the government to use its coercive power for their benefit can earn economic rents at the expense of others. With this foundation, Stigler was able to show why regulation tends to get "captured" by well-organized interest groups acting to maximize their own well-being, often at the expense of broader society.  Stigler's contemporaries, James Buchanan (also a Nobel laureate) and economics professor Gordon Tullock, were also concerned about the socially undesirable consequences of regulatory capture and the rent-seeking behavior that accompanies it. They distinguished "rent-seeking"-when people attempt to gain economic rewards through favorable government treatment-from "profit-seeking," when people attempt to create rewards by discovering and acting on new opportunities.

The Elusiveness of Regulatory Capture | RegBlog: Nearly everyone sees regulatory capture – and rightly disdains it. And yet, for a phenomenon so universally decried, capture actually remains quite elusive. The problem with capture is that different people “see” different things. Those on the political left see signs of capture in weak laws or lax law enforcement, while those on the right see capture in strict laws imposing burdens on smaller businesses and new competitors. Can both be correct? Perhaps, but it is also easy for people to talk past each other when talking about capture. First, different people mean different things by “capture.” Some people mean simply that public policy outcomes  exhibit a general bias in favor of one segment of society, such the wealthy, over other segments. Others mean not a general policy bias, but a very specific bias: namely, bias toward firms in the regulated industry that succeed in influencing policy outcomes to reap benefits for themselves at the expense of society overall. (Economists call these benefits “rents.”) Second, irrespective of how people define capture, a question of proof arises. Some view capture as binary condition – an agency either is or is not captured. Others view capture as arrayed along a spectrum. Both views demand  a showing of some level of bias, whether general or specific. But how much bias must exist to say that a regulator has been captured, even if it is just to a small degree?  Third, although capture might be intrinsically problematic, it often is viewed as a cause of other problems, such as chemical accidents, cases of fraud, or instances of market consolidation. When people see that these other problems exist, and when they observe that regulation has failed to correct or prevent them, they infer that capture must have been the root cause. This is why we see a resurgence of interest in regulatory capture in the wake of the 2008 financial crisis, the Gulf Coast oil spill, and other perceived regulatory failures. The only thing is: regulatory problems might have still other causes too.

Bill Black: When Is Crime Not a Crime? When It Is White-Collar Crime - The New York Times published a book review entitled “Thin Blue Lines.” The two books reviewed were about street crimes. Based solely on reading the NYT book review, and wearing my criminology hat, neither book adds materially to the useful literature. The two books, and the book review, however, share a common characteristic that is worth analysis. All three conflate “street crime” with “crime” and “police” with “law enforcement.” The “blue lines,” of course, refer to police, rather than the FBI white-collar crime section that is supposed to investigate elite white-collar crime. If the American police represent “thin blue lines,” then in comparison the pittance of law enforcement personnel charged with investigating elite white-collar crime represent the sheerest tissue paper – so insubstantial that they must be described as diaphanous or gossamer. We are living with the consequences of the three most devastating epidemics of elite financial frauds (liar’s loans, appraisal fraud, and the fraudulent resale of these fraudulently originated mortgages through fraudulent “reps and warranties”) in U.S. history. Not a single executive who led, and became exceptionally wealthy, by leading those epidemics has been imprisoned or even required to pay back the fraud proceeds. But none of this shows up in reported “crime rates” for a reason so basic and so outrageous that it reveals how little our political cronies care about crimes by their elite supporters. The FBI and the Department of Justice refuse to keep statistics on the most damaging white-collar crimes committed by elites.

The Perfect Antidote to Dodd-Frank | Bank Think: To overhaul the Dodd-Frank Act, here is a radical and really good idea from House Financial Services Committee Chairman Jeb Hensarling. The  Financial CHOICE Act, Hensarling's bill, says to U.S. banks: "Don't like the endless additional regulation imposed on you by the bloated Dodd-Frank Act? Get your equity capital up high enough and you can purge yourself of a lot of the regulatory burden, deadweight cost and bureaucrats' power grabs – all of which Dodd-Frank called forth."This Choice bill, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, is not an order to increase your capital. Rather, it's offering a logical choice. Option 1: Put enough of your equity investors' own money in between your creditors and the risk that other people will have to bail them out if you make big mistakes. And you may. Then, the government can't claim you live on the taxpayers' credit, and therefore, can't justify its inherent urge to micromanage. Option 2: Don't get your equity capital up high enough and live with the luxuriant regulation instead. Think of this scenario as the imposed cost of using the taxpayers' capital instead of your own to support your risks.  Depending on how large the explicit costs and the opportunity costs of the regulation are, you might think that the second option will yield higher returns on equity than option one or you might not. Some banks would choose one option, while some would choose the other.  Different choices would create diversification in the banking sector. They would also create highly useful learning over time. One group would end up sounder and make greater contributions to economic growth and innovation. One group would, over time, prosper more than the other.

Fed’s Tarullo Sees More Changes for Big Banks, Criticizes GOP Capital Proposal - WSJ: —The Federal Reserve’s point man on regulation warned that the largest and most complex U.S. banks might have to make further changes to keep pace with the Fed’s postcrisis agenda, and criticized a Republican proposal to give the best-capitalized of those firms an off-ramp to avoid those rules. “The adaptations will vary with the firm,” Fed governor Daniel Tarullo said at a Wall Street Journal/WSJ Pro event Wednesday, referring to large U.S. banks. “But each firm needs to make a judgment, and I believe is making a judgment, as to how its business model should evolve, given the regulatory requirements, particularly on capital and liquidity, that have been put in place.” Mr. Tarullo said that the eight U.S. banks considered crucial to the economy have made substantial progress in reducing risk since the financial crisis. But, he noted, the Fed will raise capital requirements by changing its stress tests later this year, will examine more rigorously the banks’ liquidity through separate tests of their funding practices, and will push the firms to address regulators’ concerns about the credibility of their bankruptcy plans.

Hackers Wanted (Must Be Willing to Work at Bank) | American Banker: It's hard finding a good hacker these days — a hacker to work for banks, that is. Even though cybersecurity jobs can offer six-figure salaries, generous signing bonuses and other perks, banks are struggling to find people to hire. Part of it is perception — banks don't seem nearly as cool as all of the other industries that are just as aggressively targeting the same talent pool. But another — and more serious — factor is that the demand for cybersecurity experts is vastly outstripping supply. The digital security firm Symantec estimates there are 500,000 to 1 million open cybersecurity jobs across the nation that cannot be filled due to a shortage of skilled candidates. By 2020, Symantec expects that number to increase to 1.5 million. Gary Warzala, chief information security officer at PNC Bank, describes the cyber workforce as experiencing negative unemployment. "Clearly, the demand for talented people has never been greater," he said. The stakes could not be higher for banks, which are expected to have fortresslike protection. Indeed, 77% of the 161 directors and senior executives who participated in Bank Director's 2016 risk practices survey ranked cybersecurity as their top concern.

Hack Us and We’ll Pay You: The Case for Using Bug Bounty Hunters It sounds counterintuitive if not downright scary to some bankers: invite hackers to analyze your applications, looking for security holes, and pay out a “bounty” when they find them. But PayPal, Western Union, Square, Simple and other financial services companies that have created or worked with so-called bug bounty programs say they’re an effective supplement for the work done by sometimes-strapped internal security folks. In bug bounty programs – which aren’t new but are almost unheard of in banking – companies officially welcome hackers to search their websites and software applications for security issues. They offer a financial reward for every reported glitch that turns out to truly be a software problem that can be patched. Many bankers contacted for this story didn’t know what a bug bounty program was. Others said, as they often do, that they can’t discuss security. Outside the industry, it's become a common-enough practice that even the U.S. government launched a “Hack the Pentagon” program in March. Hackers have already found 100 vulnerabilities in Department of Defense systems and the program has paid out $15,000 to 1,400 participants. In the absence of such a program, relations with so-called white-hat hackers can get messy. Some software companies have taken legal action against such hackers who have uncovered security weaknesses in their code. FireEye, for instance, filed an injunction last year against Felix Wilhelm, a security researcher for ERNW GmBH who found and exposed a flaw in FireEye’s software that could be exploited by attackers to compromise servers and steal data. He disclosed the flaw to FireEye, which got a court injunction blocking him from discussing the vulnerability at 44CON, a U.K. security conference.

What's the Biggest Threat to Data Security? - American Banker (slides) Chief information security officers at banks say their top priority is keeping data of all kinds (customer, employee, credit, performance, you name it) safe from attacks. They answered candidly when we asked who or what the greatest risks are.

Stress Test 2016: Who Improved, Who Faltered - American Banker - slide show - U.S banks have come a long way from the early days of the stress tests, when it was unclear if any would pass. The majority of banks easily cleared the 5% minimum level for capital under the severely adverse scenario as well as the vaguer qualitative test the Federal Reserve Board imposes, suggesting institutions have finally gotten a handle on the process. Still, it's useful to see which banks improved from last year, as well as the few which fell toward the back of the back.

I’m in Awe at How Fast Deutsche Bank is Coming Unglued -  Deutsche Bank – “the most important net contributor to systemic risks,” as the IMF put it last week after a lag of several years – is having a rough time. Shares dropped 4.2% today to close at a new three-decade low of €11.63, down 48% since July 31 last year, lower even than the low during the doom-and-gloom days of the euro debt crisis and the Global Financial Crisis.  It’s not the only European bank in trouble. Credit Suisse dropped 1.7% today to CHF 9.92, another multi-decade low, down 63% since July 31. Other European banks are getting mauled too. The European Stoxx 600 banking index dropped 3% today to 117.69, approaching the Financial Crisis low of March 2009. If July 31, 2015, keeps showing up, it’s because this was the propitious day when Draghi’s harebrained experiment with negative interest rates and massive QE came unglued, when European stocks, and particularly European bank stocks began to crash.  Deutsche Bank is so shaky that German Finance Minister Wolfgang Schäuble found it necessary to stick his neck out and explain to Bloomberg in February that he has “no concerns about Deutsche Bank.” Finance ministers don’t say this sort of thing about healthy banks. At the time, CEO John Cryan – whose main job these days is propping up Deutsche Bank with his rhetoric – explained ostensibly to frazzled employees that the bank’s position was “absolutely rock-solid, given our strong capital and risk position.”

Banks Need to Adapt to Millennials, Not Vice Versa | Bank Think: For all the hand-wringing about millennials' values, life goals and timelines, it's easy to lose sight of an important fact: Their digitally native ways give us more insight into their needs and wants than any previous generation. While many financial services providers have been waiting for this young client base to "grow up" and adapt to "the real world" before catering to their needs, it should be the other way around: banks need to adapt to millennials, whose behavior is already signaling the future of the industry. Ignoring their needs is nothing short of risking extinction.At FIS, our research found that millennials already make up a third of banked consumers in America. Hardly insignificant, this highly educated and entrepreneurial generation represents a banked client base almost equal to baby boomers. Sure, millennials have been statistically slower to launch careers and families than previous generations; however, those needs are certainly coming.Our data shows American millennials are nearly 40% more likely to anticipate a major life event in the coming 36 months than boomers. As more of these young consumers seek to pay for school, buy a car or start a business, banks will face a tsunami of demand for personal financial services. Are banks ready for it? Not really. A full 86% of banked millennials report that they have no form of financial adviser.This generation will be the largest banking segment soon. Further, they are also poised to inherit trillions of dollars from their parents over the next few decades. Once they need support, what will millennials expect from their banks? Since they are already accustomed to transacting life in clicks and swipes, as opposed to calls and meetings, the answer is fast and easy mobile service. The latest trends suggest that millennials will opt for convenience over a big, trusted name in banking.

California Department of Business Oversight reports big jump in high-interest consumer lending - The volume of consumer loans made in California by institutions other than banks and credit unions rose nearly 50 percent last year, showing a stunning increase in high-interest debt being taken on by people with few other options. The increased borrowing was outlined in a report released Thursday by the state Department of Business Oversight, on institutions regulated under the California Finance Lenders Law. The non-bank lenders regulated under the law include paycheck advance lenders and providers of auto-title loans, where the borrower's car is pledged as collateral. Some of these financial products charge annual interest rates ranging from 30 to 180 percent. Firms licensed under the California Finance Lenders Law loaned a total of $34.1 billion in 2015, up 48.7 percent from the previous year, according to the report. The increase could persuade state lawmakers to impose new rules for high-interest consumer lenders. They have already come under greater federal regulation in recent years with the Dodd-Frank Wall Street Reform and Consumer Protection Act, imposed in the wake of the financial crisis. “The good news is the increased lending activity reflects continued improvement in California’s economic health,” Department of Business Oversight Commissioner Jan Lynn Owen said in a news release. “Less heartening is the data that show hundreds of thousands of borrowers facing triple-digit Annual Percentage Rates.

CFPB Must Address Lenders HMDA Data Privacy Concerns: The implementation date of the Consumer Financial Protection Bureau's final Home Mortgage Disclosure Act Rule is fast approaching and the mortgage industry still has not received any answers in regard to their data privacy concerns. While the privacy issue has been raised repeatedly by those in the mortgage industry, the CFPB has thus far avoided addressing the valid concerns and states that the bureau will use a "balancing test" to "determine whether and, if so, how HMDA data should be modified prior to its disclosure in order to protect applicant and borrower privacy while also fulfilling HMDA's disclosure purposes." The CFPB simply states that at a later date, the bureau will provide a process for the public to provide input regarding the application of this balancing test to determine the HMDA data that will be publicly disclosed. That "later date" is rapidly approaching. Currently there is a lot of public data on the internet and more is added daily. The CFPB also publishes the HMDA data which they collect, and makes it all downloadable and searchable through their online HMDA tool. The National Mortgage Database, a separate joint project between the CFPB and the Federal Housing Finance Agency, is in the works and will also house a lot of loan-specific and possibly personally identifying data. Then there are online county records systems, such as the one used in the five boroughs of New York City, called Automated City Register Information System. All of these databases offer different, identifiable data points about a property and its owner. As widely reported, the new rule will require lenders to provide more than the current data points in today's HMDA reporting. Some of the new data points include borrower age, credit score, a unique loan identifier, property value, application channel, points and fees paid, borrower-paid origination charges, discount points, lender credits, loan term, interest rate and loan originator identifier. The complete list of data points as well as their descriptions can be found on the CFPB's Summary of Reportable HMDA Data — Regulatory Reference Chart. The expansion of these data points expands the risk of possible disclosure of a borrower's personal information, and also opens lenders up to scrutiny surrounding their fair lending practices. Currently, the mortgage industry has no idea how the CFPB is even utilizing the fact that information from multiple databases can be aggregated to re-identify a borrower.

Will Installment Loans Get Painted with CFPB's Payday Brush? - Installment lenders are concerned that efforts by the Consumer Financial Protection Bureau to curb the most abusive practices associated with payday loans will wreak havoc on their business. The CFPB's payday proposal seeks to eliminate some of the worst practices of short-term, small-dollar lenders, including repeatedly rolling over or refinancing loans that trap consumers into cycles of debt. The plan also aims to restrict lenders from directly withdrawing payments from borrowers' bank accounts, which can lead to repeat fees. But some fear the proposal has gone too far by lumping installment loans, a longer-term credit product that has been around for 100 years, in with payday loans, which typically are due at a borrower's next paycheck. "These are really two different markets — they're like apples and oranges," said Bill Himpler, executive vice president of legislative affairs at the American Financial Services Association, the trade group for installment and auto finance lenders. "It would be akin to lumping a hamburger joint like McDonald's and Morton's Steakhouse into the same category just because both are restaurants." The CFPB estimates there will be a 60% to 70% reduction in payday loan volume as a result of its plan, but only a 7% to 11% reduction in the number of borrowers who take out payday loans. The plan would eliminate the ability of lenders to allow borrowers to take out multiple loans, which make up a large share of payday loans being originated. Though both payday and installment loans are offered by some lenders, there are key differences, mostly in the annual percentage rates charged and in state licensing requirements. Installment lenders offer annual percentage rates that range from 36% to 100% or perhaps higher. Payday loans typically have APRs of 350% or more.

Payday Loan Overhaul May Have Big Impact on Credit Reporting - The big three U.S. credit bureaus — Equifax, Experian and TransUnion — have long acted as if payday lending does not exist. The firms compile information on millions of mortgages, auto loans, student loans and credit cards, but not on the expensive short-term credit that often serves as a last resort for those who need cash. An estimated 45 million U.S. adults lack credit scores. And the large credit bureaus' allergy to payday loans, which appears to be mutual, is one important reason why. Rules for payday lenders proposed by the Consumer Financial Protection Bureau promise to reshape the payday loan industry and pull it closer to the financial mainstream. Among the many unanswered questions about the agency's proposal are whether payday lenders will be pulled into the orbit of the big three credit bureaus, and if so, whether that change will benefit subprime borrowers. The CFPB's 1,300-page proposal envisions a sea change in data collection for an industry that has historically relied on post-dated checks to secure repayment. The industry would be subject to new underwriting rules and restrictions on the rollover of loans that will be impossible to obey without the availability of better data on each borrower. So the CFPB is proposing that private-sector firms establish new "information systems" — essentially industrywide databases that would play a role somewhat analogous to the big three credit bureaus. Payday lenders would be required to report their loans to these information systems. The lenders would also have to check the systems to determine whether a customer is eligible for a new loan.

Will a CFPB Commission Ever Happen? -At the end of 2015, there were at least 48 bills pending before Congress that sought to change, defund, or otherwise weaken the Consumer Financial Protection Bureau. None of them passed. Yet some critics of the bureau think there is a renewed chance to change the bureau's structure. They point to the presidential election and recent setbacks to CFPB Director Richard Cordray, including a watchdog's report on employee discrimination and a pending legal challenge to its constitutionality, as laying the groundwork for a change. "If Republicans sweep the election, it's a real possibility," said Justin Schardin, acting director of the Bipartisan Policy Center's Financial Regulatory Reform Initiative. "If Democrats win the White House, it isn't." Schardin noted that the most recent bill, by House Financial Services Committee Chairman Jeb Hensarling, would change the CFPB's name to the "Consumer Financial Opportunity Commission" and give it a dual mandate: consumer protection and competitive markets. "It would change the nature of the agency," Schardin said. Since its inception, the CFPB has faced enormous criticism from Republicans who have sought to replace the current single director with a bipartisan five-member commission and subject the agency to the appropriations process. Some CFPB insiders even see a commission as a positive for Democrats. Having a single director made sense early on, when the CFPB first started. But pivoting to a commission could help prevent a Republican-appointed director from undoing its previous work.

What the Card Settlement Reversal Means for CUs — A federal appeals court decision to toss out the $7.25 billion settlement between merchants and major card networks has re-opened old industry wounds — and spells possible trouble ahead for card-issuing financial institutions, including credit unions. Analysts and industry groups scrambled to make sense of the surprise decision, issued Thursday by the 2nd U.S. Circuit Court of Appeals in New York. The court tossed out the terms of a blockbuster 2012 agreement—one of the largest anti-trust deals in U.S. history—resolving claims that Visa and MasterCard illegally fixed swipe fees on debit and credit card payments. The decision promises to continue what has already been a long and complicated legal battle. The case was first filed in 2006 and, with the latest development likely sending it back through the court system for re-negotiation, there is no end in sight, observers said. It also opens the door to a handful of unfavorable—and expensive—outcomes for card-issuing credit unions and banks. Some financial institutions—who are shareholders in Visa—could see an uptick in legal costs, particularly if negotiations result in a higher monetary settlement for merchants. But perhaps more worrisome is the possibility that the terms of a new deal could result in lower swipe-fee revenue for credit unions and banks, according to industry experts.

Time To Take The Fed's Warning Seriously: CMBS Has "Greatest Ever Monthly Delinquency Increase" -- With three UK-based property funds, among them Standard Life, Aviva and M&G, all "freezing" assets in the past 2 days and suspending redemptions over fears of a swoon in UK housing prices, spreading panic shockwaves around the globe that the Brexit dominoes have come home to roost (to mix and match metaphors), it may not be a bad time time to jump across the Atlantic and look at US real-estate and in particular, commercial properties. As CMBS specialist Trepp wrote today in its weekly TreppWire commentary, the "Trepp CMBS delinquency rate moved noticeably higher in June, as the rate was pushed up by loans that reached their maturity date but were not paid off." It was the fourth straight month that the rate has crept higher following two large decreases in January and February. The delinquency rate for US commercial real estate loans in CMBS is now 4.60%, an increase of 25 basis points from April.  This is in line with recent warnings from the Fed which just two weeks ago cautioned not only about another stock bubble when on June 21 it said that "forward price-to-earnings ratios for equities have increased to a level well above their median of the past three decades" but again warned that commercial real estate remains the most troubled sector: "valuation pressures have remained notable in the commercial real estate sector, to which some small banks have substantial exposures." This includes not just bricks and mortar malls, which are losing bankrupt retail tenants by the hour, but also the collapse in the shale sector.  It also includes a sudden spike in vacant office space. Over the weekend, the Fed's warning was validated not just by Trepp, but also by Morgan Stanley, whose Richard Hill looked at the latest CMBS 2.0 remittance reports and observed that in June, "delinquent loans rose by $142MM, including a potential reps breach." As Hill puts it,"this delinquency increase was the greatest ever." The silver lining: so too was the decline in specially serviced and watchlist loans, as near insolvent loans rolled off to delinquent status.

Small Lenders Fear Fannie, Freddie Credit Risk Transfer Plan: – The Federal Housing Finance Agency has opened the door to experimenting with front-end credit risk transfer transactions, but it is not wide enough for some market players. Trade groups representing small mortgage lenders are concerned that their members will be shut out of front-end transactions and subject to pricing dictated by larger institutions. "It isn't the kind of risk sharing that we have been advocating for," said David Stevens, president and chief executive of the Mortgage Bankers Association. "In order for risk transfers to actually work, we need a solution that is accessible and usable by all lenders large and small." The FHFA issued a request for comment last week on whether and how to offer front-end risk transfers, in which a private mortgage insurance company or investor could bid on the credit risk of newly pooled loans. Fannie Mae and Freddie Mac have so far engaged only in back-end risk transfers, where the loans were closed and seasoned. Many in the industry argue that front-end deals could help with pricing transparency and assist in housing finance reform. But it's unclear where small lenders would fit into these deals. In the FHFA's request for comment, the agency acknowledges that small lenders would likely enter into collateralized recourse agreements, which would be difficult for them. The agency suggested that smaller lenders could participate in upfront credit risk transfers through loan aggregators. But the MBA and other trade groups are concerned about that approach.

FHFA Report Highlights Results of GSEs Nonperforming Loan Sales: — The Federal Housing Finance Agency's first report on the sales of nonperforming loans owned by Fannie Mae and Freddie Mac may seem discouraging at first. Of the 8,849 such loans sold before June 30, 2015, only 24% were resolved, roughly half through foreclosures. Yet the results, released Thursday, also show that a significant percentage of loans sold to investors had better outcomes than nonperforming loans in the portfolios of Fannie and Freddie, according to Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute. Eight months after the loans were sold, 21% of the borrowers avoided foreclosure while 16% were foreclosed upon, according to the FHFA report. That compares to 14% of borrowers of loans held in GSE portfolios who avoided foreclosure and 20% who were foreclosed upon. "What that says is the NPL sales are better at avoiding foreclosure and resolving loans more quickly than leaving the severely delinquent loans in GSE portfolios," Goodman said. "The difference between 21% and 14% seems very material to me." Investors buying nonperforming loans have incentives to offer principal reductions and more flexibility in modifying loans than GSE servicers, Goodman said. But Julia Gordon, an executive vice president at the National Community Stabilization Trust, noted that FHFA report doesn't provide details about the loan modifications or principal reductions used to help the distressed homeowners."One of the things they tout is more foreclosure alternatives were achieved through the note sales. What we don't know is the sustainability of the loss-mitigation that occurred,"

In One Way, the U.S. Mortgage Market Looks Just Like It Did in 2007 | Web Only: The U.S. mortgage market is of course considerably smaller, safer and less accessible than it was nine years ago. The homeownership rate has fallen by more than four percentage points since 2008. At the same time, post-crisis reforms banned much of the risky lending that inflated the nationwide housing bubble, and it became much harder for families to make their first home purchase. But by one important measure — the ability of borrowers to make their monthly payments — today's mortgage market is almost exactly where it was on the eve of the meltdown. In the first quarter of 2016, 94.9% of the residential mortgages serviced by seven big banks were current and performing, according to a report released Friday by the Office of the Comptroller of the Currency. That percentage compared to 94.4% in October 2007, when the OCC first reported the data. During the intervening years, the percentage of mortgages that were current and performing bottomed out at 86.4% in the fourth quarter of 2009. Meanwhile, 0.90% of mortgages during the first three months of 2016 were at some stage of the foreclosure process, the exact same level as in October 2007. That percentage peaked during the first two quarters of 2012, when 4.1% of mortgages were at some stage of the foreclosure process. Since September 2008, approximately 6.2 million U.S. homes have been lost to foreclosure, according to CoreLogic. The nationwide homeownership rate fell this year to 63.5%, its lowest level since 1967.

A New Type of Occupancy Fraud: Fake Investors: Lenders are seeing more attempts at reverse occupancy mortgage fraud, with borrowers typically pretending that their primary residences are investment properties. Non-owner-occupied mortgages usually require the borrower to put more money down and pay a higher interest rate than for a typical residential mortgage. The appeal for fraudsters is that they can skirt minimum-income requirements with non-owner-occupied mortgages by listing rent proceeds as income, failing to disclose that they will be living in the properties and not paying rent. Fannie Mae warned lenders about the scheme, which usually involves multiple-unit properties, in January. According to a Fannie Mae alert, the scheme typically arises from an application for a non-owner-occupied property purchase, with a first-time buyer who is willing to make a large down payment and has significant verifiable liquid assets, but who also has minimal or no established credit and low income. The scheme's growth comes from the new rules that were designed to stop the infamous no doc and low doc loans — loans that were made based on little or no documentation of borrower income. Some consumers have been looking for ways to get around the strict underwriting guidelines created by Qualified Mortgage rules and the ability to repay rule — rules that require lenders to make good-faith efforts to ensure that borrowers will be able to repay their loans. An underwriter at Total Mortgage Services recently came across an application depicting a scenario similar to the Fannie Mae alert: A potential borrower with low income who couldn't meet the debt-to-income ratio test for an owner-occupied home mortgage and who claimed plans to rent out all units in a multi-unit rental property, using the rent income to pay back the loan.

Who Benefits Most From Housing Subsidies? The Wealthy. --The United States is in the midst of an affordable-housing crisis. Nearly 1 in 3 households with a mortgage devotes more than 30 percent of their income to their home. The situation is even worse for renters-more than half of America's 38 million rental households are shouldering a cost burden.   Some of this crisis is fallout from the Great Recession, which brought homeownership rates to historic lows. African-American and Latino households were hit particularly hard, because of predatory-lending practices that targeted racially segregated communities.   Congress supports housing in two main ways: rental assistance programs and homeownership tax programs. In 2015, the price tag for federal rental-assistance programs-which includes Section 8 housing vouchers, public housing, Homeless Assistance Grants, and other programs-was $51 billion. In contrast, two of the largest homeownership tax programs-the Mortgage Interest Deduction and the Property Tax Deduction-cost $90 billion in 2015. That's nearly double the amount spent on public-benefit housing programs.   The important question is: Who benefits?  All told, households making over $100,000 a year received nearly 90 percent of the $90 billion spent on the two tax programs discussed above. Households making less than $50,000 got a little more than 1 percent of those benefits.. There are nearly 8 million low-income homeowners that struggle to pay for housing from month to month. On average, low-income households get about 8 cents per month from these two homeownership tax programs. Eight cents. There are also about 4 million middle-income households paying more than 30 percent of their income on housing. The average monthly benefit from these tax programs for middle-income earners? Twelve bucks. Don't spend it all in one place.  In contrast, the top 0.1 percent of earners-folks with an average annual income of more than $9 million-get an average of $1,236 per month (nearly $15,000 per year) from just these two homeownership tax programs. That federal benefit is much more than the typical cost of rent in most American cities, and it's going to wealthy households who really don't need help keeping a roof over their heads.

MBA: "Mortgage Applications Surge in Latest Weekly Survey" -- From the MBA: Mortgage Applications Surge in Latest MBA Weekly Survey Mortgage applications increased 14.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 1, 2016. ... The Refinance Index increased 21 percent from the previous week to the highest level since January 2015. The seasonally adjusted Purchase Index increased 4 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 23 percent higher than the same week one year ago.  “Interest rates continued to drop last week as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes by the Fed, and mortgage rates for 30-year conforming loans dropped to their lowest level in over 3 years,” said Mike Fratantoni, MBA’s Chief Economist. “In response, refinance application volume jumped almost 21 percent last week to its highest level since January 2015.”  ...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to its lowest level since May 2013, 3.66 percent, from 3.75 percent, with points decreasing to 0.32 from 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 a little this year since rates have declined. With rates falling again this week (below the MBA reported rates for the week ending July 1st), there will probably be a further increase in refinance activity. The second graph shows the MBA mortgage purchase index. The purchase index is "23 percent higher than the same week one year ago".

Goldman Expects Jump In Mortgage Refis, Blames "Burned Out" Borrowers -- Due to the "new lower path for mortgage rates" Goldman is raising their estimate for 2016 MBS Issuance to $1.3 trillion from $1.2 trillion and raising their 2017 MBS issuance estimate to $1.3 trillion from $1.1 trillion. Goldman's team cut their 10-Yr US TSY estimate to 2% from 2.4% ahead of an expected refinancing blitz.   All of this follows "the decision" out of the UK and Goldman's credit group fears the "burned-out" borrower (which consists of 65% of the whole borrower pool) and those borrowers who are "sensitive to a change in rates" will seek to refinance their mortgages as the Fed raises rates (though that action is debatable as Jeff Gundlach said in June). Goldman expects refinancing volumes to increase as rates remain lower for longer in advance of an inevitable Fed rate hike: A large fraction of outstanding conventional mortgage borrowers are on the cusp of refinancing, so a further decline in rates could elicit significant additional refi volumes. Exhibit 1 shows that over 65% of outstanding mortgage borrowers have note rates between 3.5% and 4.5%; these borrowers are the ones whose refi behavior is most sensitive to changes in rates. Prepayments on borrowers with high note rates (> 5.0%) are not very sensitive to changes in interest rates, as these borrowers are already far in-the-money to refi, and are burned-out. Borrowers with note rates below 3.25% are out-of-the-money to refi, and are also insensitive to small rate moves. The borrowers who are now slightly in-the-money are most sensitive to rate changes, and there are many such borrowers. Mortgage universe negative convexity is at -2.0, an 80th percentile level relative to 2000-2016 history, meaning that MBS portfolio durations can move significantly as rates change going forward.

Mortgage Rates at Record Lows -- From Matthew Graham at Mortgage News Daily: Mortgage Rates Back to 3.25% in Some Cases Mortgage rates dropped noticeably today, bringing quite a few lenders down to 3.25% in terms of conventional 30yr fixed quotes on top tier scenarios. For all intents and purposes, these rates are "all-time lows," even though there were several occasions in late 2012 where some lenders offered lower rates. It just depends on what sort of time-frame you want to put on the previous instances of all-time lows. If we're talking about rates that were available for a few days here and there, then we're not quite back to those yet. If we're talking about the lowest stably-held rate for most top-tier quotes, we're back!  Here is a table from Mortgage News Daily:   Home Loan Rates.   View More Refinance Rates

Foreign Interest in U.S. Homes Cools - Miami condo developers, California realtors and others in the housing industry have hoped recent turmoil in the global economy would boost foreign interest in U.S. real estate. New figures suggest the opposite is likely. Purchases of U.S. residential real estate by foreigners who aren’t residents of the United States fell by $10 billion in the year ending March to $44 billion, the lowest level since 2013, according to a survey by the National Association of Realtors released Wednesday. A strong U.S. dollar and weakening economies in Europe, South America and China along with rising U.S. home prices have hurt the purchasing power of foreign buyers. Tighter restrictions by the Chinese government on moving money out of the country also have made it more difficult for people there to buy U.S. homes. The survey looks at two categories of foreign buyers: recent immigrants and non-residents. Purchases by immigrant foreigners actually rose to $59 billion from $49 billion, according to the trade group. The share of non-resident buyers decreased to 41% from about 50% in previous years. Foreigners also bought less expensive homes than they did in the prior year. The average price of homes purchased by foreign buyers fell to about $480,000 from nearly $500,000 in 2015, largely because immigrants tend to buy less expensive homes than affluent non-residents purchasing investment or vacation properties. While foreigners make up a tiny share of the U.S. housing market, they are critical to small, lucrative segments of the industry. Miami and Manhattan developers are relying on foreign buyers to help fill a swell of high-priced condos coming to market in the next couple of years. The high-end housing market in San Francisco and southern California also gets a significant boost from foreign purchasers.

NAR Home Sales Data Shows Bubble II Still Boiling: The NAR released it May report on sales of existing housing–what it calls “Pending Home Sales.” The report covers actual sales contracts reached during the previous month. The NAR reports the data both on a seasonally manipulated (SA) basis and also on an actual basis, not seasonally manipulated (NSA). The media focuses on the SA numbers. In so doing this month, their instant “analysis” reached the wrong conclusion, and we got headlines like CNBC’s: Pending home sales down 3.7%, marking first annual drop in two years or The Wall Street Journal’s: U.S. Pending Home Sales Fell 3.7% in May National Association of Realtors index also suffered its first annual decline since May 2015 In reality, the SA factor overstated the April to May decline. Furthermore, sales did not decline year to year. The NAR’s data on the actual number of contracts in May had the Pending Home Sales Index at 133.2 in May of 2015 and 136.4 this May. That’s a gain of +2.4% year over year. This is not a surprise. Contract data from the national online Realtor firm Redfin had already revealed that May was a record month. Even though Redfin’s data is national in scope and comes from the Realtor’s MLS services, and even though it is released weeks before the NAR report, the mainstream media don’t report it.

CoreLogic: House Prices up 5.9% Year-over-year in May --  The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA). From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 5.9 Percent Year Over Year in May 2016 Home prices nationwide, including distressed sales, increased year over year by 5.9 percent in May 2016 compared with May 2015 and increased month over month by 1.3 percent in May 2016 compared with April 2016, according to the CoreLogic HPI.  ...“Housing remained an oasis of stability in May with home prices rising year over year between 5 percent and 6 percent for 22 consecutive months,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The consistently solid growth in home prices has been driven by the highest resale activity in nine years and a still-tight housing inventory.
This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 1.3% in May (NSA), and is up 5.9% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase. The index is still 7.2% below the bubble peak in nominal terms (not inflation adjusted).

CoreLogic: Home prices keep rising, demand not letting up -- HousingWire: Home prices in May are up both monthly and annually, according to the Home Price Index and HPI Forecast released today by CoreLogic. Overall, home prices, including distressed sales, increased by 5.9% from last year, and 1.6% from April, according to the CoreLogic HPI. "Housing remained an oasis of stability in May with home prices rising year over year between 5% and 6% for 22 consecutive months," CoreLogic Chief Economist Frank Nothaft said. "The consistently solid growth in home prices has been driven by the highest resale activity in nine years and a still-tight housing inventory." It does not seem like the demand will let up any time soon, as the industry continues to predict that mortgage rates will drop still further. In the wake of the United Kingdom’s shocking decision to leave the European Union, experts throughout the U.S. housing industry weighed in on the potential impact of the Brexit.  The general consensus among those experts is that mortgage interest rates will go down, but just how low? Here's the prediction from Fitch  Ratings. “CoreLogic reported a strong rise in house prices in May, in line with the recent run of solid gains,” Capital Economics Property Economist Matthew Pointon said. “With mortgage rates now likely to stay close to record lows for longer, house prices will continue to come under upwards pressure.” The HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. The values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. The HPI Forecast showed that prices will increase by 5.3% annually by May 2017, and by 0.8% month-over-month in June 2016.

Are renters of today worse off than their parents? Examining rental and household income growth going back to 1960. » The rental revolution continues unabated in this country.  While everyone is now trying to be on the home buying train, sales figures don’t really reflect a major shift.  Desires don’t always coincide with what the market is doing.  Prices are largely being driven by tight inventory, investors, and low interest rates.  Prices can be boosted by low rates but rents need to be paid out through real earned income.  This is important to understand especially in Los Angeles County with 10 million people and the majority of households actually being renters.  The reality is, today’s renters are worse off than their parents.  Over the last decade we’ve added 10 million renter households while homeownership has been stagnant – largely by 7 million completed foreclosures.  How bad has the rental situation gotten?  Too poor to buy or even rent.  At least that is the case for millions of Millennials living at home with parents.  Unable to afford even rents, many are staying home.  The data backs this up in a dramatic fashion.  You have anecdotal stories of Taco Tuesday baby boomers sitting on big bucks giving out gifts to kids to buy homes.  While this of course happens, this completely ignores the reality of 2.3 million young adults living at home in California.  Many recent buyers are investors and high income households chasing the low amount of inventory on the market.  For those looking to rent, the market is also intense.Take a look at rent growth and income growth since the 1960s:

Reis: Apartment Vacancy Rate unchanged in Q2 at 4.5% -- Reis reported that the apartment vacancy rate was at 4.5% in Q2 2016 to 4.5%, unchanged from Q1, and up from 4.2% in Q2 2015. The vacancy rate peaked at 8.0% at the end of 2009, and bottomed at 4.2% in 2014 and early 2015.  A few comments from Reis Senior Economist and Director of Research Ryan Severino:  The national vacancy rate was unchanged at 4.5% during the second quarter. However, this was merely due to rounding as demand simply cannot keep pace with the volume of new construction hitting the market. Given the trend over time for increased construction volume and limited demand, vacancy should increase steadily over time. This increase in vacancy is heavily concentrated in the newer properties that are coming online which are having a more difficult time securing tenants, either from the pool of new renters or from the pool of renters in other buildings. The vacancy rate for newly completed properties has been increasing dramatically over the last 12 to 18 months. This is a far cry from just a couple of years ago when the majority of new properties were arriving on the market stabilized or fully occupied. .. Asking and effective rents both grew by 0.9% during the second quarter. This is a rebound from the significant pullback that occurred in quarterly growth rates during the first quarter, though that was likely due to seasonal effects. However, the rising vacancy rate is clearly taking the wind out of landlords' sails, especially for the new completed properties. Concessions are slowly creeping back into the market and newly completed properties are struggling to hit pro forma rents. As vacancy continues to inch higher, it will put continued downward pressure on rent growth.

Reis: Office Vacancy Rate declined in Q2 to 16.0% --Reis released their Q2 2016 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined to 16.0% in Q2, from 16.1% in Q1. This is down from 16.5% in Q2 2015, and down from the cycle peak of 17.6%. From Reis Senior Economist and Director of Research Ryan Severino: For the eighth consecutive quarter, the national vacancy rate declined, falling by 10 basis points to 16.0%. As anticipated, the improvements in the space market are ongoing, but are very slight on a quarter-to-quarter basis. ... Both asking and effective rents grew by 0.6% during the second quarter, the twenty-second consecutive quarter of asking and effective rent growth. These figures represent a modest decline versus the first quarter when asking and effective rents grew by 0.9% and 1.0% respectively. The 12-month changes for asking and effective rent growth both also slowed slightly versus the figures from the first quarter. Rent growth during the second quarter was likely hampered by the relatively weak demand and somewhat poor performance from the labor market.This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual). Reis reported the vacancy rate was at 16.0% in Q2. Office vacancy data courtesy of Reis.

Reis: Regional Mall Vacancy Rate increased in Q2 2016, Strip Mall Vacancy Rate declined --Reis reported that the vacancy rate for regional malls was increased to 7.9% in Q2 2016 from 7.8% in Q1, and unchanged from Q2 2015. This is down from a cycle peak of 9.4% in Q3 2011. For Neighborhood and Community malls (strip malls), the vacancy rate declined to 9.9% in Q2 2016 from 10.0% in Q1, and down year-over-year from 10.1% in Q2 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011. Comments from Reis Senior Economist and Director of Research Ryan Severino: The national vacancy rate for neighborhood and community shopping declined by 10 basis points to 9.9% during the second quarter. Although the rate of improvement is not yet accelerating, net absorption once again outpaced new construction. The vacancy rate for malls increased by 10 basis points to 7.9%. ...Asking and effective rents grew by 0.4% and 0.5% respectively during the second quarter. Although this is a minor pullback from recent quarters, it is only noteworthy because rents have been growing so slowly. On a year-over-year basis, asking and effective rents having grown by just 2.0% and 2.1% respectively. These growth rates are just a tad slower than core inflation. That is weak by historical standards, but is certainly reflective of a market with an elevated vacancy rate. It is highly unlikely that vacancy will fall sufficiently low enough to engender more meaningful rent growth before the onset of the next recession.

Annual U.S. Bankruptcy Filings on Track for 6.7% Decline -- We are at the halfway point for the year, and the U.S. has had 398,000 bankruptcy filings. It is tempting to simply double that figure to get an estimate of what filings will total for all of 2016, but that estimate would be too high. Bankruptcy filings are somewhat more concentrated in the first six months of the calendar, which have accounted for about 52% of yearly filings for the past two years. Extrapolating from recent experience would mean there will be 764,000 filings for the calendar year.  That would be a 6.7% decline in filings from 2015. Back in January, I forecasted a 5% decline or 780,000 filings for 2915. Given that we are well within the confidence interval of that estimate, I will take that. Although we still have half the year left to go, the model I use for the forecasting looks to be holding up. In terms of trends, we have had 68 straight months of year-over-year declines in the daily filing rate. The annualized filing rate per 1,000 currently stands at 2.46. The graph shows a 12-month moving average for filings per 1,000 persons since 2008. The discerning eye will note the tail of the graph is flattening. The year-over-year decline is slowing. Where we saw double-digit declines in 2013-14, the declines are in the 5%-8% figures now. To give a sense of how historically low the current filing rate is, the table lists the filing rate per 1,000 for the past 30 years (on a July - June basis). One has to go back to 1988 to find a filing rate that low. The current filing rate is lower than even 2007, which contains the trough in the filing rate after the rush to beat the effective date of the 2005 bankruptcy law. My hunch is that filings will increase slightly in the coming years but not greatly. The great driver of bankruptcy filings is debt -- quite insightful, I know. Nondischargeable student loan debt has become an increasing component of consumer debt, meaning there are fewer reasons to file bankruptcy. Over the last year, non-student loan consumer debt has increased by about 10%. That will eventually show up in more bankruptcy filings in two or three years -- not 10% more filings but an increase or at least a stop to the declining filing rate.

May 2016 Consumer Credit Annual Rate of Growth Continues to Slow: The headlines say consumer credit rate of annual growth increased from last month. The unadjusted data tells a different story, and continues to decelerate. The headline said: In May, consumer credit increased at a seasonally adjusted annual rate of 6-1/4 percent. Revolving credit increased at an annual rate of 3 percent, while nonrevolving credit increased at an annual rate of 7-1/4 percent. Overall takeaways from this month's data:

  • There were significant backward revisions this month. The published data values for consumer credit growth last month was 6.3 % (unadjusted) and 5.5 % (seasonally adjusted) Vs. the current revised values for last month of 6.4 % (unadjusted) and 4.5 % (seasonally adjusted).
  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013.
  • Student loans growth rate was down 0.3 % month-over-month and year-over-year growth is 11.3 % year-over-year.
  • Revolving credit (credit cards and this series includes no student loans) and has been slightly accelerating since 2010 (although it slightly decelerated this month)...

The market expected (from Bloomberg) consumer credit to expand $15.0 B to $18.5 B billion (consensus = $16.0 billion) versus the seasonally adjusted headline expansion of $18.6 billion reported. Note that this consumer credit data series does not include mortgages.

Consumer Credit Jumps $19 Billion In May Thanks To New All Time Highs In Student And Auto Loans -- The latest consumer credit report confirmed what we have now known for years: revolving credit remains stagnant at best, with just $2.3 billion in credit card debt added in May, a modest rebound from last month's $1.4 billion but certainly nowhere near pre-crisis monthly increase levels. Why not? Because US consumers once again found a way to "fungibly" convert non-revolving credit, namely auto and mostly student loans, into purchasing power. And sure enough, in May another $16.2 billion in non-credit card debt was added, bringing the total monthly increase to $18.55 billion, above the $16 billion consensus. What this means is that for one more month Americans became even more encumbered by record amounts of student debt and car loans. Finally, when it comes to the all too generous sources of consumer credit, one entity sticks out.

A staggering percentage of Americans are too poor to shop | New York Post: Retailers have blamed the weather, slow job growth and millennials for their poor results this past year, but a new study claims that more than 20 percent of Americans are simply too poor to shop. These 26 million Americans are juggling two to three jobs, earning just around $27,000 a year and supporting two to four children — and exist largely under the radar, according to America’s Research Group, which has been tracking consumer shopping trends since 1979. “The poorest Americans have stopped shopping, except for necessities,” said Britt Beemer, chairman of ARG. Beemer has been tracking this subgroup for two years, ever since his weekly surveys of 15,000 consumers picked up that 21 percent of consumers did not finish their Christmas shopping in 2014 due to being too busy working. That number grew to 29 percent last year, and Beemer dug in to learn more about them, calling them on holidays. He estimates that this group has swelled from 6 million households four years ago, because their incomes have not kept pace with expenses like medical costs. Nearly half of all Americans have not seen an increase in salary over the last five to seven years, and another 28 percent have seen their take-home pay reduced by higher medical insurance deductions or switching to part-time jobs, ARG found.“It’s scary when you start to see things that you’ve never seen before,” said Beemer. “People are so pessimistic about their future.” Most of those living on the edge — 68 percent are women between the ages of 28 and 38 — work in retail or in call centers, according to Beemer.

Gallup US ECI July 5, 2016: Gallup's U.S. economic confidence index averaged minus 14 in June, the same reading as in April and May. Confidence ticked slightly higher earlier in the month with the index averaging minus 12 in each of the first two weeks but retreated near the end, with subsequent weekly readings of minus 15 and minus 17. Gallup's June data show no immediate effect on Americans' confidence in the U.S. economy. The referendum did cause instantaneous turmoil in U.S. markets, which have since recovered, but the long-term effect of Brexit on the U.S. economy -- and by extension, Americans' confidence in it -- is unclear. Americans' economic confidence began to slide in the first week of June prior to the Brexit vote and remained lower the following week, perhaps related to the anxiety leading up to the British referendum. Although the latest weekly figure is on the low end of what Gallup recorded in 2015 and thus far in 2016, it is much higher than all monthly readings from 2008 to 2011. In June, the current conditions score registered minus 6, the result of 25 percent of U.S. adults rating the current economy as "excellent" or "good" and 31 percent rating it as "poor." June's result is consistent with the minus 1 to minus 7 range for this component since April of last year. Meanwhile, the economic outlook score in June remained at minus 22, the same as in May and the lowest this component has been since November 2013. The outlook score is based on 37 percent of U.S. adults saying the economy is "getting better" and 59 percent saying it is "getting worse."

Dallas Massacre Boosts Gun-Maker Stocks -- As a continuation of our comments from Thursday afternoon, we are watching gun-maker stocks skyrocket this morning as the country prepares for perhaps more restrictive measures on how guns can be purchased in the US.  Yesterday we said in our piece As Gun Violence Drives Sales, Shooting Ranges May Aid Local Education Efforts " each violent event brings about increased government chatter of more regulation which then sparks fear in gun-owners and results in a spike in background checks and typically boosts sales." After the tragedies in Dallas, Baton Rouge, and Minnesota, it's no wonder our charts look like this today:

Energy's Impact on Inflation Expectations - San Francisco Fed -  Some closely watched measures of inflation expectations have been in gradual decline over the past five years. Over the same time, oil prices have fallen dramatically. Although the movements in energy prices are normally considered temporary, they appear to have played a large role in pushing down some longer-term forecasts for consumer price index inflation from professional forecasters. . This Economic Letter assesses the role of energy price inflation in the decline of the median 10-year SPF projection for CPI inflation. We find that movements in energy prices can explain about three-fourths of its decline over the past five years. Specifically, our results suggest that if forecasters' expectations of "noncore" inflation, which is driven mainly by energy prices, had remained at their 2011 level, the 10-year SPF would currently be about 0.15 percentage point higher. Overall, our analysis reveals that energy price projections are playing a large role in the decline in professional inflation forecasts because of their effects on forecasters' anticipations in the shorter run.

California Issues Subpoenas To Oil And Gas Companies In Price-Fixing Probe - Chevron Corp, ExxonMobil Corp, Shell, Phillips 66, Valero Energy Corp. and Tesoro have all received subpoenas from California Attorney General Kamala Harris. The subpoenas are part of an inquiry into why gas prices in the state are higher than those in other states.The California AG’s office wants information regarding maintenance shutdowns at refineries as well as pricing, as they may relate to shortages that drive up prices. Chevron and Valero have pledged their cooperation, while Exxon and Phillips 66 have not commented on the subpoenas. Tesoro and Shell had yet to respond as of Thursday. The Western States Petroleum Association said that its members would cooperate as well.  Association President Catherine Rehies-Boyd stated that she expected the findings to mirror those of the past: that prices in California are driven by the market. In 2006, the California Energy Commission (CEC) conducted an investigation similar to the one launched by Harris. That investigation did not uncover any evidence that oil companies had manipulated prices. The CEC has had an advisory panel review gas prices in the state over the last few months in order to determine if the state needs to take action to protect consumers.

What Happened When Gasoline Prices Plunged? We Bought More Gas - What was the American response to cheap gasoline? Buy more gasoline. That’s at least part of a fairly nuanced picture the J.P. Morgan Institute found after analyzing (anonymized) transaction records from 1 million of the bank’s credit and debit cards. When crude oil prices plunged in 2014, many economists and analysts expected households would splurge, offering a boost to consumer spending numbers and helping support the economy. Instead, the results were mixed and evidence of a cheap-oil dividend often elusive. Federal Reserve Chairwoman Janet Yellen last month estimated the sharp fall in gasoline prices worked out to an average $780 in savings per household last year and another $420 through May of this year. J.P. Morgan’s think tank found more modest, but still significant savings among its cardholders in 2015. “Households had the potential to save $630 at the pump, of which they spent the majority—58%. This spending provided more than a $200 boost to spending on non-gas goods and services, primarily restaurants and retailers. The lower gas prices also caused significant changes in household transportation choices, leading people to spend $150 more at gas stations and spend less on transit.” Middle-income households—in the $43,100 to $56,500 per year range—saw a $477 drop in gas spending from 2014 to 2015. That’s equal to about 1% of income or more than half of one month’s housing costs for a typical family, according to the report. Savings were biggest in the Midwest and South and the lowest on the West coast and urban areas in the Northeast.

Gas Pump Skimming At New Records This Holiday Weekend | Gas pump skimming has always been popular among identity thieves, probably as popular as ATM skimming because it is apparently simple to attach a card-reading device to the legitimate card slot on both ATMs and pumps. The devices are getting smaller and cheaper and the transfer of data is now done wirelessly, via Bluetooth. In other words, ID and card detail theft is getting even easier, and as a consequence, all the more harmful. In 2014 alone, in the U.S., fraudsters stole the credit card details of as many as 31.8 million people, which was three times as many as in the previous year. And last year, over the first four months alone, non-ATM skimming rose by a stunning 316 percent.  It seems there is little the authorities and the gas stations can do. Attempts are being made to tighten the penalties for gas pump skimming in some states, such as Florida, or increase the frequency of pump checks, in Kentucky. It’s questionable how the new Florida law will turn out in terms of demotivating criminals to rig gas pump card readers, but practical measures such as the ones applied in Kentucky and elsewhere seem to be doing some good. It doesn’t matter how often gas station management and local law enforcers check the pumps, whatever CCTV they rely on, there is always a way for the criminals: they come during the night when the station’s closed and the cameras are off; they use trucks to block the pump to be rigged from view; and so on.

U.S. Auto Sales Hit Record in 1H16, SAAR Falls in June - U.S. light-vehicle sales improved 1.5% year over year to 8.65 million units in the first half of 2016, per Autodata. This represents a new record for first-half sales results. Sales increased 2.5% year over year to 1.5 million units in Jun 2016. However, sales on a seasonally adjusted annualized rate (“SAAR”) basis declined to 16.68 million units in the month from 17.46 million units in May 2016 and 17.01 million units in Jun 2015. Product segments like trucks and utility vehicles recorded higher sales in June. However, car sales declined in the month. General Motors was the leader in terms of sales volume for Jun 2016. Among the six major American and Japanese automakers, Nissan recorded the maximum year-over-year sales improvement in the month.General Motors recorded 255,210 vehicle sales in June, marking a 1.6% year-over-year decrease. While retail sales improved 1.2%, commercial deliveries fell 7%. Sales in the first half of 2016 declined 4.4% year over year to 1.44 million units. Ford Motor Co. F reported a 6.4% increase in U.S. sales from the year-ago period to 240,109 vehicles in Jun 2016. Sales volume of the Lincoln brand vehicles advanced 5.8% year over year to 8,809 units in the month. Sales of the Ford brand improved 6.4% year over year to 231,300 vehicles. In the first half of 2016, Ford’s sales increased 4.6% year over year to 1.35 million units. FCA – controlled by Fiat Chrysler – recorded a 7% year-over-year rise in sales to 197,073 vehicles in Jun 2016. This marks the best June sales for the group since 2005. Sales increased 6% year over year to 1.15 million units in the first half of 2016.

Are vehicle sales warning of a US slowdown? --American interest rates imply the economic outlook has worsened considerably in the past eight months. Optimists think the markets are wrong, pointing to the continued improvement of the job market and the rebound in consumer price inflation. But other data corroborate the pessimism of the fixed-income markets. Recall the world five months ago, when fears of a downturn were far more pronounced than today. Back then, plunging industrial commodity prices, yawning risk spreads, and sharp declines in stock prices led many to worry a downturn was imminent. When we looked at the data we were cautiously optimistic, noting previous recessions had been mostly attributable to sharp contractions in residential construction and spending on motor vehicles, which in turn were often associated with big changes in credit conditions: Back then, both categories of spending seemed robust, with credit ample, terms getting even looser, and the drop in oil prices boosting household disposable income. While the outlook for housing remains healthy — new construction starts are up about 12 per cent over the previous year, the fastest sustained pace in more than two years — the figures on cars and trucks are less encouraging. (Our sources for what follows are tables 7.2.3B from America’s National Income and Product Accounts, published by the Bureau of Economic Analysis, which are quarterly, the BEA’s monthly supplemental table on motor vehicles, and the Federal Reserve’s consumer credit data.) American demand for motor vehicles seems to have peaked in the middle of 2015 and has since declined about 3.5 per cent:

Traffic deaths surged in 2015 as driving hit new record (AP) — Traffic deaths surged last year as drivers racked up more miles behind the wheel than ever before, a result of an improved economy and lower gas prices, according to preliminary government data released Friday. Fatalities rose 7.7 percent to 35,200 in 2015, the National Highway Traffic Safety Administration said. That overall rate was significantly outpaced by non-motorist traffic deaths: Bicycle fatalities were up 13 percent; pedestrian deaths rose 10 percent, and motorcyclist deaths rose by 9 percent. Last year was the deadliest driving year since 2008, when 37,423 people were killed. It was also the year in which American drove 3.1 trillion miles, more than ever before. The fatality rate for 2015 increased to 1.12 deaths per 100 million vehicle miles traveled (VMT), up from 1.08 deaths in 2014. The information comes as tens of millions of Americans were hitting the road for the Fourth of July holiday, one of the busiest and deadliest days on the year on the nation’s roadways. Historical data show that, after peaking in the 1970s, traffic deaths have fluctuated quite a bit while generally trending downward, according to the Insurance Institute for Highway Safety. Large dips in deaths have corresponded to shocks to the economy: the oil embargo of the mid-1970s, the recessions of the early 1980s and early 1990s and the more recent downturn that began with the subprime mortgage crisis. “It’s not just that Americans drive more miles when the economy improves; it’s the kind of miles they drive,” said Russ Rader, a spokesman for the insurance institute. “What comes back after a recession is the optional driving that’s riskier, like going out on the weekends or taking long trips — different driving than the daily commute.”

Without Government Intervention, Self-Driving Cars Could Make Our Lives Worse -- In a February 4, 2016 letter, the National Highway Traffic Safety Administration gave Google an important break in its quest to bring self-driving cars to the marketplace.  This project had been stymied by legal concerns about just who should be regarded as the “driver” of such vehicles, when they aren’t being directly piloted by any of their passengers. The answer, according to the NHTSA, is that the driver is the car itself, and that Google’s cars “will not have a ‘driver’ in the traditional sense that vehicles have had drivers during the last more than one hundred years.”  There remain many unanswered questions about this new technology, and the NHTSA itself insists that it remains an open question whether self-driving cars can be made compatible with federal safety standards. One sticking point is that Google’s current design doesn’t give the rider any ability to take control of the car, even in an emergency, since it has no steering wheel and no brake pedals. But there are problems that go beyond the caution of government bureaucrats. One of them has to do with the piecemeal, individualized way in which Google wants to introduce this technology. And the second gets to a common misapprehension about the introduction of labor-saving technologies and the myths of perfect automation that accompany them.  Robot cars have become remarkably good at navigating the physical environment and navigating around other cars—provided that those cars are self-driving as well. But a study by two University of Michigan researchers found that when mixed with regular traffic, self-driving vehicles got into crashes at higher rates than traditional cars. The California Department of Motor Vehicles has reported 12 accidents involving self-driving vehicles through February 2016. In all but the most recent case, the accident was ascribed to human error, not to the car software.

"The US Economy: Off the Rails? -- As we indicated last January, the weekly rail traffic report published by the Association of American Railroads ("AAR") can provide a reasonable snapshot of US economic performance almost in real time by looking at diverse categories of transported goods and commodities. It can also highlight important changes in trends and areas of weakness, or red flags. So let's see what these indicators are telling us midway through 2016. We start with rail intermodal traffic, which registers the long-haul movement of shipping containers and truck trailers by rail whenever combined with (a much shorter) truck movement at one or both ends. This covers a broad range of goods that Americans consume regularly, from laptops to frozen chickens. Since consumption drives the US economy this should give us some clues on recent performance overall. As in the remainder of our analysis, the grey cloud in the graph above (in units) shows the maximum and minimum volume range recorded for the same week over the five years prior (2011-2015). The green line shows the readings so far this year. And as we can see, these have been quite lackluster since the start of the second quarter, after a strong start of the year. Is this telling us something? Yes it is. To put these readings into perspective, we have accumulated year-to-date ("YTD") values going back to 2006, as shown in the graph below (in MM units).

Factory Orders July 5, 2016: May was a weak month for the factory sector as new orders fell 1.0 percent and show specific weakness in capital goods. New orders for core capital goods (nondefense ex-aircraft) fell 0.4 percent following a 0.9 percent drop in April while shipments fell 0.5 percent to nearly reverse April's 0.6 percent gain. Commercial aircraft orders, which have been soft, improved on the month with vehicle orders, where growth has been respectable, also showing a bounce. Monthly weakness in transportation came from defense aircraft and ships & boats, two smaller components that show large double-digit declines. Excluding transportation, factory orders inched up 0.1 percent on the month. This report would be weaker were it not for price-related gains in oil-related subcomponents, specifically on the non-durables side where orders rose 0.3 percent. Durables orders fell 2.3 percent on the month, 1 tenth deeper than last week's advance report for this component. Weakness in capital goods means weakness in business investment and reflects weakness in business expectations. And expectations aren't getting any lift from Brexit. Weakness in capital goods also means extended trouble for the nonresidential investment component of the GDP report, here trouble for the second quarter.

U.S. Factory Orders Pull Back In Line With Estimates In May - - New orders for U.S. manufactured goods pulled back in line with estimates in the month of May, the Commerce Department revealed in a report released on Tuesday. The report said factory orders fell by 1.0 percent in May following a 1.8 percent jump in April. The drop in orders matched economist estimates. The decrease in factory orders was primarily due to a sharp pullback in durable goods orders, which tumbled by 2.3 percent in May after surging up by 3.2 percent in April. Meanwhile, the Commerce Department said orders for non-durable goods rose by 0.3 percent in May after climbing by 0.4 percent in April. The report also showed that shipments of manufactured goods were virtually unchanged in May following a 0.4 percent increase in the previous month. Inventories of manufactured goods edged down by 0.1 percent in May, matching the modest decrease seen in April. The inventories-to-shipments ratio subsequently came in at 1.36 in May, unchanged from the previous month.

U.S. Factory Orders Drop in May; Military Spending Plunges - — Orders at U.S. factories dipped in May, dragged down by less demand for steel, aluminum, furniture, electrical appliances and military aircraft.The Commerce Department said Tuesday that factory orders fell 1 percent in May, after gains in the two prior months. So far this year, orders for manufactured goods have dropped 1.9 percent to $2.2 trillion compared to the same period in 2015.The decline suggests that U.S. manufacturers have yet to fully recover from the sting of weaker economic growth worldwide. Measures of factory activity increasingly look mixed, with some still showing the pain caused earlier this year by a stronger dollar hurting exports and lower oil prices leading to cutbacks in orders for equipment and pipelines.Demand in a category that serves as a proxy for business investment —non-military goods that exclude the volatile aircraft category_slipped 0.4 percent in May. Orders for military aircraft, a volatile category, plummeted 35.3 percent in May. The decline was compounded by drops in demand for military communications and navigation equipment. Demand for primary metals such as iron, steel and aluminum fell 1.8 percent. Orders for electrical appliance and furniture also tailed off.Offsetting some of those declines was slightly greater demand for motor vehicles and machinery.

Factory Orders Declined by -1.0% for May --The Manufacturers' Shipments, Inventories, and Orders report shows factory new orders declined by -1.0% for May.  That's after April new orders increased 1.8%.  Durable goods new orders by themselves dropped by -2.3% for May after an April 3.2% icnrease.  Transportation new orders plunged by -5.7%.  The year to date in comparison to the same time period in 2015, new orders are down -1.9% while just durable goods new orders are up 1.6%.  Overall things look sluggish at best.  The Census manufacturing statistical release is called Factory Orders by the press and covers both durable and non-durable manufacturing orders, shipments and inventories. While transportation equipment new orders plunged by -5.7% , motor vehicles bodies & parts new orders increased by 0.8%.  Volatile aircraft new orders increased 0.8% in nondefense and declined in defense aircraft new orders by -35.3%.  Core capital goods new orders decreased by -0.4%.  The previous month showed a -0.9% decrease.  Core capital goods are capital or business investment goods and excludes defense and aircraft.  This is indicating slower future economic growth.  Nondurable goods increased by 0.3%.  Manufactured durable goods new orders, decreased -2.3%, shown below.  Shipments had no change for the month.  Nondurable goods shipments increased 0.3%.  Durable goods shipments on the other hand decreased -0.2% as machinery shipments dropped by -0.9%  Core capital goods shipments decreased by -0.5%.  Core capital goods shipments go into the GDP calculation.  Below is a graph of core capital goods shipments.Inventories for manufacturing overall were down slightly by -0.1% . Durable goods inventories decreased by -0.3% while nondurables increased 0.1%.   The inventory to shipments ratio was 1.36, the same as April.  When ratios increase it can imply economic sluggishness.Unfilled Orders increased 0.2%.  Core capital goods unfilled orders declined by -0.3%.  Motor vehicles unfilled orders increased 1.0%.  Some in the press are claiming this bit of news erases the bad news of declining new orders.  As one can see core capital goods unfilled ordered declined so there is no real silver lining in the unfilled orders percentage increase.One might notice the trend in the graphs and it all isn't good news for manufacturing.  All graphs are showing long term trend declines. Part of this report goes into calculating GDP.  The BEA takes this report, called M3, and uses the shipments values to calculate investment in private equipment, investment in software.  Manufacturing inventories also goes into the changes in private inventories GDP calculation.  At the bottom of this post is a little more information to estimate part of the GDP investment component.

WTF Chart Of The Day - Factory Orders Collapse To Longest Streak In US History -- For the 19th month in a row, US Factory Orders decline YoY (-1.2% for May) with a 1% drop MoM. Simply put, in 60 years of historical data, the US economy has never, ever suffered a 19 month stretch of consecutive annual declines... And yet we are supposed to believe there is no recession? What happens next? Charts: Bloomberg

Domestic Trade Is Disintegrating: Heavy Truck Orders Plunge To Lowest Since 2010 -- Who says you need trade and logistics to maintain the S&P within 2% of its all time high? Notthe Fed, that's who, and it's a wonderful thing because the state of US heavy trucking - the backbone of domestic trade infrastructure and logistical supply chains - suggests the US economy is in a far more dire state than the Fed would ever admit. According to the latest data from ACT Research released today, June orders for new heavy-duty, or Class 8, trucks plunged to just 13,100, the lowest number since 2010 according to the WSJ (and since 2012 according to Bloomberg, but no need to split hairs here) indicating that trucking companies - the forward-looking bedrock of any viable recovery along with rails - expect little relief from a weak freight market and sluggish economic growth. This month’s order activity was the lowest monthly total since July 2012 and the worst June since 2009. As the WSJ reports, Trucking companies ordered 13,100 Class 8 trucks, which are used for long-haul routes, the fewest orders since the third quarter of 2010 and a more-than 30% drop from last year. With the manufacturing levels depressed thanks in part due to the strong dollar, and retail inventory levels high, freight volumes have not kept up with the ramp up in truck orders in recent years, leading to overcapacity, said Kenny Vieth, ACT’s president. Truck orders plummeted last fall and have held at low levels throughout 2016. “In a nutshell, Class 8 sales far outpaced freight creation through 2015 and early 2016, causing a capacity glut, which the industry is now paying for” with lower profits, Mr. Vieth said.

Rail Week Ending 02 July 2016: Rail Improves Affected By A Mismatch Of Holiday Weeks. June Rail Movements Down 6.3%: Week 26 of 2016 shows same week total rail traffic (from same week one year ago) expanded according to the Association of American Railroads (AAR) traffic data. The short term rolling average's contraction continues to moderate - but this comparision is affected by the 4th of July being in a different week last year (was in week number 27 in 2015). The deceleration in the rail rolling averages began over one year ago, and now rail movements are being compared against weaker 2015 data.A summary of the data from the AAR: Carload traffic in June totaled 1,245,025 carloads, down 7 percent or 93,687 from June 2015. U.S. railroads also originated 1,295,240 containers and trailers in June 2016, down 5.6 percent or 76,920 units from the same month last year. For June 2016, combined U.S. carload and intermodal originations were 2,540,265, down 6.3 percent or 170,607 carloads and intermodal units from June 2015. In June 2016, six of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with June 2015. These included: grain, up 13.8 percent or 12,982 carloads; miscellaneous carloads, up 17 percent or 4,569 carloads; and waste and nonferrous scrap, up 16.4 percent or 2,907 carloads. Commodities that saw declines in June 2016 from June 2015 included: coal, down 16.4 percent or 73,194 carloads; petroleum and petroleum products, down 22.2 percent or 15,415 carloads; and crushed stone, gravel and sand, down 6.6 percent or 7,727 carloads. Excluding coal, carloads were down 2.3 percent or 20,493 carloads in June 2016 from June 2015. Total U.S. carload traffic for the first 26 weeks of 2016 was 6,295,216 carloads, down 12.3 percent or 886,579 carloads, while intermodal containers and trailers were 6,713,003 units, down 2.1 percent or 147,056 containers and trailers when compared to the same period in 2015. For the first six months of 2016, total rail traffic volume in the United States was 13,008,219 carloads and intermodal units, down 7.4 percent or 1,033,635 carloads and intermodal units from the same point last year.

Trade Deficit at $41.1 Billion in May -- From the Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $41.1 billion in May, up $3.8 billion from $37.4 billion in April, revised. May exports were $182.4 billion, $0.3 billion less than April exports. May imports were $223.5 billion, $3.4 billion more than April imports.   The trade deficit was larger than the consensus forecast of $40.0 billion.  The first graph shows the monthly U.S. exports and imports in dollars through May 2016. Imports increased and exports decreased in May. Exports are 10% above the pre-recession peak and down 4% compared to May 2015; imports are 4% below the pre-recession peak, and down 3% compared to May 2015. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $34.19 in May, up from $29.48 in April, and down from $50.76 in May 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012.

May 2016 Trade Data Continues To Be Soft.: A quick recap to the trade data released today continues to paint a relatively soft view of global trade. The unadjusted three month rolling average value of exports and imports decelerated (but all rolling averages are in contraction). Many care about the trade balance which worsened. .

  • Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported up month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth up 6.9 % month-over-month (unadjusted data) - down 0.9 % year-over-year (up 4.1 % year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating. Note that the improvement was mostly due to oil - and not economically positive.
  • Exports of goods were reported down, and Econintersect analysis shows unadjusted goods exports growth acceleration of (not including services) 0.7 % month-over month - down 6.7 % year-over-year (down 2.2 % year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating.
  • The change in seasonally adjusted (but not inflation adjusted) exports was insignificant (an not due to any specific cause). Import increase was due to oil.
  • The market expected (from Bloomberg) a trade deficit of $-40.5 B to $-38.4 B (consensus $-40.0 billion deficit) and the seasonally adjusted headline deficit from US Census came in at a deficit of $41.1 billion.
  • It should be noted that oil imports were down 7 million barrels from last month, and up 22 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

US Trade Deficit Jumps In May As Stronger Dollar Puts A Lid On Exports -- Confirming once again that a rising dollar is not good for US trade, moments ago the dept of commerce announced that the goods and services deficit was $41.1 billion in May, up $3.8 billion from $37.4 billion in April, and worse than the $40 billion expected. In fact, this was the first miss on expectations (a bigger than expected deficit) since October 2015. The rising deficit was a function of a modest decline in exports - courtesy of a stronger dollar - which dropped by $0.3 billion to $182.4 billion, while May imports rose $3.4 billion to $223.5 billion. The May increase in the goods and services deficit reflected an increase in the goods deficit of $3.7 billion to $62.2 billion and a decrease in the services surplus of $0.1 billion to $21.1 billion. Year-to-date, the goods and services deficit decreased $7.2 billion, or 3.5 percent, from the same period in 2015. Exports decreased $47.2 billion or 4.9 percent. Imports decreased $54.3 billion or 4.7 percent. Breaking the trade components down, Exports of goods decreased $0.2 billion to $119.8 billion in May. Exports of goods on a Census basis decreased $0.4 billion:

  • Capital goods decreased $0.8 billion.
  • Civilian aircraft decreased $0.4 billion.
  • Computer accessories decreased $0.3 billion.
  • Automotive vehicles, parts, and engines decreased $0.3 billion.
  • Other parts and accessories decreased $0.3 billion.
  • Foods, feeds, and beverages increased $0.5 billion.

On the imports side, Imports of goods increased $3.4 billion to $182.1 billion in May. Imports of goods on a Census basis increased $3.3 billion.

  • Industrial supplies and materials increased $2.3 billion.
  • Nonmonetary gold increased $1.0 billion.
  • Crude oil increased $0.7 billion.
  • Consumer goods increased $1.3 billion.
  • Capital goods decreased $0.9 billion.
  • Civilian aircraft decreased $0.9 billion.

Why trade deficits are worse for the economy than they used to be -  Under normal circumstances, foreign trade is supposed to affect the types of jobs available to workers, not the number. There are a couple of reasons why. For starters, whatever money flows out of the U.S. thanks to our import tab eventually comes back to us as investment; after all, countries have to do something with all the dollars they earn selling us flat-screen TVs, oil, and sneakers. More often than not, that means buying U.S. Treasury bonds, which in turn keeps our interest rates low, allowing businesses here to borrow cheaply and invest. Beyond that, if the job market ever gets too soft, the Federal Reserve can ordinarily cut rates to push the economy back to full employment. So when T-shirt imports from China put a bunch of American textile factories out of commission, to take just one example, other businesses should emerge to take their place. But these are different times. Interest rates have been stuck near zero ever since the Great Recession as the economy has struggled to fully recover, meaning Treasury purchases by our trade partners don't do us much good. (If you buy Larry Summers' theories about secular stagnation, those capital inflows might actually be harmful.) And in the sick, sad economic world of the zero lower bound, our central bankers at the Fed can't do much to boost the labor market, either; their monetary policy tool kit is all but tapped out (some countries have tried negative rates, but the effects haven't exactly inspired confidence yet). So during the post-financial crisis era, our trade deficit has indeed turned into a drag on employment—a point Paul Krugman has been making off and on for several years now, as has the lefty Economic Policy Institute. I assume that Trump himself hasn't considered any of these nuances, but at least his mercantilist instincts—which date back at least to his days of Japan-bashing in the 1980s—correspond to some sort of present day reality.

There Are a Couple of Reason To Think the U.S. Trade Deficit Will Continue to Rise This Year - The May trade data is out, and, the trade deficit widened.  Imports jumped. Real non-petrol goods imports rose by $2 billion from April. That makes some sense. They had been a bit too soft in the first part of the year for an economy that continues to grow, with both March and April on the weak side.  Exports continue to stall. May’s real non-petrol exports were down about $2 billion from April, but I would not focus on the month to month fall. The underlying trend remains pretty clear: year-over-year non-petrol export volumes are down two to three percent. Weak global growth and the lagged impact of the dollar’s rise in 2014 and all. This is unlikely to change in an real way over the course of the year: the fall in exports to commodity exporters should slow, but Brexit uncertainty will weigh on Europe and the renminbi’s slide will make China a bit more competitive. And going forward there will be an additional dynamic at play: the improvement in the oil balance is going to (partially) reverse. The following chart shows all of the trade data as a trailing 3 month sums (see Calculated Risk for the monthly data), and it uses the nominal rather than the real data. March offsets May, so the non-petrol deficit looks to be heading down. As the March and April data points drop out, that is likely to change. But what really stands out—apart from the 2013 to 2015 rise in the non-petrol deficit, is the spectacular fall in the petrol deficit. In the first few quarters the U.S. oil deficit was tiny.  It is safe to project that this will change. The oil import bill is price times quantity. Prices are going to be higher than the $30 a barrel the United States paid on average for imported crude in the first five months of the year. And with U.S. crude production now trending down, import volumes will start inching up. The monthly data actually already shows a rise in June.

June 2016 ISM Services Index Improves.: The ISM non-manufacturing (aka ISM Services) index continues its growth cycle, and improved from 52.9 to 56.5 (above 50 signals expansion). Important internals improved and remain in expansion. Market PMI Services Index was released this morning, was statistically unchanged and remains in expansion.. This was below expectations (from Bloomberg) of 52.0 to 54.1 (consensus 53.3).For comparison, the Market PMI Services Index was released today - and was statistically unchanged. Here is the analysis from Bloomberg: Highlights: New orders picked up but only to a moderate pace for Markit Economics' U.S. service sector sample where the final PMI for June came in at 51.4, little changed from 51.3 readings for both the June flash and May final. New orders are at their best reading of the year but are still below trend. And backlog orders continue to decline, down now for 11 straight months. Firms in the sample are hiring but not very much with job growth at a 17-month low. Optimism in the general outlook, down four of the last five months, is at a survey low. Price data are muted despite the rise in fuel costs. The bulk of the U.S. economy is chugging along at marginal rates of growth heading into Brexit fallout. There are two sub-indexes in the NMI which have good correlations to the economy - the Business Activity Index and the New Orders Index - both have good track records in spotting an incipient recession - both remaining in territories associated with expansion. This index and its associated sub-indices are fairly volatile. The Business Activity sub-index improved 4.4 points and now is at 59.5.

ISM Non-Manufacturing Index increased to 56.5% in June -- The June ISM Non-manufacturing index was at 56.5%, up from 52.9% in May. The employment index increased in June to 52.7%, up from 49.7% in May. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management:June 2016 Non-Manufacturing ISM Report On Business® Economic activity in the non-manufacturing sector grew in June for the 77th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.  "The NMI® registered 56.5 percent in June, 3.6 percentage points higher than the May reading of 52.9 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 59.5 percent, 4.4 percentage points higher than the May reading of 55.1 percent, reflecting growth for the 83rd consecutive month, at a faster rate in June. The New Orders Index registered 59.9 percent, 5.7 percentage points higher than the reading of 54.2 percent in May. The Employment Index grew 3 percentage points in June after one month of contraction to 52.7 percent from the May reading of 49.7 percent. The Prices Index decreased 0.1 percentage point from the May reading of 55.6 percent to 55.5 percent, indicating prices increased in June for the third consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in June. Respondents’ comments are mostly positive about business conditions and the economy. Overall, the report reflects a strong rebound from the 'cooling-off' of the previous month for the non-manufacturing sector."This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.  This was above the consensus forecast of 53.3, and suggests faster expansion in June than in May.

"Rebound? What Rebound?" - Services Sector Business Confidence Hits Record Lows As ISM Surges To 7-Month Highs -- Markit's Chris Williamson sums up today's Services sector data in three simple words - "Rebound? What Rebound?" With new business expanding at the fastest pace since January but business confidence plumbing record lows, there appears to be total confusion in the Services economy as today's PMI print at 51.4 offers little hope for Q2 GDP. So having said all that, ISM data hit and soared to 56.5 - the highest since Nov 2015 - beating expectations by 5 standard deviations and well above the highest forecast. All subcomponents improved aside from Prices Paid as it seems "baffle 'em with bullshit" economics is back. Seriously...  With ISM beating expectations by 5 standard deviations...  As if the world were not confused enough by record low bond yields and near record high US equity prices, here are two headlines from today's Services PMI data that sum it all up... "New business expands at fastest pace since January" "Business confidence drops to a fresh survey-record low" So everything is awesome... and the future is terrible? Or as per ISM - everything is awesome again...

Weekly Initial Unemployment Claims declines to 254,000 --The DOL reported: In the week ending July 2, the advance figure for seasonally adjusted initial claims was 254,000, a decrease of 16,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 268,000 to 270,000. The 4-week moving average was 264,750, a decrease of 2,500 from the previous week's revised average. The previous week's average was revised up by 500 from 266,750 to 267,250.  There were no special factors impacting this week's initial claims. This marks 70 consecutive weeks of initial claims below 300,000, the longest streak since 1973.  The previous week was revised up by 2,000. The following graph shows the 4-week moving average of weekly claims since 1971.

US employers planned 38,536 layoffs in June as pace of cuts slows: Challenger: Layoffs by U.S. employers in the first half of 2016 outpaced job cuts during the same period last year, but payroll reductions are beginning to trail off, outplacement firm Challenger, Gray & Christmas reported Thursday. In June, employers said they planned to hand out 38,536 pink slips, according to the latest Challenger report. That marked a slight uptick from job cuts announced in May, but Challenger notes the June figure is below the 12-month average, indicating a "positive employment environment." "Just like the job creation numbers have been low in this second quarter, also the layoffs are low, so that is kind of a signal that we're nearing full employment," John A. Challenger, CEO of Challenger, Gray & Christmas told CNBC's "Squawk Box" on Thursday. "Companies are just holding onto their people. They're not laying off even their C players, but there's just not that many people to hire either," he said. Employers announced 313,754 layoffs in the first six months of 2016, up 9 percent from the same period last year. Still, payroll reductions tapered between the first and second quarters. Second-quarter job cuts totaled 132,834, down 27 percent from the 180,920 layoffs announced in the first quarter.  In the hard-hit energy sector, employers cut 42 percent fewer jobs in the second quarter. Retail, another leading job-cutter, saw a 48 percent drop in pink slips.

ADP: Private Employment increased 172,000 in June From ADP: Private sector employment increased by 172,000 jobs from May to June according to the June ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis....Goods-producing employment was down by 36,000 jobs in June after an additional loss of 5,000 jobs in May. The construction industry lost 5,000 jobs, offsetting May’s gain of 9,000 jobs. Meanwhile, manufacturing lost 21,000 jobs after losing 3,000 the previous month. Service-providing employment rose by 208,000 jobs in June, a stronger increase when compared to May’s 173,000 jobs. The ADP National Employment Report indicates that professional/business services contributed 51,000 jobs, up from May’s 47,000. Trade/transportation/utilities grew by 55,000, nearly twice that of the 27,000 jobs added the previous month. Financial activities added 2,000, down from last month’s gain of 13,000 jobs. ..Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth revived last month from its spring slump. Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won’t help, but small- and mid-sized companies continue to add strongly to payrolls.”This was above the consensus forecast for 150,000 private sector jobs added in the ADP report.   The BLS report for June will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in June.

June 2016 ADP Job Growth Is 172,000 - Above Expectations: ADP reported non-farm private jobs growth at 172,000. The rate of growth continues in a downtrend.

  • The market expected 100,000 to 209,000 (consensus 150,000) versus the 172,000 reported. These numbers are all seasonally adjusted;
  • In Econintersect's June 2016 economic forecast released in late May, we estimated non-farm private payroll growth at 110,000 (based on economic potential) and 205,000 (fudged based on current overrun of economic potential);
  • This month, ADP's analysis is that small and medium sized business created 85 % of all jobs;
  • Manufacturing jobs declined 21,000.
  • All of the jobs growth came from the service sector as goods producing sector contracted;
  • May report (last month), which reported job gains of 173,000 was revised down to 168,000;
  • The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 - it is now 1.99% (lower than last month's revised 2.05%)

ADP changed their methodology starting with their October 2012 report, and ADP's real time estimates are currently worse than the BLS. Per Mark Zandi, chief economist of Moody's Analytics: Job growth revived last month from its spring slump. Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won't help, but small- and mid-sized companies continue to add strongly to payrolls.

ADP Jobs Beat Expectations As Manufacturing Jobs Drop Most Since 2010 --Following May's disastrous payrolls print, drastically below ADP's guess, expectations for June were already marked down from 173k last month to 160k (with a whisper number well below 100k as ADP 'adjusts' itself back to payrolls 'reality') but in a surprise turn, printed a better than expected 172k gain (revising May down modestly) suggesting as Zandi proclaims "last month's weak payrolls data was an outlier."However, both Manufacturing (-5k) and Construction (-12k) tumbled but Services-related jobs soared 208k miraculously. In fact, as the chart below shows, the manufacturing job drop was the biggest since February 2010: The summary table: As ADP details: Payrolls for businesses with 49 or fewer employees increased by 95,000 jobs in June, up from 84,000 in May. Employment at companies with 50-499 employees increased by 52,000 jobs, down from last month’s 60,000. Employment at large companies – those with 500 or more employees – increased by 25,000, up from May’s 23,000. Companies with 500-999 employees added 21,000 and companies with more than 1,000 employees added 4,000 this month. Goods-producing employment was down by 36,000 jobs in June after an additional loss of 5,000 jobs in May. The construction industry lost 5,000 jobs, offsetting May’s gain of 9,000 jobs. Meanwhile, manufacturing lost 21,000 jobs after losing 3,000 the previous month. Service-providing employment rose by 208,000 jobs in June, a stronger increase when compared to May’s 173,000 jobs. The ADP National Employment Report indicates that professional/business services contributed 51,000 jobs, up from May’s 47,000. Trade/transportation/utilities grew by 55,000, nearly twice that of the 27,000 jobs added the previous month. Financial activities added 2,000, down from last month’s gain of 13,000 jobs. “Since the start of 2016, average monthly job creation has slightly dropped,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “Lackluster global growth, low commodity prices, and an unfavorable exchange rate continue to weigh on U.S. companies, especially larger companies.” Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth revived last month from its spring slump. Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won’t help, but small- and mid-sized companies continue to add strongly to payrolls.” The ADP charts:

ADP: US Annual Job Growth Dips To 3-Year Low -- Private payrolls in the US increased by 172,000 in June, according to this morning’s release of the ADP Employment Report. The gain, although modest by the standards of the last several years, marks the strongest advance since March. But the annual pace of growth dipped to a three-year low, providing more evidence that the labor market’s expansion continues to decelerate.  “Job growth revived last month from its spring slump,” says Mark Zandi, chief economist of Moody’s Analytics, which co-produces the data with ADP. “Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won’t help, but small- and mid-sized companies continue to add strongly to payrolls.”  The overall trend, however, is showing signs of aging. ADP’s estimate of private payrolls eased to a 1.9% year-over-year rate, the slowest annual pace since June 2013. Nonetheless, the respectable monthly increase implies that tomorrow’s June update from the Labor Department will post a sizable rebound after May’s tepid increase in private payrolls of just 25,000—a five-year low.  Using a linear regression framework to model the relationship between the ADP and government data points to a gain of 169,000 for private payrolls in tomorrow’s Labor Department release for June, or fractionally below the 170,000 increase that’s projected via’s consensus forecast. If the prediction holds, the news will provide support for arguing that the dramatic downshift in May was noise.

Gallup Good Jobs Rate July 7, 2016: June good jobs (GGJ) rate in the U.S. was 46.0 percent. This is up nominally from May (45.5 percent) and stands as the highest monthly rate Gallup has recorded since measurement began in 2010. The current rate is also half a percentage point higher than in June 2015, suggesting an underlying increase in full-time work beyond seasonal changes in employment. The percentage of U.S. adults in June who participated in the workforce -- by working full time, part time or not working but actively seeking and being available for work -- was 67.5 percent. This is up nominally from May's 67.3 percent and above the 66.9 percent average workforce participation rate since June 2013. Current workforce participation is slightly lower than the period from May 2010 to June 2013 when it averaged 67.7 percent. Gallup's unadjusted U.S. unemployment rate was 5.3 percent in June, down nominally from May's 5.5 percent. June's unemployment estimate is the second lowest for any month since Gallup began tracking the measure in 2010, after reaching 5.2 percent in April of this year. Gallup's U.S. unemployment rate represents the percentage of adults in the workforce who did not have any paid work in the past seven days, either for an employer or for themselves, and who were actively looking for and available to work. Gallup's measure of underemployment in June was 13.6 percent, almost the same as May's (13.7 percent) yet also the lowest Gallup has recorded since 2010. June's rate also marks the fourth straight month of declining underemployment from February's rate of 14.7 percent. Gallup's U.S. underemployment rate combines the percentage of adults in the workforce who are unemployed (5.3 percent) with those who are working part time but desire full-time work (8.3 percent).

Jobs Roar Back With Gain of 287,000 in June, Easing Worry -  With the Republican and Democratic national conventions just weeks away, the government reported on Friday that employers added 287,000 workers in June, a vigorous rebound as the presidential nominees get ready to present their economic visions.The official unemployment rate rose to 4.9 percent, from 4.7 percent. And average hourly earnings ticked up again, continuing a pattern set by three months of rising wages.The welcome report on Friday showed the largest single monthly job gains since October 2015. The three-month average of monthly gains rose to 147,000. “This report should ease any fears that a persistent slowdown or recession is coming soon in the U.S.,”. “The service sector is where the real strength is, with 256,000 hires, but the gains were widespread across sectors.” The unexpectedly grim employment report in May had been disturbing enough to convince every voting member of the Federal Reserve’s policy-making committee last month to oppose any increase in its benchmark interest rate, as the official account of the meeting, released this week, revealed. That jobs report, combined with Britain’s vote to leave the European Union, had fanned wider worries that the American economy was in danger of stalling.Concerns about the vitality of the recovery — which is in its seventh year — persist, but economists pointed to several encouraging signs, like manufacturing and consumer spending data.Continue reading the main story AdvertisementContinue reading the main story Every monthly jobs report provides only a fleeting and incomplete picture, and a strike by more than 35,000 Verizon workers artificially held down May’s totals; they were back on the job in June and counted once again.

June Employment Report: 287,000 Jobs, 4.9% Unemployment Rate - From the BLS: Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment also increased in information, mostly reflecting the return of workers from a strike.... The change in total nonfarm payroll employment for April was revised from +123,000 to +144,000, and the change for May was revised from +38,000 to +11,000. With these revisions, employment gains in April and May combined were 6,000 less, on net, than previously reported. Over the past 3 months, job gains have averaged 147,000 per month.... In June, average hourly earnings for all employees on private nonfarm payrolls edged up (+2 cents) to $25.61, following a 6-cent increase in May. Over the year, average hourly earnings have risen by 2.6 percent. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 287 thousand in June (private payrolls increased 265 thousand). Payrolls for April and May were revised down by a combined 6 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In June, the year-over-year change was 2.45 million jobs. A solid gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate increased in June to 62.7%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio decreased to 59.6% (black line).The fourth graph shows the unemployment rate.  The unemployment rate increased in June to 4.9%

June Jobs Report – The Numbers - WSJ:  U.S. employers ramped up hiring in June after a sluggish spring, adding a seasonally adjusted 287,000 jobs in June, the Labor Department said on Friday. That was the strongest month of hiring since last October. Meanwhile, the unemployment rate, calculated from a separate survey of American households, rose to 4.9% in June from 4.7% in May. Here are more details from the report. U.S. employers added 287,000 jobs in June, the most since October and a big rebound from the prior month. May’s job growth was revised down to 11,000. April’s was revised up to 144,000. Over the past three months, the economy has added an average of 147,000. So despite June’s surge, the broader trend suggests job growth is still slower than last year, when the economy added an average 229,000 jobs a month.  The jobless rate rose to 4.9% in June from 4.7% a month earlier. The increase was encouraging: The overall pool of workers grew as more Americans entered the job search. The number of employed workers within that pool also grew. For context, most Federal Reserve officials project the economy, in the longer run, will average between 4.7% and 5% unemployment.  The average hourly earnings of private-sector employees climbed 2.6% in the year through June. The last time 12-month wage growth was that high was in December, and the last time it was higher was in July 2009. The figure suggests the labor market is tightening.   A broad measure of underemployment fell to 9.6%. This rate—known among economists as the U-6—takes into account jobless workers, those too discouraged to look for work, and part-timers who would prefer full-time jobs. The rate has fallen over the past year, from 10.5% in June 2015. But it’s still more than a percentage point above its pre-recession level.   The share of Americans with jobs or actively looking for work rose to 62.7% last month from 62.6% in May. The rate stood at 66% just before the recession. It had climbed through the fall and winter, reaching 63% in March.

US Job Growth Surged In June - The pace of employment growth at US companies bounced back sharply in June after slumping to a five-year low in May, the Labor Department reports. The gain, which beat expectations by a wide margin, suggests that the economy is stronger than the May release implied. But note that the year-over-year gain in private payrolls, although fractionally higher, is essentially unchanged from May, holding close to a three-year low. In sum, there’s still no smoking gun for arguing that the US slipped into a new NBER-defined recession, but the weak numbers from other corners of the economy—industrial production, for instance—continue to raise questions about the outlook for this year’s second half. The first half, by contrast, ended on a high note, based on today’s payrolls release. The 265,000 increase in private-sector jobs in June is the biggest monthly gain since last December. “If you take the last three months and smooth these numbers out — which is really what you should do — employment conditions are improving, but there’s no question there’s, to some extent, a slowdown in the improvement,” says Hugh Johnson, chairman at Hugh Johnson Advisors, via Bloomberg. Let’s put Johnson’s advice to work in the chart below, which clearly shows that job growth in the private sector has decelerated steadily over the past year or so. The trend eased to just a hair below 2.0% for the year through June, based on three-month averaging–the lowest in three years. A 2% pace is still a respectable advance, but recent history suggests we’ll see even lower growth rates in the months ahead. The key question: will the deceleration slide below the previous low of roughly 1.86% in April 2014? The last time job growth was decelerating, the slide reversed before the macro trend suffered serious damage. Will history repeat? Or has the expansion run out of road? This year’s second half will probably provide the answer.

Employment Rebounds in June, but Unemployment Edges Higher - Dean Baker - The Labor Department reported that the economy added 287,000 jobs in June, a sharp bounce back from the 11,000 jobs now reported for May. A big factor in the reversal was the end of the Verizon strike, which subtracted 37,000 jobs from the May growth number and added the same amount in June, but even adjusting for this effect, the June growth figure is much stronger. The average hourly wage is 2.6 percent above its year-ago level. In the last three months, it has risen at a 2.7 percent annual rate compared with its level for the prior three months. While there has been some acceleration in wage growth by this measure, the Employment Cost Index shows no upward trend whatsoever. Clearly compensation is being shifted in part from benefits, most importantly health care, into wages. It is important not to mistake this shift for an increase in labor costs. The household survey showed a bleaker picture. The unemployment rate rose modestly to 4.9 percent. The employment-to-population ratio (EPOP) fell to 59.6 percent as employment measured by the household survey increased by just 67,000. Employment in the household survey is still more than 200,000 below its March level.  By demographic group, the most disturbing item is the reported rise in the unemployment rate among black teens to 31.2 percent. It had been 23.3 percent in February. These data are highly erratic, but the trend is large enough that it could reflect a substantial deterioration in the labor market. Employment patterns by education are showing an interesting pattern in this recovery. Over the last year the unemployment rate for college grads has not changed while their EPOP is down by 0.3 percentage points. By contrast, the unemployment rate for those with a high school degree has fallen by 0.4 percentage points and by 0.6 percentage points for those with less than a high school degree. Their EPOPs have risen by 0.3 and 1.2 percentage points, respectively. The increased demand for skills is not obvious in this picture. Other aspects of the household survey were mixed. There was a drop of 587,000 in the number of people working involuntarily part-time, which more than reversed a sharp rise reported for May. The number of discouraged workers is more than 150,000 below its year-ago level and not too far above pre-recession levels. The duration measures of unemployment were mixed. The median duration of unemployment spells fell slightly to 10.3 weeks, a new low for the recovery, but both the average duration and share of long-term unemployed rose slightly.

June 2016 BLS Jobs Growth Jumped But ...: The BLS job situation headlines showed a tremendous recovery in jobs growth. Last month's terrible job growth was revised downward. Last month was affected by the Verizon stike (which is over) - but averaging the last two month, the jobs growth was around 150,000 jobs per month. Economic intuitive sectors were mixed.

  • The rate of growth for employment accelerated this month (red line on graph below).
  • The unadjusted jobs increase month-over-month was well above average for times of economic expansion.
  • Economic intuitive sectors of employment were mixed.
  • This month's report internals (comparing household to establishment data sets) was very inconsistent with the household survey showing seasonally adjusted employment improving 67,000 vs the headline establishment number of growing 287,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey added 414,000 people to the workforce after removing 458,000 people from the workforce last month.
  • BLS reported: 287K (non-farm) and 265K (non-farm private). Unemployment rate significantly degraded to 4.9 % from 4.7 %.
  • ADP reported: 172 K (non-farm private)
  • In Econintersect's June 2016 economic forecast released in late May, we estimated non-farm private payroll growth at 110,000 (based on economic potential) and 205,000 (fudged based on current overrun of economic potential);
  • NFIB comments on this Jobs Report is towards the end of this post.

The June Jobs Report in 15 Charts -- WSJ: U.S. employers added 287,000 jobs in June, a wild reversal from May’s report, in which the economy saw net job growth of just 11,000. The unemployment rate, meanwhile, rose to 4.9% as more Americans returned to the labor force. Here’s a run through some of the highlights of the June report. Including June’s reading, the economy has added nearly 172,000 jobs per month on average this year, down from 198,000 at this point last year and nearly 243,000 two years ago.Over the past year, job growth is up 1.7%, which is a touch below the average expansion of 1.8% witnessed over the past four years. . Hourly earnings for employees on private nonfarm payrolls are up 2.6% over the past year, matching the strongest annual gain in several years. . The standard measure of unemployment, at 4.9% in June, only counts people who are actively looking for work. The broadest unemployment gauge, which also includes part-time workers who would prefer full-time work, edged down to 9.6% last month. . The unemployment rate varies considerably by race and gender, though unemployment rates for each group are nearing the lowest points recorded during the last expansion eight years ago. . Unemployment rates also differ by educational background, with significantly lower jobless rates for workers with more education. . The share of Americans in the labor force, or those over the age of 16 who are working or looking for work, rose to 62.7% last month. The share of Americans who were employed ticked down to 59.6%.Employment and labor-force participation rates are higher for people between 25 and 54 years old because they haven’t yet retired and are less likely to be in school. . The average spell of unemployment has grown shorter in recent years but remains high relative to levels seen in past economic cycles. . The share of Americans who went from not being in the labor force—that is, they weren’t actively looking for work—to finding a job surged over the last two years, but it has stabilized this year. . At the same time, the share of unemployed people who are giving up their job hunt and dropping out of the labor force has steadily declined. . The unemployment rate is back to where it was before the last recession began, but the share of the unemployed who have been out of work for more than six months is still higher than it was back then.The vast majority of jobs added since the economy exited the last recession seven years ago have been full-time positions. . Compared to December 2007, when the last recession began, the number of new part-time positions is still above the level of full-time positions. . The share of jobs that are full-time positions has been increasing steadily over the past several years. After slowing this spring, it appears to have rebounded in June.

June jobs report: June takes back May, but deceleration remains HEADLINES:

  • +287,000 jobs added (would have been 252,000 except for Verizon strike)
  • U3 unemployment rate rose from 4.7% to 4.9%
  • U6 underemployment rate rose from 9.7% to 9.8%
  • Not in Labor Force, but Want a Job Now:  declined -231,000 from 5.923 million to 5.692 million
  • Part time for economic reasons: declined -587,000 from 6.430 million to 5.843 million
  • Employment/population ratio ages 25-54: unchanged at 77.8% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +$.04 from $21.47 to $21.51,  up +2.4% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

April was revised upward by +21,000, but May was revised downward by -27,000, for a net change of -6,000. The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.

  • the average manufacturing workweek was unchanged at 41.8 hours (but May was revised down -0.1 hours.  This is one of the 10 components of the LEI.
  • construction jobs were unchanged.  YoY construction jobs are up +217,000.  
  • manufacturing jobs increased by +14,000, and are down -29,000 YoY
  • temporary jobs - a leading indicator for jobs overall increased by 15,200 (this made a peak in December, and seems to be stabilizing now)

Jobs Report: June’s big number reveals welcome bounceback, but you’ve gotta smooth these noisy data. -Jared Bernstein - Payrolls posted a big 287,000 jump in June in stark contrast to revised gains of just 11,000 in May. Such monthly volatility provides an extremely clear example of why we should never over-interpret one month’s worth of jobs data. You have to “smooth,” or average out the gains over numerous months, as I do below. When you do so, you get a picture of a solid job market, adding somewhat fewer jobs than a year ago, but still making progress towards full employment.The unemployment rate ticked up to 4.9% as more people entered the labor market, leading to a small but welcome uptick in the participation rate, up one-tenth to 62.7%. Year-over-year wage growth ticked up slightly as well, from 2.5% to 2.6%, a positive sign that some of the benefits of the ongoing recovery are finally reaching workers’ paychecks. As shown below, this pace of wage growth remains well below Fed chair Yellen’s benchmark target of 3.5%. In other words, this trend should be very much welcomed, not feared! It’s what’s supposed to happen as the job market improves and working people get a little more bargaining power. The punchlines are thus as follows: May’s dismal report was an outlier; the US recovery proceeds apace; Brexit hasn’t shown up in the jobs numbers; wage growth is slowly picking up a bit of speed, as I’d expect; and the job growth engine has downshifted from around 200K/month to around 150K/month, once you smooth out the monthly noise. That’s also to be expected as we get closer to full employment, though given that we’re not there yet, both monetary and fiscal policy needs to continue to be as pro-growth as possible. This policy stance is underscored by the absence of inflationary pressures. JB’s patented monthly smoother is particularly important this month. The monthly trend job gains over the past 3 months is about 150K, 6 months: ~170K; 12 months: ~200K. There’s the downshift noted above.

90% Of June Job Gains Went To Workers 55 And Older -- While the algos have long forgotten about today's job report whose headline was good enough to unleash an epic buying spree which has pushed the S&P to the highest level since July 2015, a quick read between the lines reveals a continuation of some recent troubling trends, namely that all job gains in recent years have gone exclusively to the oldest segment of the population, those 55 and older.  First, as the chart below shows, when breaking down the job additions by age group as per the Household Survey, of the 180K jobs added in this particular survey, 259,000 were in the 55 and over age group, while only 28,000 were added in the critical 25-54 age group. Young workers, those under 24, lost a collective 107,000 in June. In other words, 90% of all job gains in the month went to workers 55 and over. Another way of seeing this dramatic discrepancy in job gains by age groups, is shown in the chart below: since the start of the 2007 recession, nearly 10 years ago, over 8 million jobs have been gained by workers 55 and over. Everyone else, and especially those 25-54, have lost jobs, with the "younger" cohort of American workers still down 3.4 million jobs since December 2007. Finally, for a snapshot look at the graying of the US economy, look no further than the chart of job gains only for those 55 and over: at 34,459,000, the number of elderly workers has never been higher and continues to rise at a torrid pace.

Where The June Jobs Were - While the quantitative aspect of the June jobs report was stellar, so stellar in fact that not a single Wall Street forecaster expected it would happen, the next question is what was the qualitative component of this unprecedented Establishment Survey beat. Here are the details of the 287K jobs supposedly added:

  • Leisure and Hospitality added 59,000 minimum wage jobs
  • Education and Health also added 59,000 mostly minimum wage jobs
  • Retail Trade added 30,000 certainly minimum wage jobs

With more than half of job additions being minimum wage one can see why the June average hourly earnings increase was below the expected 0.2% (and 2.7% Y/Y), instead printing at 0.1% and 2.6%. Where were the rest of the job increases: Information +44K, Professional Services (ex temps) +23K, Government +22K, Financial Services supposedly added 16K just dont tell all those recently laid off bankers, temp workers rose by 15K, and somehow even manufacturing added 14K despite the ADP report seeing the biggest drop in mfg employment since 2010. Were there any job losses: yes, in mining and logging, which lost 5K jobs and transportation and warehousing which saw a 9.4K drop as the heavy trucking collapse hits home. The full breakdown.

Missing Workers: The Missing Part of the Unemployment Story --In a complex economy, conventional measures sometimes fall short.   In today’s labor market, the unemployment rate drastically understates the weakness of job opportunities. This is due to the existence of a large pool of “missing workers”–potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. In other words, these are people who would be either working or looking for work if job opportunities were significantly stronger. Because jobless workers are only counted as unemployed if they are actively seeking work, these “missing workers” are not reflected in the unemployment rate.  As part of its ongoing effort to create the metrics needed to assess how well the economy is working for America’s broad middle class, EPI tracks missing worker” estimates, updated on this page on the first Friday of every month immediately after the Bureau of Labor Statistics releases its jobs numbers. The “missing worker” estimates provide policymakers with a key gauge of the health of the labor market.Current “missing worker” estimates at a glance Updated July 8, 2016, based on most current data available

Employment Comments: A Strong Report following a Weak Report -- The headline jobs number was very strong, however there were small downward revisions to job growth for prior months.  The key positives were the number of jobs added in June (287,000), a decline in U-6, and a pickup in wage growth.   In June, the year-over-year change was 2.45 million jobs.This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.6% YoY in June.  This series is noisy, however overall wage growth is trending up. Note: CPI has been running under 2%, so there has been real wage growth. From the BLS report: The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) decreased by 587,000 to 5.8 million in June, offsetting an increase in May. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.  The number of persons working part time for economic reasons decreased sharply in June - reversing the sharp increase in May. This level suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that declined to 9.6% in June - the lowest level since April 2008. This graph shows the number of workers unemployed for 27 weeks or more. According to the BLS, there are 1.979 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.885 million in May. This is generally trending down, but is still high. There are still signs of slack (as example, elevated level of part time workers for economic reasons and U-6), but there also signs the labor market is tightening. Overall this was a strong report. However it is just one report and follows a weak report in May (only 11,000 jobs added). Job growth only averaged 149,000 over the last two months, and 172,000 per month this year.

Bill Black and Stephanie Kelton: Is it Time for a New Deal Federal Jobs Program? - naked capitalism - Yves here. On Real News Network, Bill Black and Stephanie Kelton discuss why we need more direct federal job creation, particularly for infrastructure. Whenever we mention “jobs programs,” there is a knee-jerk tendency among the commentariat to treat them as insulting make-work, when the last effort at creating mass employment was anything but. As Marshall Auerback wrote of the New Deal programsThe government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.  As for administration, one way to make implementing infrastructure projects faster and more responsive to local needs is to take a page from the playbook of that great American socialist Richard Nixon. He established revenue sharing, in which the Federal government gave money to state and local governments for their use, with anti-fraud and corruption oversight in place. The idea was that the Federal government could fund more cheaply than smaller government entities, but government bodies that were more accountable to their own citizens would often do a better job of spending.

Productivity mismeasurement: it goes both ways -- Jared Bernstein - Many economists, myself included, argue that among our greatest concerns is the slowdown in productivity growth, as the growth of output per hour (that’s how productivity is measured) is a key determinant of living standards (yes, the distribution of productivity growth is another key determinant; in our age of inequality, growth is necessary but not sufficient to raise middle class living standards and lower poverty; but it sure is necessary!).  Some critics of the slowdown hypothesis argue that we are undercounting output, and thus systematically undercounting output per hour. I and many others find this hypothesis wanting, but an article I read in the NYT this AM got me thinking about a corner of this debate that tends to be overlooked: virtually every mismeasurement argument focuses on how technology is making us better off that are not counted in the national accounts, but some technologies push hard in the other direction.  The article focuses on tech support, which is often not only unbearable and enraging for users trying to find out how to restore their files after their cat erased them, but can be deliberately set up to be so, in order to save costs and discourage their use. One could say the same thing about phone menus in general. They are typically one of the many ways technology is used to externalize labor functions that were formally internal, which is a cost shift onto those of us endlessly pushing buttons in hopes that maybe we’ll find a person, and maybe that person will deign to help us.  If we were accurately measuring the output of tech service industry, such inconveniences would score as a negative.  There are other ways in which we fail to capture quality deterioration in our national accounts. Air travel is often raised as a poster child. Infrastructure deterioration is another. But anyone seriously considering this mismeasurement hypothesis must consider both sides of the equation. There’s no point in denying the existence of the often hellish worlds of tech support and phone menus.

Paid Interns Get More Job Offers, Higher Salaries Than Unpaid Peers - Those unpaid internships may perk up your resume, but they don’t do much to boost your job prospects. A new survey shows that paid interns are far more likely to land a job offer after graduation than their unpaid peers. They’re also more likely to make a lot more money. Paid interns at private, for-profit companies had a 72% chance of getting a job offer, compared with just 44% of unpaid interns, according to a survey of students from from the graduating class of 2015 by the National Association of Colleges and Employers. The gap was widest at for-profit companies, but the trend remained true in non-profit, federal, local and state government jobs. Those who fared worst were unpaid interns at state or local government agencies, who had only a 34% chance of getting a job offer. That was lower than people with no internship experience, who had a 37% chance of getting a job offer.  The NACE survey also found that paid interns at private, for-profit companies received a median starting salary offer of $53,521, over $19,000 more than their unpaid peers at similar companies. The lowest median salary offers were made to unpaid interns at nonprofit organizations, coming in at $31,443. Such interns may be better off taking no post at all. According to the survey, students who took no internships received a median salary offer of $38,572.

Unpaid interns fare worse in the job market -- It’s internship season and offices across the country are filled with interns trying to make a good impression. Do internships lead to jobs? It depends. Evidence shows that paid internships lead to better employment outcomes than do unpaid internships. The National Association of Colleges and Employers (NACE) Student Survey Report provides troubling evidence that unpaid internships are associated with less success in the job market after graduation, both in terms of job offers and salary offers.

  • College students who had an unpaid internship did significantly worse than students in paid internships, whether the job was non-profit, state, federal, or for-profit. The job offer rate for graduates who had taken a paid, for-profit internship was 72% vs. 44% for unpaid, for-profit internships (See Figure).
  • The NACE survey found that regardless of the sector, unpaid interns received lower salary offers than students who had taken a paid internship.
  • Most notably, the median graduate who had taken an unpaid internship in a for-profit firm was offered $19,000 less than the median paid intern in such firms.

Why Some Economists See Faster Wage Growth Around the Corner -- Elusive wage growth has frustrated many Americans throughout the seven-year economic expansion. But some economic gauges suggest wages are set to accelerate in the months ahead. Here are some key measures to watch: One measure gaining popularity is the Federal Reserve Bank of Atlanta’s wage tracker. Some economists say the indicator, which hit a seven-year high last month, is a better gauge of wage inflation because it adjusts for composition bias. The more familiar average hourly earnings series put out by the Labor Department’s Bureau of Labor Statistics is influenced by demographics — namely, the large number of retiring baby boomers who are leaving the workforce with wages that are higher than those of new entrants. “It’s masking an underlying gradual increase,” said Nariman Behravesh, chief economist at IHS, of the BLS wage data that showed wages rose 2.5% from a year earlier. He favors the Atlanta Fed’s measure because it looks at wages of people who have remained in their job for at least a year. “Under normal labor market conditions, we’d expect the Atlanta numbers to run ahead of the regular hourly earnings series because people who remain in the same job tend to see their wages rise more quickly over time,” says Pantheon Macroeconomics chief economist Ian Shepherdson. But the spread is widening, he warns, with the current gap between the Atlanta Fed’s tracker (last up 3.4% from a year earlier) and the BLS average hourly earnings measure “much wider than early 2006, when the unemployment rate last slipped below 5%.” Back then, the spread between the measures disappeared and hourly earnings briefly ran hotter than the Atlanta measure. While the Atlanta Fed’s gauge doesn’t always lead the BLS numbers, Mr. Shepherdson says it would be dangerous to ignore it.

Job Training Can Work. So Why Isn’t There More of It? - MDRC, the New York-based policy analysis group, last week released the preliminary assessment of an experiment called WorkAdvance, commissioned by the New York City government and funded in part by a federal grant. WorkAdvance offered targeted sectoral training programs for low-income workers in New York City, as well as in Tulsa, Okla., and northeast Ohio. From 2011 to 2013, about 1,300 unemployed or low-wage workers were enrolled in the programs. They included support services like job placement and post-employment counseling on how to move up the career ladder.But the main twist was the training, targeted at the most promising sectors. Per Scholas and the other nonprofits that took part in the experiment had to link up with employers in their areas to figure out what kind of skills were in demand and might open the door to a career path of rising wages.Their results were heartening. After two years, participants made 14 percent more on average than workers in a control group, who did not benefit from the new approach. That amounts to $1,945 a year. Workers who had been on unemployment for a long time when the study started, a group that tends to have a hard time finding a job, had an earnings bump of $2,347 — 21 percent compared with the control group. Notably, the gains did not come only from working more but also from higher wages.

The 1% are recovering from 2008 recession while 99% are still waiting --The top 1% of Americans are finally recovering from the great recession. A new analysis of IRS data revealed that the average income of the top 1% of income earners grew by 7.7% in 2015, reaching $1.36m. Report author Emmanuel Saez, an economics professor at the University of California-Berkeley, calculated earlier this year that the top 1% had an average income of $1.26m in 2014. And though the world’s wealthiest were able to raise that income to $1.36m within one year, they are still not making as much as they were just before the 2008 recession.   Saez revealed that in 2015, the rich were also taking home larger chunk of the US income. “The share of income going to the top 10% of income earners – those making on average about $300,000 a year – increased to 50.5% in 2015 from 50.0% in 2014, the highest ever except for 2012,” Saez wrote. “The share of income going to the top 1% of families – those earning on average about $1.4m a year – increased to 22% in 2015 from 21.4% in 2014.” According to him, while the 1% power ahead and continue to reclaim income lost during the recession, a full recovery for the bottom 99% remains elusive. “Six years after the end of the Great Recession, those families have recovered only about 60% of their income losses due to that severe economic downturn,” he said. The top 1% of families saw their income grow by 37% between 2009 to 2015, from $990,000 to $1.36m. The incomes of the other 99%, however, grew by just 7.6% during that time – from $45,300 in 2009 to $48,800 in 2015.

Top White House Economist Dismisses the Idea of a Universal Basic Income --The White House’s chief economist dismissed the idea of a universal basic income, saying it would be counterproductive for the labor market and could worsen income inequality. “We should not advance a policy that is premised on giving up on the possibility of workers’ remaining employed,” Jason Furman, chairman of the Council of Economic Advisers, said Thursday in remarks at New York University. The concept of a universal basic income has gained traction among economists in the U.S. and Europe in recent years. Essentially, it would offer all residents over a certain age a minimum monthly allowance—regardless of whether they work or how much they make. The idea is to ensure everyone has a chance at a decent life even as technology shifts and the labor market churns, eliminating and creating millions of jobs that often require vastly different skill sets. “A UBI would present the most disadvantaged among us with an open road to the middle class if they put their minds to it,” American Enterprise Institute scholar Charles Murray said in a Wall Street Journal column last month. “It would say to people who have never had reason to believe it before: ‘Your future is in your hands.’ And that would be the truth.” The idea has gotten as far as a referendum—soundly defeated last month—in Switzerland.  In the U.S., policymakers appear skeptical. Mr. Furman, in a speech largely focused on the economic opportunities and challenges created by artificial intelligence, wasn’t buying into the idea at all. “Our goal should be first and foremost to foster the skills, training, job search assistance and other labor market institutions to make sure people can get into jobs, which would much more directly address the employment issues raised by [artificial intelligence] than would UBI,” he said

Kentucky Noah’s Ark Encounter opens amidst severe flooding -- Christian fundamentalist organization Answers in Genesis‘ (AiG) just opened their Ark Encounter in Kentucky, and the event was, ironically, greeted with epic flash floods and heavy rain. Kentucky announced a state of emergency as severe flooding overwhelmed the area. Though AiG’s Ark seems to have survived the worst of it, others have been evacuated and homes destroyed in the deluge. The theme park, Ark Encounter, is located near AiG’s Creation Museum. The new full-size ark replica is just a short drive from Cincinnati. Dezeen reports that it’s “within a day’s drive for two thirds of the US population,” and, judging by the thousands of visitors who inundated the park on opening day, people are taking advantage of the proximity. Architecture company Troyer Group designed the ark, which was constructed with the help of Amish carpenters.   AiG’s ark is 510 feet long, 85 feet wide, and 51 feet high, and builders drew on dimensions found in the Bible. According to AiG, it is “the largest timber-frame structure in the world” and they built the attraction to provide answers about the story of Noah’s Ark.  The $100 million project was, controversially, funded partially through sales tax incentives.About 10,000 people can visit the ark every day, but for the first 40 days and nights – the amount of time rain fell while Noah floated in his ark – the park will operate with extended hours. According to the National Weather Service, there are still flood warnings for a few areas in the state, and most are on a severe thunderstorm watch.

Religion may become extinct in nine nations, study says - BBC News: A study using census data from nine countries shows that religion there is set for extinction, say researchers. The study found a steady rise in those claiming no religious affiliation. The team's mathematical model attempts to account for the interplay between the number of religious respondents and the social motives behind being one. The result, reported at the American Physical Society meeting in Dallas, US, indicates that religion will all but die out altogether in those countries. The team took census data stretching back as far as a century from countries in which the census queried religious affiliation: Australia, Austria, Canada, the Czech Republic, Finland, Ireland, the Netherlands, New Zealand and Switzerland. Their means of analysing the data invokes what is known as nonlinear dynamics - a mathematical approach that has been used to explain a wide range of physical phenomena in which a number of factors play a part.  "The idea is pretty simple,"  "It posits that social groups that have more members are going to be more attractive to join, and it posits that social groups have a social status or utility. "For example in languages, there can be greater utility or status in speaking Spanish instead of [the dying language] Quechuan in Peru, and similarly there's some kind of status or utility in being a member of a religion or not."

Breakdown Of US Citizens Killed By Cops In 2016 -- In the U.S. a total of 509 citizens have been killed this year alone by police. The body count for the previous year stands at a grand total of 990 people shot dead, according to the Washington Post. As the below infographic from Statista shows, most of those killed by police are male and white. 123 of those shot were Black Americans. This is a relatively high share, keeping in mind that close to 13 percent of Americans belong to that ethnic group. You will find more statistics at Statista. What’s also disturbing is that according to the data compiled by the Washington Post a big proportion of those killed obviously showed signs of mental illness. Of the 509 killed this year at least 124 were thought to be suffering from such conditions. Many of those killed carried guns according to police records. In at least 22 cases officers mistook toy guns for the real thing.

Police, Prosecutors and Judges Rely on a Flawed $2 Drug Test That Puts Innocent People Behind Bars - ProPublica - Police officers arrest more than 1.2 million people a year in the United States on charges of illegal drug possession. Field tests like the one Officer Helms used in front of Amy Albritton help them move quickly from suspicion to conviction. But the kits — which cost about $2 each and have changed little since 1973 — are far from reliable.  The field tests seem simple, but a lot can go wrong. Some tests, including the one the Houston police officers used to analyze the crumb on the floor of Albritton’s car, use a single tube of a chemical called cobalt thiocyanate, which turns blue when it is exposed to cocaine. But cobalt thiocyanate also turns blue when it is exposed to more than 80 other compounds, including methadone, certain acne medications and several common household cleaners.  Other tests use three tubes, which the officer can break in a specific order to rule out everything but the drug in question — but if the officer breaks the tubes in the wrong order, that, too, can invalidate the results. The environment can also present problems. Cold weather slows the color development; heat speeds it up, or sometimes prevents a color reaction from taking place at all. Poor lighting on the street — flashing police lights, sun glare, street lamps — often prevents officers from making the fine distinctions that could make the difference between an arrest and a release.

America's Female Prison Population Has Grown 800% & Nobody Is Talking About It -- Holly Harris was the first speaker at FreedomWorks#JusticeForAll event, and as the leader of USJAN, she set the tone for what turned out to be a fascinating conference. The veteran litigator opened her speech by outlining USJAN’s goals, explaining the organization believes “our [criminal] code just doesn’t make sense.” That’s why their “goal is to shrink criminal codes” and “get rid of these unfair, unnecessary duplicative and inconsistent laws.” But it was something else she told the crowd a few minutes later that got attendees worked up.“The fastest growing segment of the prison population in America,” Harris articulated, “is women … and nobody is talking about that.” According to the Families Against Mandatory Minimums Foundation (FAMM), the female prison population in the United States has grown by over 800 percent in the last 30 years, while the male population grew by 416 percent during the same period. Despite this staggering growth, violent criminals are not being sent to prison in droves. Instead, nearly two-thirds of female prisoners are incarcerated for nonviolent offenses. About 56 percent of incarcerated women are in jail due to the drug war or over property crimes, FAMM reports. These types of offenses usually carry mandatory minimums, which are sentences that must be imposed no matter what. This strips judges of the ability to consider mitigating circumstances. Due to mandatory minimums, FAMM contends, many women are given sentences that do not fit the crime — and the result is tragic. Because 60 percent of women in prison are also mothers to children under the age of 18, the drug war has negatively impacted countless families; the number of American children whose mothers are in jail has more than double since 1991. When data is broken down into racial classifications, we also learn there’s a serious racial element to incarceration in the United States. According to FAMM, 380 out of every 100,000 black women in America are in jail, while 147 out of every 100,000 Hispanic women and 93 out of every 100,000 white women are incarcerated.

U.S. spending on prisons grew at three times rate of school spending: report | Reuters: U.S. state and local spending on prisons and jails grew at three times the rate of spending on schools over the last 33 years as the number of Americans behind bars ballooned under a spate of harsh sentencing laws, a government report released Thursday said. U.S. Secretary of Education John King said the report's stark numbers should make state and local governments reevaluate their spending priorities and channel more money toward education. Between 1979 and 2012, state and local government expenditures grew by 107 percent to $534 billion from $258 billion for elementary and secondary education, while corrections spending rose by 324 percent to $71 billion from $17 billion, the U.S. Department of Education report found. In that same period, the population of state and local corrections facilities surged more than four-fold to nearly 2.1 million from around 467,000, more than seven times the growth rate of the U.S. population overall. The prison population shot up following the widespread adoption of mandatory minimum sentence laws in the 1990s. Seven states - Idaho, Michigan, Montana, North Dakota, South Carolina, South Dakota and West Virginia - each exceeded the average rate, increasing their corrections spending five times as fast as they did their pre-kindergarten to grade 12 education spending.

Millennials are ripe for socialism: A generation is rising up against neoliberal oppression - Few developments have caused as much recent consternation among advocates of free-market capitalism as various findings that millennials, compared to previous generations, are exceptionally receptive to socialism. A recent Reason-Rupe survey found that a majority of Americans under 30 have a more favorable view of socialism than of capitalism. Gallup finds that almost 70 percent of young Americans are ready to vote for a “socialist” president. So it has come as no surprise that 70 to 80 percent of young Americans have been voting for Bernie Sanders, the self-declared democratic socialist. Some pundits have been eager to denounce such surveys as momentary aberrations, stemming from the economic crash, or due to lack of knowledge on the part of millennials about the authoritarianism they say is the inevitable result of socialism. They were too young to have been around for Stalin and Mao, they didn’t experience the Cold War, they don’t know to be grateful to capitalism for saving them from global tyranny. The critics dismiss the millennials’ political leanings by repeating Margaret Thatcher and Ronald Reagan’s mantra, “There is no alternative” (TINA), which prompted the extreme form of capitalism we now know as neoliberalism. But millennials, in the most positive turn of events since the economic collapse, intuitively understand better. Circumstances not of their choosing have forced them to think outside the capitalist paradigm, which reduces human beings to figures of sales and productivity, and to consider if in their immediate lives, and in the organization of larger collectivities, there might not be more cooperative, nonviolent, mutually beneficial arrangements with better measures of human happiness than GDP growth or other statistics that benefit the financial class. Indeed, the criticism most heard against the millennial generation’s evolving attachment to socialism is that they don’t understand what the term really means, indulging instead in warm fuzzy talk about cooperation and happiness. But this is precisely the larger meaning of socialism, which the millennial generation—as evidenced in the Occupy and Black Lives Matter movements—totally comprehends.

Advanced-Stage Charter Syndrome: What "Maturity" Means to the Charter Movement - Education Week recently posted a fine series of articles on the 25th anniversary of charter schools--the exciting original concept winding down to the dismal, show-me-the-money reality. And yesterday, the New York Times deftly and accurately outlined what happened to one state (Michigan) that embraced the charter movement early, then crafted additional legislation to support "choice," chip away at public systems where the poorest children (and unionized teachers) are found, then provide cover for obvious failure of individual charters and CMOs. If you want to know what your state may look like, given twenty-plus years' worth of burgeoning charterism, simply take a look at Michigan. And keep in mind that #1) there is no foolproof charter legislation model (caps, authorizing agents, profit/non-profit, staffing requirements, etc.) that will guarantee control over charterism; and #2) the concept of a unique, mission-driven charter school is very different from the wide-scale rollout of an alternative organizing model for public education. Here's the story of my personal aha moment, re: charter schools:

Report: 99% of Post-Recession Jobs Went to Those Who Went to College -- Quartz: “Jobs have come back back in post-recession America—but they’re reserved almost exclusively for people who went to college. Georgetown University’s Center on Education and the Workforce put out an extensive report this week revealing that while the US created 11.6 million new jobs after the recession, 11.5 million of those went to individuals with at least some college education.” “According to the report, the recession ‘decimated low-skill blue-collar and clerical jobs.’ Industries like manufacturing and construction have shrunk; office and administrative support positions—a primary source of work for non-college grads—have also dwindled, thanks to the rise of automation and digital information storage.”

How Chinese Students Saved America's Colleges -- There's a long tunnel connecting the Haidianhuangzhuang subway station in northwest Beijing with the Gate City Mall, and it's plastered with advertising displays. I was about halfway through it Wednesday when I noticed that every last one of the ads was for classes to prepare students for the ACT or SAT, the two main U.S. college entrance tests.  EF English Schools has classrooms in the mall, so that's a partial explanation. But EF has 24 such outposts just in Beijing; in Shanghaithere are 27, in Guangzhou, 17, and so on. I'm guessing there are a lot of subway corridors in China like the one I saw.  A survey released this week by Bain and Kantar Worldpanel found that Chinese shoppers are increasingly turning to domestic brands and abandoning foreign ones. That's not happening with post-secondary education, though! The number of Chinese students at foreign universities rose from 417,351 in the 2005/2006 school year to 712,157 in 2012/2013 (the most recent year for which I could find data). The U.S. is by far the leading destination:  China has been among the top senders of students to the U.S. for quite a while, but things have really taken off since 2007: This rapid rise in the number of Chinese students crossing the Pacific is the product partly of rising affluence in China and frustration with the relative inflexibility of the Chinese higher-education system. But it's also been driven by U.S. colleges and universities looking to counter a decline in the number of college-age kids in the U.S. and, in the case of state universities, big cutbacks in government aid, especially since the financial crisis of 2008. A couple of weeks ago, I wrote that Americans couldn't have Christmas without China because we're so dependent on exports from this country for our tree ornaments, Christmas lights and such. I wasn't being entirely serious about that -- like the Whos in Whoville, I'm sure we could find a way to get by. But when it comes to American colleges and universities, I really don't know how many of them could survive without foreign students in general and Chinese students in particular. The flow of money from foreign students has become so big that it even has some impact on the overall economy.

Racial/Ethnic Distribution of Advanced Degrees -- I stumbled on a website run by the American Academy of Arts and Sciences that looks at the Racial/Ethnic Distribution of Advanced Degrees.  Here's a graph from that page:  Here's a follow-up graph:   Interpret and prognosticate.

Clinton's pledge to forgive student debt of entrepreneurs, not average workers, will benefit the elite -- Democratic presidential front-runner Hillary Clinton has pledged to help forgive the student loans of entrepreneurs and small business owners, yet has not made similar promises to help forgive the student debt of average workers. Clinton released her Initiative on Technology & Innovation on Tuesday. It reflects her neoliberal, technocratic vision of the economy. In the initiative, Clinton outlines her plan to "support young entrepreneurs." As president, she says she would allow entrepreneurs to forgo paying their student student loans for up to three years, "so they can get their ventures off the ground and help drive the innovation economy."  Moreover, "innovators who start social enterprises or new businesses in distressed communities," Clinton adds, can apply for forgiveness of up to $17,500 of their student loans after five years.  Clinton has not made similar promises to help average working-class Americans with crippling student debt. In the education platform on her campaign website, she says she will allow Americans to refinance their loans at current rates, but there is no serious discussion of forgiveness.  At first glance, Clinton's new policy might sound like a good idea, but, simply by virtue of how entrepreneurship works, it will inevitably disproportionately benefit the elite.  Entrepreneurs employ people; business owners have people who work under them. Clinton's policy will help ease the student loans of these workers' bosses, while employees are crushed under the enormous weight of their student debt. At least 43.3 million Americans had student loan debt as of the end of 2014, according to Federal Reserve Bank of New York figures. This number has likely increased since then. There is approximately $1.2 trillion of student debt in the U.S. today. The average American with student debt has $26,700 in loans to repay.

Cutting the Cost of College with Three-Year Degrees - - According to a recent poll by veteran Democratic pollster Peter Brodnitz for the Progressive Policy Institute (PPI), When asked to choose between free college tuition and a proposal to offer three-year college degrees, thereby cutting college tuition costs by a quarter, Swing voters picked three year degrees by a 63 percent to 29 percent margin  Three-year colleges are the norm in many European countries, and a few enterprising universities here have begun to follow suit. This proposal would require any U.S. college or university with students who receive any type of federal student aid to offer the option of earning a bachelor’s degree in three years, and to hold annual increases in the price of tuition and fees to just over inflation. By making a three-year bachelor’s degree the norm the cost of attending college would drop dramatically. Students currently attending four-year public schools (in-state) would see savings on average of $8,893 while those at private schools would experience a $30,094 reduction. Cutting tuition by a quarter would also reduce the amount students need to borrow. Nearly 70 percent of bachelor degree holders have taken out student loans, with an average debt burden of $29,400. Assuming someone borrows $29,400 at the going rate of 4.66 percent over four years, the interest owed would amount to $7,505. But shaving a year off college cuts that interest tab to about $5,629, a savings of $1,876. And keep in mind we are talking averages here; the many students carrying debts well above the average will reap bigger savings.

Why Clinton’s New Tuition-Free Plan Matters -- The Clinton campaign made a major announcement today: Democratic presidential candidate Hillary Clinton will pursue a debt-free college for all policy, including a proposal to eliminate the cost of college tuition for a significant portion of the public. Clinton’s new proposals move her beyond previous statements that she would try to make college “as debt-free as possible“ and toward making “debt-free college available to all.” Clinton is adding three features to her plan for higher education policy, called the “New College Compact.“ They include eliminating tuition at in-state public universities for families making under $125,000 by 2021 and restoring year-round Pell Grant funding so students can take summer classes to finish school quicker. The plan isn’t great. I think means-testing higher ed makes about as much sense as means-testing Social Security or elementary school (though, alas, we still do that in this country through local funding and property taxes). I would have preferred free higher ed for everyone.  That said, and assuming Clinton can get this plan through (a big assumption), this is still a big step forward. For three reasons. First, lots of men and women—students and their families—will get this benefit, not in a far-off time, but soon.   Second, and more important for the long term, I’ve been saying forever that the biggest challenge facing contemporary liberalism is that, from the point of view of the average taxpayer, it has so little to offer.  Which brings me to my third reason.  To my mind, this announcement today goes way beyond the Clinton/Sanders horserace or the Clinton/Trump race. If there is anyone to be celebrated here, it’s the millions of people—particularly young people—who pushed so hard during this campaign, and who have been slowly changing American politics outside the electoral realm.

Daddies, “Dates,” and the Girlfriend Experience: Welcome to the New Prostitution Economy - Geraldine’s, the swank spot in Austin’s Hotel Van Zandt, is brimming with tech guys, some loudly talking about money. The college student at our table recommends the ribs—she’s been here before, on “dates” with her “daddies.” “There are a lot of tech guys,” she says. “They want the girlfriend experience, without having to deal with an actual girlfriend.” “The girlfriend experience” is the term women in the sex trade use for a service involving more than just sex. “They want the perfect girlfriend—in their eyes,” says Miranda, the young woman at our table.* “She’s well groomed, cultured, classy, able to converse about anything—but not bringing into it any of her real-world problems or feelings.”As the debate over whether the United States should decriminalize sex work intensifies, prostitution has quietly gone mainstream among many young people, seen as a viable option in an impossible economy and legitimized by a wave of feminism that interprets sexualization as empowering. “People don’t call it ‘prostitution’ anymore,” says Caitlin, 20, a college student in Montreal. “That sounds like slut-shaming. Some girls get very rigid about it, like ‘This is a woman’s choice.’ ”“Is Prostitution Just Another Job?” asked New York magazine in March; it seemed to be a rhetorical question, with accounts of young women who found their self-esteem “soaring” through sex work and whose “stresses seem not too different from any young person freelancing or starting a small business.” “Should Prostitution Be a Crime?” asked the cover of The New York Times Magazine in May—again apparently a rhetorical question, with an argument made for decriminalization that seemed to equate it with having “respect” for sex workers.   The Times Magazine piece elicited an outcry from some feminists, who charged that it minimized the voices of women who have been trafficked, exploited, or abused.

How MBA Programs Drive Inequality - INET - Business school students are taught to extract resources instead of creating value.  Over the last several decades, American business executives have made decisions that have exacerbated the inequality that chokes prosperity for the country. They have misallocated resources and they have awarded themselves mind-boggling compensation packages while workers have suffered stagnant wages and increasing job insecurity. The stats are shocking: In 1965, a typical CEO took in about 20 times what an average employee earned, while the latest figures from the AFL-CIO put current CEO pay at 373 times what the average worker makes. Inequality holds back the growth of the entire economy, as research supported by INET has shown. Even today’s business elites are worried about its impact: In a 2015 poll of over 2,700 Harvard Business School alumni, respondents said that they were more concerned about growing inequality than ever before. They saw it as a serious threat to the country, and to the bottom line of U.S. corporations. According to Harvard Professors Jan Rivkin and Michael Porter, and Harvard Business School Senior Fellow Karen Mills, who reported on the findings, respondents “remain pessimistic on balance about the likelihood that firms will lift American living standards by paying higher wages and benefits in the near term.”  In other words, don’t look to American companies to help solve inequality any time soon. The pessimism of the Harvard alums comes despite business-school programs in recent years adding courses that examine issues related to inequality.  Why is there so little expectation that today’s MBAs will run companies differently than their predecessors have done in light of the inequality crisis? What are they learning or failing to learn?

The Ones We've Lost: The Student Loan Debt Suicides -- Suicide is the dark side of the student lending crisis and, despite all the media attention to the issue of student loans, it's been severely under-reported. I can't ignore it though, because I'm an advocate for people who are struggling to pay their student loans, and I've been receiving suicidal comments for over two years and occasionally hearing reports of actual suicides. More people are being forced into untenable financial circumstances as outstanding student loan debt has surpassed $1 trillion. And people simply aren't able to pay all the money they owe. In the past few years, the rate of defaults for federal loans has increased at an alarming rate. According to the Department of Education, those recent graduates who began repayments in 2009, 8.8 percent had already defaulted on their federal loans. That compares to 7 percent in 2008. Currently, 36 million Americans have outstanding federal loans. I can't help but wonder how many of those millions are feeling distressed or suicidal, or how many have attempted suicide because of all that debt hanging over their heads. I first started appreciating the depth of the problem of suicidal debtors a few years ago, with a post on my blog, All Education Matters, entitled, "Suicide Among Student Debtors: Who's Thought About It?" I was stunned by the responses. In comment after comment, people confessed to feeling suicidal. One person wrote, "I was very actively looking into suicide until I got on anti-depressants. Now I have to take happy pills every day to keep the suicidal urges at a minimum level. You are correct to ask the question. Many of the folks who are incredibly deep in law school debt will end up killing themselves. I think, in the next 1-3 years, we are going to see absolutely massive numbers of law school graduate suicides."

Not Even Death Will Help You With Student Loans --Student loans are incredibly difficult to discharge, even through bankruptcy, this is widely known. However in New Jersey, it appears as though student loans are still expected to be paid, even if someone gets cancer or even dies. This is something that Marcia DeOliveira-Longinetti learned when trying to close out a list of things to take care of after her son's unsolved murder last year. When Marcia called about federal loans that her son had taken out for college, an administrator offered condolences and assured her that the balance would be written off. However, the New Jersey Higher Education Student Assistance Authority gave a quite a different response. "Please accept our condolences on your loss. After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you." a letter from the agency read. Of course Marcia was shocked, and even though she co-signed the loans was left confused. However, as a joint investigation by ProPublica and the New York Times discovered, this was not an isolated case. According to the NYT, New Jersey's loans, which total $1.9 billion, come with extraordinarily stringent rules that can lead to financial ruin. As the NYT explainsNew Jersey’s loans, which currently total $1.9 billion, are unlike those of any other government lending program for students in the country. They come with extraordinarily stringent rules that can easily lead to financial ruin. Repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks.The loans also carry higher interest rates than similar federal programs. Most significant, New Jersey’s loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state. New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings — all without having to get court approval.“It’s state-sanctioned loan-sharking,”

Teamsters are still looking at pennies on dollar in retirement - – Teamsters in Minnesota and across the country may believe they caught a break when the U.S. Treasury Department stopped cuts in their retirement pay. But the Pension Benefit Guaranty Corporation (PBGC) is now saying the government is on track to run out of money to prop up the troubled Teamsters Central States Pension Fund in 2024, roughly the same time the fund itself is expected to go bankrupt. Without major congressional action, the confluence of those two events could leave Central States pensioners collecting pennies on the dollars they invested in their retirements, Joshua Gotbaum, a former PBGC director, said. “I’m the son of a labor leader, and a former union member,” said Gotbaum. “I get it. The only people who did not contribute to this are the pensioners themselves … But the fact that it is not fair does not mean they are not going to lose their pensions.” Central States, the largest of the country’s troubled pension plans negotiated between single unions and multiple employers, has been operating at deficits of $2 billion a year recently. A June 17 report says the PBGC, which guarantees a minimum benefit to pensioners, expects to spend the better part of $15 billion assisting Central States in the next decade. But the projected rate of assistance to Central States and other ailing pension plans will wipe out the government’s multi-employer assistance funds by 2024. In a perfect storm of impossible math and congressional gridlock, Gotbaum, who led PBGC from 2010-2014, called the prospect of pension cuts to retirees unjust and probably unavoidable.

Are State and Local Government Pensions Underfunded by $5 Trillion? - If the Actuarial Standards Board enacts recommendations from its Pension Task Force, actuarial valuations for state and local government pensions will report unfunded liabilities of over $5 trillion and funding ratios of just 39 percent. The public pensions industry will hate it, but those figures are the best available measures of the costs of public employee retirement plans. A Pension Task Force established by the Actuarial Standards Board (ASB) has recommended rules changes that would require all pension actuaries to calculate and disclose the “market value” of retirement plan liabilities, a step that has been fought hard by the public pensions industry. Proponents of market-value liability figures, which include most economists as well as many policy analysts concerned about pension funding, argue that current actuarial methods understate pensions’ true benefit liabilities and encourage pensions to take excessive investment risk. While the ultimate decision on actuarial standards lies with the Actuarial Standards Board, it would be difficult for the ASB to reject the recommendations of its own task force on such an important issue. So this could mean a big change in how we view state and local government employee pension funding.

Selling bonds may help U.S. pensions: Bank of America Merrill Lynch | Reuters: NEW YORK U.S. corporate pensions facing record low bond yields might consider selling debt in an effort to raise cash to meet future payouts, Bank of America Merrill Lynch analysts said on Tuesday. Longer-dated U.S. Treasury yields sank to record lows on Tuesday on worries about the global economy following Britain's June 22 vote to leave the European Union. The average funded ratios of the top 100 U.S. corporate pensions are expected to fall to the lows seen in 2012 as the U.S. 30-year yield has fallen half a percentage point and yield premiums on corporate bonds also have declined since April, according to Bank of America analysts. "Corporate bond yields are so low that corporates could consider issuing debt to make their pensions whole and come out ahead," Shyam Rajan, Bank of America's interest rates strategist, wrote in a research note. The average yield on A-rated U.S. corporate bonds is about 2.52 percent, while that on BBB-rated corporates is 3.4 percent, according to Bank of America Merrill Lynch data. If the U.S. Treasury 30-year yield stays in the low 2 percent level, the top 100 domestic corporate pensions worth $3 trillion would be running a funding deficit of $500 billion, Rajan said. In June, the aggregate funded ratio for U.S. corporate pensions fell by 1.8 percentage points at 76.1 percent, the lowest in the past 12 months. This brought its year-to-date decline to 5.3 percentage points, Wilshire Consulting said on Tuesday.

America's suicide epidemic has gotten worse  - Imagine that the rate of terrorism deaths in the US had risen dramatically over the past 15 years. Imagine that this rise in deaths had been remarkably widespread, affecting almost all identifiable demographic groups. Imagine if more than 40,000 people a year died from terrorist attacks in this country, rather than a bare handful. Imagine if terrorism were one of the 10 leading causes of death in the US. It's almost an impossible hypothetical; the impact would simply be too massive to really grasp. After all, though the impact of terrorist violence on the United States has been negligible since the September 11, 2001, attacks, we've already made massive changes to the basic functions of our system to combat it. We've tortured; we've jailed people without trial for a decade and a half; we've undertaken a system of vast warrantless surveillance; we've built an immense, and immensely expensive, infrastructure for combatting terrorism. All in the face of a threat that kills a negligible number of people. Yet the conditions I outlined above accurately describe another killer, one that attracts far less attention: suicide. The National Center for Health Statistics recently released a major study, examining the national trends in suicide. The results are grim: The age-adjusted suicide rate in the United States increased a staggering 24% from 1999 to 2014. Increases were seen in every age group except for those 75 and above and in every racial and gender category except for black men. The national rate rose to 13 deaths per 100,000 people in 2014. Contrast that with homicide, which killed 5.1 Americans per 100,000 in 2013. We instinctively fear the murderer hiding in the bushes, but we are at far greater risk from ourselves.

Analysis of more than 1.5 million people finds meat consumption raises mortality rates -- A review of large-scale studies involving more than 1.5 million people found all-cause mortality is higher for those who eat meat, particularly red or processed meat, on a daily basis. Conducted by physicians from Mayo Clinic in Arizona, "Is Meat Killing Us?" was published today in the Journal of the American Osteopathic Association. The authors analyzed six studies that evaluated the effects of meat and vegetarian diets on mortality with a goal of giving primary care physicians evidence-based guidance about whether they should discourage patients from eating meat. Their recommendation: physicians should advise patients to limit animal products when possible and consume more plants than meat.While findings for U.S. and European populations differed somewhat, the data found the steepest rise in mortality at the smallest increases of intake of total red meat. That 2014 study followed more than one million people over 5.5 to 28 years and considered the association of processed meat (such as bacon, sausage, salami, hot dogs and ham), as well as unprocessed red meat (including uncured, unsalted beef, pork, lamb or game). A 2014 meta-analysis examined associations with mortality from cardiovascular disease and ischemic heart disease. In that study of more than 1.5 million people, researchers found only processed meat significantly increase the risk for all-cause mortality. Combined, the findings of these studies are statistically significant in their similarity, the reviewers noted. Further, a 2003 review of more than 500,000 participants found a decreased risk of 25 percent to nearly 50 percent of all-cause mortality for very low meat intake compared with higher meat intake.

Marijuana Compound Removes Alzheimer's-Related Protein From Nerve Cells: With the prevalence of Alzheimer's disease expected to almost triple in the United States by 2050, there is an urgent need to identify effective treatments for the condition.Now, a new study suggests marijuana may hold the key to such a treatment.Published in the journal Aging and Mechanisms of Disease, the study reveals how a compound present in marijuana triggered the removal of beta-amyloid protein from nerve cells, or neurons.Beta-amyloid is considered a hallmark of Alzheimer's disease; the protein clumps together in the brain of people with the condition, forming plaques.Studies have suggested these beta-amyloid plaques disrupt communication between neurons in the brain, which leads to symptoms associated with Alzheimer's, such as impaired memory.Preventing beta-amyloid accumulation in the brain might seem like an obvious way to tackle Alzheimer's, but because researchers are still unclear of the exact role the protein plays in the disease process, achieving such a feat is easier said than done.

fMRI software bugs could upend years of research -- A whole pile of “this is how your brain looks like” fMRI-based science has been potentially invalidated because someone finally got around to checking the data.  The problem is simple: to get from a high-resolution magnetic resonance imaging scan of the brain to a scientific conclusion, the brain is divided into tiny “voxels”. Software, rather than humans, then scans the voxels looking for clusters. When you see a claim that “scientists know when you're about to move an arm: these images prove it”, they're interpreting what they're told by the statistical software. Now, boffins from Sweden and the UK have cast doubt on the quality of the science, because of problems with the statistical software: it produces way too many false positives. In this paper at PNAS, they write: “the most common software packages for fMRI analysis (SPM, FSL, AFNI) can result in false-positive rates of up to 70%. These results question the validity of some 40,000 fMRI studies and may have a large impact on the interpretation of neuroimaging results.” For example, a bug that's been sitting in a package called 3dClustSim for 15 years, fixed in May 2015, produced bad results (3dClustSim is part of the AFNI suite; the others are SPM and FSL). That's not a gentle nudge that some results might be overstated: it's more like making a bonfire of thousands of scientific papers.

Use of personal care products during pregnancy linked to adverse effects in newborns - A study led by SUNY Downstate Medical Center's School of Public Health presents evidence linking personal care products used during pregnancy to adverse reproductive effects in newborns. "The study found a link between women with higher levels of butyl paraben, which is commonly used as a preservative in cosmetics, and the following birth outcomes: shorter gestational age at birth, decreased birth weight, and increased odds of preterm birth," says Laura Geer, PhD, MHS, associate professor in the Department of Environmental and Occupational Health Sciences in the School of Public Health at SUNY Downstate. The antimicrobial compound, triclocarban, mainly added to soaps, was associated with shorter gestational age at birth. Another common chemical added to lotions and creams, propyl paraben, was associated with decreased body length at birth. The long-term consequences of this are not clear, and, Geer adds, "Findings must be reproduced in larger studies."  The findings are available online and will be published in a Special Issue "Emerging Contaminants" in the Journal of Hazardous Materials. Dr. Geer says, "Our latest study adds to the growing body of evidence showing that endocrine-disrupting compounds can lead to developmental and reproductive problems in animals and in humans. Effects observed in previous studies mainly came from animal models only." This study presents evidence of potentially adverse impacts in humans. Larger follow-up studies to confirm these findings are warranted. Geer suggests, "Based on this new evidence, the safety of use of these chemicals in our consumer products should be reassessed."

Stem Cell Clinics Selling Risky Treatments Explode Across the U.S. - Unproven stem cell therapies have been scorned as “medicine’s Wild West.” Patients have died while undergoing treatment. Yet others have called them “miraculous.” Hundreds of NFL players have sought them out.  A study published today in the journal Cell Stem Cell finds that there are 570 clinics operated by 351 companies selling stem-cell procedures directly to consumers in the U.S., raising concerns that unapproved treatments could cost patients thousands of dollars and threaten their health.  “The big question for me is, how did this happen in the United States?” said Leigh Turner, an associate professor at the University of Minnesota’s Center for Bioethics & School of Public Health, who co-authored the study. “It’s often framed as a story about stem cell tourism, that these businesses don’t exist in the United States, they exist elsewhere around the world in Ukraine, Mexico, China, and India. Our findings clearly show that this is a widespread problem here.”  Stem cells are undifferentiated human cells that can be made to grow into different types of tissue. Scientists hope they can one day be used to treat disease or repair injured tissue. But few therapies have been proved in rigorous trials, and unapproved treatments have been linked to harm. The only stem cell treatments approved by the Food and Drug Administration use cells taken from bone marrow, and even those are restricted to specific transplants.  Researchers worry that the legitimate field of stem cell science, which holds great if early promise for medical advances, could be tainted if the public associates it with complications from unapproved treatments.

Zika Virus May Be Spread Through Sex More Than Mosquitos -  Out of 935 total cases of Zika virus in the United States, only 13 are documented as sexually transmitted. According to The New York Times, however, research suggests sex plays a large role in spreading Zika, larger than even mosquitos. First things first: no study is conclusive. But at least four studies do seem to indicate that women are more likely to be infected by Zika virus at sexually active ages—one conducted in Rio de Janiero found that women were 60 percent more likely to be infected than men. If the virus was transmitted primarily via mosquito bites, then a gender divide would not likely appear—blood is blood to mosquitos, gender aside. Zika also resides in semen for months after an infection, no matter how mild. (No cases of female-to-male transmission have been documented.) Zika research is still getting off the ground, and Congress' most recent attempt to pass Zika funding was wrapped in tricky, highly partisan legislature. But in light of this new research, it may be time to protect against Zika with more than bug spray, as if it was an STD—especially in countries with widespread transmission. Travel safe.

Climate change is spreading Lyme disease -- Immature deer ticks are called questing nymphs. They now inhabit a wide swath of North American forests, but they didn't always. During early summer, their quest is for blood. The season now starts earlier and lasts longer than it did in the past, which is good for the ticks. But it's bad for humans, because these ticks carry the bacteria, viruses, and parasites that cause Lyme disease, anaplasmosis, deer tick encephalitis, and babesiosis.  Encounters with ticks didn't always cast a dark shadow over North American summers. Cases of Lyme disease first appeared in 1976 in the woodsy suburb of Lyme, Connecticut. At that time, deer ticks were found only in a hotbed encircling Long Island Sound, along with a small area in Wisconsin.  Since the 1970s, deer ticks have rapidly extended their reach north, west, and south. The most recent map shows that deer ticks now roam throughout the eastern coastal states, from Maine to Florida, and across the Midwest. They are now established in 45 percent of U.S. counties. That means the deer tick has more than doubled its reach in the 20 years since the previous map was published.  The spread of Lyme disease has closely followed the spread of the forest nymphs. Lyme disease is now the most common disease transmitted by a vector — a mosquito, tick, or other bug — in the United States. More than 30,000 cases are reported each year, and the Centers for Disease Control and Prevention estimates that 10 times as many Americans develop the disease. 

Pesticide exposure linked to increased risk of ALS  - Survey data suggest reported cumulative pesticide exposure was associated with increased risk of amyotrophic lateral sclerosis (ALS), a progressive and fatal neurodegenerative disease, according to an article published online by JAMA Neurology.   The authors evaluated assessments of environmental pollutants in the blood and detailed exposure reporting through a survey. The study recruited 156 patients with ALS and 128 control patients for comparison; 101 patients with ALS and 110 controls had complete demographic and pollutant data. Pesticide exposure was associated with increased risk of ALS in survey data and by blood measurements, according to the results. "Finally, as environmental factors that affect the susceptibility, triggering and progression of ALS remain largely unknown, we contend future studies are needed to evaluate longitudinal trends in exposure measurements, assess newer and nonpersistent chemicals, consider pathogenic mechanisms, and assess phenotypic variations," the study conclude.

The developing world is awash in pesticides. There may be a better way. - Vox: In today’s globalized world, it is not inconceivable that one might drink coffee from Colombia in the morning, munch cashews from Vietnam for lunch, and gobble grains from Ethiopia for dinner. That we can enjoy these products is thanks, in large part, to expanded pesticide use across the developing world. Every year, some 3.5 billion kilograms (7.7 billion pounds) of pesticides — a catchall term for the herbicides, insecticides, and fungicides applied to crops from seed to harvest — are used to preserve the quality and quantity of fruits, vegetables, and grains. Herbicides, such as Monsanto’s weed killer glyphosate, make up the bulk of the pesticides applied worldwide. In the developing world, where swelling populations, increased urbanization, and growing economies create a demand for ever more food — produced quickly and inexpensively — pesticide application rates are rising. Bangladesh and Thailand have quadrupled their pesticide use since the early 1990s, while Ghana, Ethiopia, and Burkina Faso, countries newer to the pesticide game, have seen a tenfold increase over the same period, according to the Food and Agriculture Organization of the United Nations.The global pesticides market is estimated to be US$45 billion.  "In 2015, US$9.6 billion of pesticides were sold in Brazil," Pelaez says. "Compare that to US$14.9 billion sold in the U.S."  Brazil is a top exporter of soybean, corn, and cotton, Pelaez says, with soy being its top cash crop. During the 2014-'15 season, Brazil produced 97 million metric tons (107 million tons) of soybeans, just a hair shy of the US, the world’s leading soybean producer. And with booming agriculture comes a heavy dependence on pesticides. It is estimated that Brazil consumes around a billion liters (260 million gallons) of pesticides every year, and more than a third of that is applied to soybeans, according to a report from Brazil’s scientific research institute Fiocruz.

Court rules Monsanto can't dismiss farmer's cancer claim - Christine and Kenneth Sheppard, are the former owners of Dragons Lair Kona Coffee Farm in Captain Cook on Hawaii's Big Island. From 1996 through 2004, the couple sprayed their coffee farm with Monsanto's Roundup. In 2003, Christine was diagnosed with non-Hodgkin lymphoma. Courthouse News is reporting that Sheppard's case, like the lawsuit filed by three cancer-stricken farmers in Nebraska, is alleging that the agrochemical giant downplayed the carcinogenic properties of glyphosate, the active ingredient in Roundup.  Mother-of-Three Sues Monsanto Claiming Roundup Caused Her Cancer  Sheppard's attorney Michael Miller was quoted by West Hawaii Today as saying Monsanto has engaged in "a misinformation campaign" and the lawsuit will "force Monsanto to face the human consequences of their lies." He added that the Sheppard's are originally from England, and had always wanted to pursue their dream of owning a coffee farm.   In last week's hearing, U.S. District Judge Michael Seabright struck down Monsanto's claim that the lawsuit filed by Sheppard should be dismissed because it was filed outside the two-year statute of limitations for tort claims.  Seabright said, "it is not apparent on the face of the complaint that the statute of limitations has run, especially considering the allegations regarding the 2015 designation [of Roundup as a probable carcinogen] by the WHO."

U.S. GMO food labeling bill passes Senate | Reuters: The U.S. Senate on Thursday approved legislation that would for the first time require food to carry labels listing genetically-modified ingredients, which labeling supporters say could create loopholes for some U.S. crops. The Senate voted 63-30 for the bill that would display GMO contents with words, pictures or a bar code that can be scanned with smartphones. The U.S. Agriculture Department (USDA) would decide which ingredients would be considered genetically modified. The measure now goes to the House of Representatives, where it is expected to pass. Drawing praise from farmers, the bill sponsored by Republican Senator Pat Roberts of Kansas and Democrat Senator Debbie Stabenow of Michigan is the latest attempt to introduce a national standard that would override state laws, including Vermont's that some say is more stringent, and comes amid growing calls from consumers for greater transparency.

Senate Advances GMO Labeling Bill in Attempt to Nullify Vermont’s Historic Law  -- Today, in a cloture vote, the Senate voted today to do away with our right to know what’s in our food, revoking a popular and clear state labeling law in effect in Vermont and nullifying all future state labeling initiatives. This is a slap in the face for all of the advocates that have worked hard to pass state-level measures because they believe strongly that labels should be transparent, and people should have the choice to decide whether or not they purchase and consume foods with genetically engineered ingredients. The majority of Americans support labeling for GMOs and will hold their elected officials accountable for stripping away this transparency.If this bill becomes law, the industry wins what are essentially voluntary requirements under this GMO labeling “compromise,” which does not mandate recalls, penalties or fines for noncompliance with the incredibly weak requirements of the bill that will likely leave many GMO ingredients exempt from any labeling requirements. And the bill gives companies the option to use discriminatory QR codes that require a smartphone to access basic information about the food on store shelves.

Mandatory Federal GMO Labeling Is On Its Way  - After years of debate, the question over whether or not US foods made with genetically-modified organisms should be labeled is finally coming to a head. Vermont, the first state in the country enact a law requiring GMO labeling, had its new laws come into effect on July 1, prompting major food brands to change their labels nationwide. But in Congress, food industry lobbyists are pushing for federal rules that would override state-level requirements through a bipartisan bill that requires labeling . Whether this particular bill passes or not, it’s clear that a federal decision on GMO labeling is on its way, bringing a much-awaited conclusion to one of the biggest debates in food production this country has seen.  Scientific literature has found GMO foods cause no adverse health effects, yet there is still widespread public concern over these products. Even if GMOs are perfectly safe to eat, there are other reasons consumers might want to know if their foods are GM—such as a desire to not support Monsanto, for example. There are good arguments for labeling, and even food producers are starting to get on board with the idea. But it’s the specifics of which foods should be labeled, and how, that’s causing ongoing debate.  Many food producers say they are fine with labeling GMO products (though some lobbyists lost a bid to prohibit labeling laws earlier this year), but want a federal structure to avoid a patchwork of different, possibly conflicting, requirements.  “Having very different labeling requirements on a state by state basis was going to be a nightmare,”  “The unfortunate scenario you could see coming down the pike is other state laws coming into effect that would be in conflict with each other.”

CETA and TTIP threaten the EU’s precautionary principle – The precautionary principle may be scrapped in the EU’s free trade agreements with Canada and the United States. According to the NGO Foodwatch, this could call into question the bloc’s bans on hormone-treated beef and GMOs. EurActiv France reports.  The Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated with the United States and the recently concluded Comprehensive Economic and Trade Agreement (CETA) with Canada could well signal the end of the precautionary principle, specialists is EU law have warned. A group of specialists in European, German, Belgian and Dutch law have published a study in which they stressed that neither the CETA nor TTIP agreements mentioned this fundamental principle of EU law.  This places the EU in a delicate position. “How will the EU be able to justify certain consumer protection or environmental measures introduced under the precautionary principal in this new bilateral environment?” Nicolas de Sadeleer, a professor at Saint-Louis University in Brussels, asked at a seminar at the French Parliament on Monday.  Under the precautionary principle, public authorities can adopt restrictive measures to counter potential risks, particularly to the environment or human health. Widely applied across Europe, this principle has been used to justify bans on hormone-treated beef and the cultivation of genetically modified organisms (GMOs), even in the absence of irrefutable scientific evidence of the dangers posed by these products.

Glyphosate Sprayed on GMO Crops Linked to Lake Erie’s Toxic Algae Bloom  -- Glyphosate, the controversial main ingredient in Monsanto’s Roundup and other herbicides, is being connected to Lake Erie’s troubling algae blooms, which has fouled drinking water and suffocated and killed marine life in recent years.   Phosphorus—attributed to farm runoff carried by the Maumee River—has long been identified as a leading culprit feeding the excessive blooms in the western Lake Erie basin. Now, according to a new study from chemistry professor Christopher Spiese, a significant correlation has been established between the increased use of glyphosate to the percentage of dissolved reactive phosphorus (DRP) in the runoff. As No-till Farmer observed from the study, DRP loads in Lake Erie increased in the mid-1990s at the same time that farmers began the widespread cultivation of crops genetically engineered to withstand multiple applications of Roundup. “For every acre of Roundup Ready soybeans and corn that you plant, it works out to be about one-third of a pound of P [phosphorus] coming down the Maumee,” Spiese told the agricultural publication. Through his own and others’ research, Spiese found that depending on the types of metal in the soil, glyphosate does release P. For example, when glyphosate is applied to soil containing iron oxide-hydroxide, P is immediately released. But almost nothing is removed when it’s an iron oxide material. Finally, Spiese took soil samples all over the Maumee watershed, applied P to them and then sprayed glyphosate to see how much P was released vs. soil that wasn’t sprayed with glyphosate after 24 hours. He saw desorption occurred all over the watershed, but certain areas were higher than others, specifically in the southeastern corner.

There’s A Deadly Problem With Our Water Hardly Anyone’s Talking About  -- In the more than two years that have passed since the drinking water crisis in Flint, Michigan, began, the threat of lead contamination in drinking water nationwide has perhaps never before felt more urgent -- but experts say there is another contaminant that may be linked to the Flint crisis, with deadly results.  Twelve people in the Flint area died of Legionnaires’ disease, a severe pneumonia, following the switch to sourcing drinking water from the Flint River, according to state health officials. A total of 91 cases were reported in Genesee County from 2014 to 2015, more than seven times the number of Legionnaires’ cases the county typically reports. And the number of actual cases are likely even higher, as the number of pneumonia and flu deaths in the county also rose after the switch.  The problem is not limited to Flint. The Centers for Disease Control announced this month that the number of Legionnaires’ cases in the U.S. has almost quadrupled over the past 15 years with about 5,000 people being diagnosed with the disease in 2015. Other estimates put that number closer to 18,000. Among these were the more than 120 people sickened in the Bronx, New York, last year, 12 of whom died, plus another 13 killed and dozens more sickened following an outbreak at a state veterans home in Quincy, Illinois  The CDC says the rise in Legionnaires’ cases is largely linked to improper water management, most frequently inside buildings that have large water systems, namely hotels, hospitals and other health care facilities. Buildings where the bacteria is present often haven't used enough disinfectant in their water or have not made needed repairs to filters or other equipment.  The vast majority of cases are so severe that hospitalization — often in the intensive care unit — is necessary. The disease is fatal for about 10 percent of those who contract it.

"This Is A Toilet" - US Rowing Team Will Use Sewage-Proof Suits At Rio Olympics - That Brazil is a complete economic and political disaster is well known to readers at this point. However, when we noted nearly a year ago that Olympic swimmers would be swimming in feces, it was at least somewhat assumed that the issue would have been largely addressed by now - it turns out that's not the case. With the Olympics set to begin in just one month, CBS News reports that raw sewage is still flowing from Rio's neighborhoods right into the water. "We had seven years and our authorities didn't do almost anything, because this is a toilet." said biologist Mario Moscatelli as he pointed at the water, which according to CBS contains viruses up to 1.7 million more times hazardous than any beach in the US. If that isn't bad enough, the so-called "super bacteria" in the waterway is apparently resistant to antibiotics.  CNN has more: A group of Brazilian scientists have detected a drug-resistant bacteria growing off of some of Rio de Janeiro's most stunning beaches, one month before the city is due to host the 2016 Olympic Games. According to lead researcher Renata Picao, the "super bacteria" entered the city's waterways when sewage coming from local hospitals got channeled into the bay. "We have been looking for 'super bacteria' in coastal waters during a one-year period in five beaches," Picao told CNN during a visit to her lab. "We found that the threats occur in coastal waters in a variety of concentrations and that they are strongly associated with pollution." "This bacteria colonizes the intestine and it goes along with feces to the hospital sewage," Picao said. "We believe that hospital sewage goes into municipal sewage and gets to the Guanabara Bay or to other rivers and finally gets to the beach." With the background properly set, and given that the Olympics is still on - for now - the US rowing team will be using suits designed by Boathouse Sports that will help keep the sewage off the rowers. As the AP reports, the new seamless one-piece suit is knitted with an anti-microbial finish, that will also have water-repellent features to keep the rowers cool and dry -and hopefully, free from shit.

Earth: a visualization of global weather conditions forecast by supercomputers updated every three hours - ocean surface current estimates updated every five days - ocean surface temperatures and anomaly from daily average (1981-2011) updated daily - ocean waves updated every three hours

Heat Wave Lifts June to Record Hot Temp for U.S. -  Thanks in part to the epic heat wave that sent temperatures skyrocketing in the Southwest, last month was the hottest June on record for the contiguous U.S., the National Oceanic and Atmospheric Administration announced Thursday. June was 3.3°F above the 20th century average of 68.5°F, beating the previous record set in 1933 by 0.2°F, according to NOAA data. That bump of heat comes amid what is the hottest year to date by a good margin for the world as a whole.Outside of the contiguous U.S., Alaska continued to bake, with its ninth warmest June and by far warmest year-to-date.  This was the first record hot month for the Lower 48 this year, and it boosted the year-to-date temperature to 3.2°F above the 20th century average. That means that at the halfway point of the year, the U.S. is having its third warmest year-to-date, up from the fourth spot at the end of May.

June 2016 Was Warmest on Record for Lower 48, NOAA Says: June 2016 was the hottest on record for the contiguous United States, scientists from NOAA’s National Centers for Environmental Information announced on Thursday. At an average temperature of 71.8 degrees Fahrenheit, the June record was broken with none of the Lower 48 turning in below-average temperatures for the month. NOAA said 17 states in the West, Great Plains and Southeast were well above average, rising the national average temperature to the highest ever recorded for the month of June. June 1933 was previously the warmest NOAA had ever recorded, at 71.56 degrees. June 2015 is now the third-warmest on record, at 71.4 degrees. The contiguous U.S. finished the first six months of 2016 at 3.2 degrees above the 20th-century average, and with an average temperature of 50.8 degrees, it was the third-warmest first half to any year on record, NOAA also said in its report. "Every state was warmer than average for the year to date, and Alaska continued to shatter heat records," the report also said. Heat wasn't the only problem in the Lower 48 last month. With an average of 2.47 inches of precipitation, last month was the 14th-driest June on record for the Lower 48. The lack of precipitation allowed drought conditions to worsen in parts of the Southeast, Northwest, Northeast and Plains. The Lower 48's drought footprint now sits at 16.2 percent, a rise of about 3.5 percent since the end of May, according to NOAA.

Iran city hits suffocating heat index of 165 degrees, near world record - Wherever you live or happen to travel to, never complain about the heat and humidity again.In the city of Bandar Mahshahr (population of about 110,000 as of 2010), the air felt like a searing 165 degrees (74 Celsius) today factoring in the humidity.Although there are no official records of heat indices, this is second highest level we have ever seen reported. To achieve today’s astronomical heat index level of 165, Bandar Mahshahr’s actual air temperature registered 115 degrees (46 Celsius) with an astonishing dew point temperature of 90 (32 Celsius). This 165 reading, recorded at 4:30 p.m. local time Friday, comes one day after the heat index soared to 159 degrees (70 Celsius) in the same location. Bandar Mahshahr sits adjacent to the Persian Gulf in southwest Iran where water temperatures are in the 90s. Such high temperatures lead to some of the most oppressive humidity levels in the world when winds blow off the sweltry water.

Sahel rainfall recovery linked to warming Mediterranean, study says -- Following a severe drought in the 1970s and 80s, the Sahel region of Africa has seen something of a recovery in its rainfall. A new study, just published in Nature Climate Change, suggests this recovery has been prompted by rising temperatures in the Mediterranean Sea. Looking ahead, the study suggests continued warming could make reliable rainfall more likely in the future. But climate change won't be beneficial for the Sahel - or Africa - overall, another scientist tells Carbon Brief. The Sahel region stretches from the Atlantic coast of Mauritania and Senegal through to Sudan, Eritrea and the Red Sea. It gets almost all of its rainfall in one wet season between June and September. The rain is delivered by the Intertropical Convergence Zone (ITCZ), a huge belt of low pressure that encircles the Earth near the equator. The ITCZ wanders north and south across the tropics each year, roughly tracking the position of the sun through the seasons. The Sahel marks the ITCZ's most northerly position.However, the movements of the ITCZ can be erratic, with striking consequences.  Between the 1960s and 80s, the ITCZ gradually shifted southwards, depriving the Sahel of its annual deluge and causing widespread drought and famine. Rainfall totals have since shown a partial recovery. Scientists have attributed the ITCZ's southerly shift and the subsequent drought to natural temperature fluctuations in the Atlantic, Pacific and Indian Oceans. However, the new study finds that these fluctuations are not responsible for the recovery.  Simulating Sahel rainfall in a climate model, the researchers find that the principal cause is human-caused warming of the Mediterranean Sea.

Study: Climate Change Warming Asian Waters, Altering Monsoon -  Each year as temperatures rise across India, farmers look to the sky and pray for rain. The all-important monsoon forecast becomes a national priority, with more than 70 percent of India's 1.25 billion citizens engaged in agriculture and relying on weather predictions to decide when they will sow their seeds and harvest their crops. But getting the forecast right remains a challenge, thanks to the complex — and still poorly understood — ways in which South Asia's monsoon rains are influenced by everything from atmospheric and ocean temperatures to air quality and global climate trends. Even the amount of ice in Antarctica is suspected to have an impact. And it's only getting harder to figure out, scientists say, as the monsoon becomes increasingly erratic. A new study released Friday in the journal Science Advances helps clear up a bit of the mystery, by showing that man-made climate change is responsible for most of the change seen in ocean surface temperatures near the equator across Asia, which in turn affect regional rainfall patterns including the Indian monsoon. By showing that link, the study indicates future ocean warming in the region, which could in turn increase the amount of rainfall during monsoons, strengthen cyclones and increase precipitation over East Asia. "This has important implications for understanding changes in rainfall patterns for a large, and vulnerable population across Asia,"

NASA Data Shows Toxic Air Threat Choking Indian Subcontinent - The mega-city of New Delhi has tried everything from banning diesel guzzling SUVs to taking about half the city’s cars off the streets in a fight against air pollution. Officials may yet have to do much, much more, based on National Aeronautics and Space Administration satellite research. The research depicts how much sunlight is blocked by airborne particles, providing a proxy for levels of pollution. The data show parts of the Indo-Gangetic plain -- stretching across northern India from eastern Pakistan on one side to Bangladesh on the other -- suffer some of the planet’s worst haze in October through January after monsoon rains end in September. On average during those months, as much as 10 times more solar beam was blocked over the plain from 2008 to 2014 compared with the U.S., signaling substantial concentrations in the air of the tiny, toxic PM2.5 particles that damage health. While New Delhi is heaving with millions of vehicles, exhaust-pipe emissions in cities in the densely populated plain are just part of a complex picture, according to Pawan Gupta, a research scientist at Goddard Earth Sciences Technology and Research in Greenbelt, Maryland. "During the post-monsoon season, the Indo-Gangetic plain is one of the most heavily polluted regions," Gupta said. The burning of vegetation, for instance by farmers or for cooking, as well as a winter climate and a topography that traps pollutants, all add to the problem, he said. Click here to see how a Wharton grad senses a fortune in India’s toxic air. A ribbon of 17 cities across or near the plain -- with a combined population of about 55 million -- dominates the World Health Organization’s ranking of the 30 metropolises with the worst air. The chain starts with Peshawar in Pakistan and heads south and east in a shallow arc through New Delhi and onto Narayanganj in Bangladesh.

Floods in China kill almost 130, wipe out crops - Severe flooding across central and southern China over the past week has killed almost 130 people, damaged more than 1.9 million hectares of crops and led to direct economic losses of more than 38 billion yuan ($5.70 billion), state media said on Tuesday. Premier Li Keqiang traveled on Tuesday to Anhui, one of the hardest-hit provinces, where he met residents and encouraged officials to do everything they could to protect lives and livelihoods. Li was also to visit Hunan province. Heavy rainfall had killed 128 people across 11 provinces and regions and 42 people are missing, state news agency Xinhua reported. More than 1.3 million people have been forced out of their homes, it said. Weather forecasts predicted more downpours during what is traditionally China's flood season. Xinhua said more than 1.9 million hectares (4.7 million acres) of cropland had been damaged and another 295,000 hectares had been destroyed, resulting in direct economic losses of 38.2 billion yuan. More than 40,000 buildings have also collapsed, it added. It was not clear how that would affect the summer grain harvest, which was expected to reach 140 million tonnes this year.

Australia's vast kelp forests devastated by marine heatwave, study reveals -- A hundred kilometres of kelp forests off the western coast of Australia were wiped out by a marine heatwave between 2010 and 2013, a new study has revealed. About 90% of the forests that make up the north-western tip of the Great Southern Reef disappeared over the period, replaced by seaweed turfs, corals, and coral fish usually found in tropical and subtropical waters. The Great Southern Reef is a system of rocky reefs covered by kelp forests that runs for 2,300km along the south coast of Australia, extending past Sydney on the east coast, down to Tasmania and, previously, back up to Kalbarri on the west coast. It supports most of the nation’s fisheries, including the lucrative rock lobster and abalone fisheries, and is worth about $10bn to the Australian economy. It is also a global biodiversity hotspot, with up to 30% of species endemic. Dr Thomas Wernberg, from the University of Western Australia’s oceans institute and lead author of the study, told the Guardian that 100km of kelp forest died following a marine heatwave in 2011 which saw the ocean temperature increase by 2C. The death of the kelp caused the functional extinction of 370sq km of rocky cool-climate reefs, extending down the coast from Kalbarri, about 570km north of Perth, Western Australia.

Miami-Dade Could Ask Developers to Pay for Climate Change Costs -- If you live in South Florida, you've probably come around to the idea of climate change and realized that, like it or not, sea levels are rising. But solutions to the problem are pricey, and there's no clear consensus on how we'll pay for the changes we need to continue living here.  Four Miami-Dade commissioners have suggested an idea so new it doesn't appear any other city has implemented it: Create new "impact fees" that would require developers to basically pay for their portion of the burden of sea-level-rise-related costs. "We have to be forward-thinking and open-minded about how we’re going to share responsibility for solving the challenge,"    The proposal, which is on today's agenda, asks the mayor to prepare a report on whether such fees would be appropriate. (It's worth noting that Miami-Dade Mayor Carlos Gimenez has said much of the discussion about climate change involves "doomsday scenarios which, frankly, I do not believe.") The commissioners' resolution says new developments place an additional strain on the county in terms of providing infrastructure or services to address sea-level rise, and that it might be reasonable to make those developers shoulder part of the cost. After holding public workshops and soliciting input from the business community, Levine Cava tells New Times it would be at least a year before any new fees would be added, if the idea moves forward.

Double shock of El Nino, La Nina could affect more than 100 million people: U.N. | Reuters: - The number of people affected by the combined impact of the El Nino and La Nina weather patterns could exceed 100 million by the end of the year, the United Nations said on Wednesday. The U.N. Food and Agriculture Organisation (FAO) estimates that more than 60 million people, two thirds of them in east and southern Africa, are facing food shortages because of droughts linked to El Nino, a climate phenomenon that occurs when water in the Pacific Ocean becomes abnormally warm. The impact of La Nina, when waters in the eastern Pacific Ocean cool after a phase of El Nino, is not as severe - but the weather pattern has also been linked to floods and droughts. "EL Nino has caused primarily a food and agricultural crisis," FAO Director-General Jose Graziano da Silva said at a meeting of U.N. agencies in Rome to discuss the impact of El Nino in Africa and Asia Pacific. He said almost $4 billion was needed to meet the humanitarian demands of countries affected by El Nino. The United Nations has called on governments and the international community to increase efforts to boost the resilience of "highly vulnerable" communities who are struggling to feed themselves, as well as to help them prepare for La Nina. The FAO was mobilizing extra funding for agriculture, food and nutrition, and to invest in disaster preparedness, he said. "It [the FAO] will finance early actions that prevent unfolding disasters from happening,"

World must stop next El Niño harming development: U.N. envoy | Reuters: - Governments have been too slow to respond to droughts and floods linked to the El Niño weather pattern, and must do better next time if global development goals are to be met, said Mary Robinson, U.N. special envoy for El Niño and climate. Last year, U.N. member states agreed on an ambitious set of 17 goals to end poverty, hunger and inequality by 2030, known as the Sustainable Development Goals (SDGs). In an interview with the Thomson Reuters Foundation, Robinson said the world's mishandling of El Niño - a warming of Pacific Ocean surface waters - has hurt the most vulnerable communities and threatened progress to meet the SDGs. "We will do our best to cope with the fact that we are too late with too little - and the international community didn't pay it any attention for far too long, and we've got a big (funding) gap," the former Irish president said. She was speaking from the northern Ethiopian region of Tigray, which has been hit hard by drought. The United Nations says there is a shortfall of $2.5 billion for aid needed this year to help more than 60 million people affected by El Niño in 22 countries across southern and eastern Africa, Central America and the Pacific. "We have to do it differently next time - we cannot have an El Niño aggravated by climate (change) undermine development hugely, drastically," said Robinson, who is visiting Ethiopia with Irish aid agencies. "We will never achieve the Sustainable Development Goals unless we address this."

Can New York Be Saved in the Era of Global Warming? -- Hurricane Sandy, which hit New York in October 2012, flooding more than 88,000 buildings in the city and killing 44 people, was a transformative event. It did not just reveal how vulnerable New York is to a powerful storm, but it also gave a preview of what the city faces over the next century, when sea levels are projected to rise five, six, seven feet or more, causing Sandy-like flooding (or much worse) to occur with increasing frequency. "The problem for New York is, climate science is getting better and better, and storm intensity and sea-level-rise projections are getting more and more alarming," . "It fundamentally calls into question New York's existence. The water is coming, and the long-term implications are gigantic."  Next year, if all goes well, the city will break ground on what's called the East Side Coastal Resiliency Project, an undulating 10-foot-high steel-and-concrete-reinforced berm that will run about two miles along the riverfront. It's the first part of a bigger barrier system, known informally as "the Big U," that someday may loop around the entire bottom of Manhattan, from 42nd Street on the East Side to 57th Street on the West Side. There are plans in the works to build other walls and barriers in the Rockaways and on Staten Island, as well as in Hoboken, New Jersey, across the Hudson River. But this project in Lower Manhattan is the headliner, not just because the city may spend $3 billion or more to construct it, but also because Lower Manhattan is some of the most valuable real estate on the planet – if it can't be protected, then New York is in deep trouble.

2 months later, massive Canadian wildfire finally 'under control': The "beast" is dead. The Fort McMurray wildfire — one of the costliest and most damaging wildfires in Canadian history — was officially declared "under control" Tuesday by provincial officials. The fire started May 1 near Fort McMurray, Alberta, and soon roared into the city, forcing 80,000 residents to flee in what was the biggest fire evacuation in Albertan history. Though it's under control, the fire could burn for another year in some areas, the Alberta Agriculture and Forestry department said. While the cost has not been totaled yet, the fire will "probably" be Canada's all-time most expensive wildfire to fight, said Marc Mousseau of the Canadian Interagency Forest Fire Centre. The number of structures burned — 2,400 — could also be a Canadian record, he said. But at 2,300 square miles burned — roughly the size of Delaware — it was not the biggest wildfire in Canadian, or even Albertan, history, Mousseau said. The Richardson fire in 2011 in Alberta was larger, but, as with many fires in Canada, it did not directly threaten large cities, though evacuations of oil sand facility workers were required. Before satellites could "see" fires burning in remote, forested areas of Canada, many massive fires would have gone unnoticed, Mousseau said. One known wildfire in 1815 in the eastern Canadian province of New Brunswick charred more than 6,000 square miles, according to Canadian Geographic.

Ravaged woodlands | The Economist: IT WAS the dead animals his team found upsetting, says Steve Lydick, surveying, from a high ridge in the western Cascade range, the burnt, blackened valley below. Dotted with charred boles, like used matchsticks protruding from the cracked, depleted soil, its sides drop to a stream from which the Stouts Creek fire, which consumed 25,000 acres of mixed conifer forest in southern Oregon last August, took its name. As the inferno roared through the valley, coyotes, bears, deer and rodents of all kinds rushed for the water. It fell to Mr Lydick’s colleagues in the Bureau of Land Management, a federal agency that manages almost a quarter of a billion acres in America’s 12 western states, to dispose of their remains. “Some found it pretty distressing,” he says. It is a grisly image: ash-black water running through singed carcasses. It also seems paradoxically suggestive of how much harder it is to be moved, in any comparable way, by the vaster devastation taking place in America’s forests, owing to fire, pestilence and drought. All are indicators of a warming climate, to which decades of human intervention have made the forests—the fourth most expansive of any country—especially susceptible. These blights are therefore growing, especially in the semi-arid West.

The biggest body of warm water on Earth is getting even bigger - When it comes to fundamental drivers of climate and weather across the Earth, it is hard to think of a region more important than the Indo-Pacific Warm Pool, an enormous area stretching across the Pacific and Indian oceans on both sides of the equator.  This is, basically, the biggest body of warm water there is. Indeed, the warm pool, which is fueled by the intense sunlight striking the equator and tropics, is defined as the area where the average surface ocean temperature is greater than about 82 degrees Fahrenheit all year round (a temperature, incidentally, that is well above the threshold level needed for tropical cyclone or hurricane formation).   The warm pool drives monsoons, tropical cyclones and much more. Its warm ocean surface is the home to deep atmospheric "convection," or the rising of warm, moist air, which leads to atmospheric circulation and rainfall patterns that influence the entire planet.   And the warm pool is growing.  "It is about four or five times larger than Australia," said Seung-Ki Min, author of a new study in Science Advances on the warm pool's expansion. "It has been increasing about 32 percent over the last 60 years in size."  The new study proves for what is apparently the first time that this spatial expansion - which has implications for hurricane landfalls, rising seas (warm water expands and takes up more area) and much more - is caused by human-induced climate change.  It is not, of course, news that the global ocean itself is warming. But because of the warm pool's enormous heat and role in the global atmospheric circulation, its changes reverberate very widely indeed.

Claim that jet stream crossing equator is 'climate emergency' is utter nonsense -- Two bloggers have made a stunning claim that has spread like wildfire on the Internet: They say the Northern Hemisphere jet stream, the high-altitude river of winds that separates cold air from warm air, has done something new and outrageous. They say it has crossed the equator, joining the jet stream in the Southern Hemisphere. One said this signifies that the jet stream is 'wrecked', the other said it means we have a "global climate emergency."  But these shrill claims have no validity - air flow between the hemispheres occurs routinely. The claims are unsupported and unscientific, and they demonstrate the danger of wild assertions made by non-experts reaching and misleading the masses.  The two bloggers who have perpetuated this misinformation are Robert Scribbler, who describes himself as " a progressive novelist, non-fiction writer and emerging threats expert," and Paul Beckwith, who is working on a PhD with "a focus on abrupt climate system change" at the University of Ottawa. Scribbler says the cross-equator flow is a manifestation of man-made global warming, supported by the hypothesis that disproportionate heating of the Arctic is destabilizing the jet stream.  He concludes that this "violation of dividing lines" is "a kind of weather weirding that we are not at all really prepared to deal with."  Beckwith writes that the jet stream behavior is "unprecedented" and represents "climate system mayhem". . . . We must declare a global climate emergency."  I reached out to several atmospheric scientists, who have graduate degrees and are trusted sources in the profession, for their reaction to these claims. Without exception, they said air flow between the hemispheres is not at all uncommon.

Climate change causing oceanic boundary currents to intensify and shift poleward -- Weather along the eastern coasts of South Africa, Asia, Australasia and South America will get significantly warmer and stormier on average over the next 100 years, a new study finds. The culprit? Climate changes that are causing ocean currents next to these coastal regions, called western boundary currents, to become stronger and extend further toward the poles, according to the new study. Western boundary currents move warm water from the tropics toward the poles. Driven by winds, they occur on the western edges of oceans, adjacent to the eastern coasts of continents. They extend down to a depth of 1,000 meters (3,000 feet) and are among the fastest ocean currents in the world. The Gulf Stream is the North Atlantic Ocean's western boundary current, carrying warm water from the Gulf of Mexico northward up the Atlantic coast of the U.S. and Canada. Other western boundary currents include the Kuroshio Current off the coast of Japan, the Brazil Current off the eastern coast of South America, the Eastern Australia Current and the Agulhas Current off the coast of South Africa. The researchers found increasing winds in both the Northern and Southern Hemispheres are causing western boundary currents to get warmer, stronger, and extend poleward. The study was published today in the Journal of Geophysical Research: Oceans, a journal of the American Geophysical Union.

Arctic sea ice crashes to record low for June - The summer sea ice cover over the Arctic raced towards oblivion in June, crashing through previous records to reach a new all-time low. The Arctic sea ice extent was a staggering 260,000 sq km (100,000 sq miles) below the previous record for June, set in 2010. And it was 1.36m sq km (525,000 sq miles) below the 1981-2010 long-term average, according to the National Snow and Ice Data Center. That means a vast expanse of ice – an area about twice the size of Texas – has vanished over the past 30 years, and the rate of that retreat has accelerated. Aside from March, each month in 2016 has set a grim new low for sea ice cover, after a record warm winter.  January and February obliterated global temperature records, setting up conditions for the further retreat of the Arctic summer ice cover, scientists have warned.  Researchers did not go so far as to predict a new low for the entire 2016 season. But they said the ice pack over the Beaufort Sea was studded with newer, thinner ice, which is more vulnerable to melting. Ice cover along the Alaska coast was very thin, less than 0.5 meters (1.6 ft). The loss of the reflective white ice cover in the polar regions exposes more of the absorptive dark ocean to solar heat, causing the water to warm up. This goes on to raise air temperatures, and melt more ice – reinforcing the warming trend. Scientists have warned the extra heat is the equivalent of 20 years of carbon emissions.

As Global Warming Thaws Northwest Passage, a Cruise Sees Opportunity -There are few opportunities for passengers to travel the sea route along the northern coast of North America. Even with global warming opening up the Northwest Passage, fewer than 50 passenger ships have completed the full transit, and those were largely yachts and expedition boats with at most a few hundred people. With 1,070 passengers and a crew of 655, the Serenity is giant in comparison. Its foray into these waters will test not only the ability of man and machine to avoid ice, but also the readiness of a multinational search and rescue coalition. And with guests paying as much as $120,095 a person for a cabin, there are questions about the interactions between the passengers, who have been promised a “heady combination of indulgent services and enriching discovery” by the cruise line, and the local indigenous people who value their privacy. The ship is “just so big and in your face, and everybody’s perception of the Arctic is so fragile, remote and untouched,” said Patrick T. Maher, co-editor of the book “Cruise Tourism in Polar Regions.” Last September, the second in command of the United States Coast Guard told reporters that planning for the cruise kept him up at night. “I don’t want a repeat of the Titanic,” said Adm. Charles D. Michel, the vice commandant, at the Global Leadership in the Arctic conference in Anchorage. “This is a complex operation in a very environmentally sensitive and frankly navigationally difficult area, and the weather is incredibly treacherous there, logistics very difficult to deal with.”

Antarctic sea ice expansion driven by natural variability: study -- Sea ice – unlike the slow moving ice shelves or glacial ice – is seasonal. It forms when the ocean’s surface temperature drops to around -2 oC and chilly winds off Antarctica whip over the water, expanding and retreating each year. Climate modelling has shown that rising sea temperatures, thanks to global warming, should stem this growth. Instead, Antarctic sea ice extends as far and wide as ever. What’s going on?Gerald Meehr from the National Centre for Atmospheric Research in Boulder, US and colleagues examined 262 climate models – not looking for human effects, but natural variation.Indeed, they found rising sea temperatures due to global warming were swamped by the interdecadal pacific oscillation, or IPO – naturally fluctuating atmospheric pressure that causes warms or cools sea surfaces over the entire Pacific Basin. Each IPO cycle can last from 20 to 30 years. And since 1999, the IPO has been in a “negative phase”. Sea surface temperatures have plunged below average – and in Antarctica, this caused sea ice to spread far and wide. The rate of sea ice expansion increased five-fold in 2000.  William Hobbs, an oceanographer at the Antarctic Climate and Ecosystems Cooperative Research Centre in Hobart, Australia, who was not involved with the study, says the IPO is a plausible explanation of Antarctic sea ice expansion but doesn’t explain Antarctica’s western Ross Sea where sea ice has been spreading fastest. "This is a really complex interaction of land, atmosphere and ocean"he says.  Scientists think that in 2014, the IPO began to switch to a positive phase. If this is the case, and sea surface temperatures around Antarctica start to warm again, we should see less Antarctic sea ice, says Julie Arblaster from Monash University in Melbourne, Australia and study co-author.

This new Antarctica study is bad news for climate change doubters -  For a number of years now, climate change skeptics have argued that there’s a key part of the Earth’s climate system that upends our expectations about global warming, and that is showing trends that actually cut in the opposite direction.  This supposed contrary indicator is the sea ice that rings the Antarctic continent, and that reached a new all-time record extent of  7.78 million square miles in September 2014 (see above). As that record suggests, this vast field of ice has been expanding in recent years, rather than shrinking. That means it’s doing the opposite of what is happening in the Arctic, where sea ice is declining rapidly — and also that it’s doing the opposite of what we might expect in a warming world.  Scientists don’t fully understand why Antarctic sea ice is growing — suggested explanations have posited more glacial melt dumping cold fresh water into the surrounding seas, or the way the Antarctic ozone hole has changed the circulation of winds around the continent. In a new study in Nature Geoscience, though, researchers suggest that the phenomenon is simply the result of natural variability of the climate system — driven, in this case, by changes in the tropical Pacific Ocean that reverberate globally.  The new study confirms that the ice floating around Antarctica has been expanding — indeed, the expansion has accelerated since around the turn of the century. But that’s also around the time that a cycle dubbed the “Interdecadal Pacific Oscillation,” or IPO, shifted into a negative phase, which is characterized by ocean surface cooling in the tropical Pacific, and particularly its eastern part around the equator. But what’s new in the latest study is the suggestion that this negative IPO phase had consequences that stretched all the way to the Southern Ocean waters surrounding Antarctica — and that this, in turn, explains why most climate models didn’t predict the observed growth of Antarctic sea ice.

Richest nations fail to agree on deadline to phase out fossil fuel subsidies - Energy ministers from the world's major economies have failed to reach agreement on a deadline to phase out hundreds of billions of dollars in government subsidies for fossil fuels - subsidies that campaigners say are helping to propel the globe toward potentially devastating climate change.Ministers from the Group of 20 major economies met in Beijing on Wednesday and Thursday but failed to reach agreement on a deadline, despite Chinese and American efforts and a joint appeal from 200 nongovernmental organizations.The Group of Seven richest economies last month urged all countries to eliminate "inefficient" fossil fuel subsidies by 2025. At a separate annual meeting in June, the United States and China agreed to push for a firm target date to be set at a summit of G-20 leaders in Hangzhou in September.Nongovernmental groups are urging a "full and equitable phase-out by all G20 members of all fossil fuel subsidies by 2020, starting with the elimination of all subsidies for fossil fuel exploration and coal production."But energy ministers from the G-20 failed to reach agreement on a deadline this week."The communique repeats the importance of moving towards a subsidy reduction," U.S. Energy Secretary Ernest Moniz told reporters in Beijing. "But within the G-20 there are different views on how fast and how aggressive one can be on that."The communique itself was not immediately available, although Chinese state news agency Xinhua reported that it stressed the need to boost renewable energy investment and consumption.Moniz said the G-20 had not agreed on a specific timeline to eliminate subsidies but said the United States believed that by 2025 or 2030, "we'd like to see very substantial progress."

Naomi Klein on the racism that underlies climate change inaction (by Naomi Klein)- For the past three decades, since the Intergovernmental Panel on Climate Change was created and climate negotiations began, the refusal of our governments to lower emissions has been accompanied with full awareness of the dangers. And this kind of recklessness would have been functionally impossible without all the potent tools on offer that allow the powerful to discount the lives of the less powerful. These tools - of ranking the relative value of humans - are what allow the writing off of entire nations and ancient cultures. And they are what allowed for the digging up of all that carbon to begin with. Why? Because the thing about fossil fuels is that they are so inherently dirty and toxic that they require sacrificial people and places: people whose lungs and bodies can be sacrificed to work in the coalmines, people whose lands and water can be sacrificed to open-pit mining and oil spills. As recently as the 1970s, scientists advising the United States government openly referred to certain parts of the country being designated "national sacrifice areas". Think of the mountains of Appalachia, blasted off for coalmining - because so-called "mountain-top removal" coalmining is cheaper than digging holes underground. There were theories of othering used to justify the sacrificing of an entire geography: after all, if you are a backwards "hillbilly", who cares about your hills? Turning all that coal into electricity required another layer of othering, too: this time for the urban neighbourhoods next door to the power plants and refineries. In North America, these are overwhelmingly communities of colour, black and Latino, forced to carry the toxic burden of our collective addiction to fossil fuels, with markedly higher rates of respiratory illnesses and cancers. It was in fights against this kind of "environmental racism" that the climate justice movement was born.  Fossil fuel sacrifice zones dot the globe. Take the Niger Delta, poisoned with an Exxon Valdez-worth of spilled oil every year, a process Ken Saro-Wiwa, before he was murdered by his government, called "ecological genocide". The executions of community leaders, he said, were "all for Shell".

Hillary Clinton’s Ambitious Climate Change Plan Avoids Carbon Tax - Hillary Clinton, courting young voters and the broader Democratic base, has promised to one-up President Obama on climate change, vowing to produce a third of the nation’s electricity from renewable sources by 2027, three years faster than Mr. Obama, while spending billions of dollars to transform the energy economy. A half-billion solar panels will be installed by 2020, she has promised, seven times the number today, and $60 billion will go to states and cities to develop more climate-friendly infrastructure, such as public transportation and energy-efficient buildings. She would put the United States on track to reduce greenhouse gas emissions 80 percent from 2005 levels by 2050. And, she says, she could achieve all that without new legislation from Congress.  But Mrs. Clinton has avoided mention of the one policy that economists widely see as the most effective way to tackle climate change — and one that would need Congress’s assent: putting a price or tax on carbon dioxide emissions. “It’s possible, theoretically, to do all this without a price on carbon,” said David Victor, the director of the Laboratory on International Law and Regulation at the University of California, San Diego. But, he added, “it’s hard to see how.” “The problem is,” he said, “she knows the politics of this are toxic.” John Podesta, a former senior counselor to Mr. Obama who is now the chairman of Mrs. Clinton’s campaign, is an architect of both the Obama and Clinton climate change plans. In crafting them, Mr. Podesta, an ardent environmentalist and a seasoned political operative, sought to take substantive action to reduce emissions without turning to Congress, where climate legislation would most likely again be doomed.

Democratic Party Platform 7/1/16 Draft Would Lock In Catastrophic Climate Change  -- The US is second largest emitter of greenhouse gases into the atmosphere, with China being the largest overall.  The US has however 3 times the per-person emissions of China and many Chinese aspire to the lifestyle not of a bicycle-riding Dane but of an American suburbanite.  Also 25% of China’s emissions can be attributed to its export of goods to the rest of the world, though its lead over the US still remains after attributing these emissions elsewhere. The US is by far the most populous of the very high per capita greenhouse gas emitting countries, those countries that emit 15 metric tonnes of carbon dioxide or more per person, numbers that don’t include non-carbon dioxide GHG’s like methane or emissions from international air and ship travel.  The US is still the dominant though challenged military-political force in the world, projecting its power via the copious use of fossil fuels to power weapons delivery systems like planes, drones, and ships to all corners of the globe.  The mission of the US military, as its jets and aircraft carriers emit copious amounts of greenhouse gases into the atmosphere, is often to maintain enhanced access to fossil fuel reserves for the US and its European allies.A decisive move to prevent climate catastrophe by our now-global, 84% fossil-fuel dependent civilization, depends in part upon decisions that US political leaders make within the next year or two. Of the two major parties in the US, the Democratic Party is the only one that acknowledges the existence of anthropogenic global warming, though “acknowledges” must be qualified, which I will attempt below.  The Republican Party is one of the few major political parties in the world that deny human-caused climate change.Benchmarking the climate change policy perspective of any party, be it the Democratic Party or others, against the Republican Party’s views on climate change is an exercise in foolishness and self-destructiveness that unfortunately both the Democrats and non-governmental environmental and climate organizations continue to attempt.  No political or climate policy credibility should be gained by a policy proposal that is “better than” the Republican alternative, which is either non existent or entirely retrograde.  Also, finding “middle ground” with climate change deniers on climate change is like cutting a deal with your senile Uncle Miltie that he should wander into traffic only part of the time.

Auto industry seeks break on new fuel economy standards: The auto industry is looking for a break as fuel economy standards are poised to become even tighter. So far, automakers have been able to meet tougher emissions and fuel economy standards. But between 2018 and 2025 those standards get much tougher. And, assumptions that were made in 2012 about gas prices and consumers' willingness to embrace costlier, but more fuel-efficient hybrid, electric and plug-in cars have not panned out to the degree expected. So, the industry wants existing standards to reflect current gas prices, lower projections of hybrid and electric vehicle sales and changes to what is viewed as unrealistic regulations in California and nine other states for zero-emission vehicles. But regulators have signaled that they are unlikely to budge, and environmentalists say automakers are already slipping back into old, bad habits under the current standards. "If they want to weaken the standards, then there is going to be a big battle," said Daniel Becker, director of the Safe Climate Campaign, a Washington organization that promotes efforts to mitigate global warming. "I think there is ample evidence that will come out in the (report) that the standards should be strengthened."

This Ohio Rep Thinks The EPA’s Air And Water Rules Are ‘Un-American’  -- Members of the House Energy and Commerce Committee harshly questioned the EPA’s acting assistant administrator, Janet McCabe, on Wednesday, saying that the Clean Power Plan, the EPA’s rule to reduce carbon emissions from the electricity sector, was overly burdensome on the American economy and was part of the EPA’s longstanding war on industry. Rep. Bill Johnson (R-OH) notably called the EPA rules “un-American,” during a hearing of the Energy and Power subcommittee to review the EPA’s regulatory rules in the current administration. “It’s draining the lifeblood out of our businesses. Between the Clean Power Plan, the Waters of the U.S., and others that you folks have gotten,” Johnson said. “The hundreds of billions of dollars that you guys are sucking out of our economy every year that could be going toward job creation.”Speaking for several minutes, Johnson concluded by saying, “I think it’s absurd, I think it’s irresponsible. Quite frankly, Ms. McCabe, I think it’s un-American.” In his further questioning, he repeatedly cut the witness off. The exchange can be seen below.Johnson’s district runs along the southeast of Ohio, bordering Kentucky, West Virginia, and Pennsylvania. He has said that because he “is a scientist” (he has a degree in computer science), he does not accept the science of human-caused climate change. “I am not an alarmist that believes that greenhouse gas emissions coming from the coal industry are causing major problems,” he said in 2011.

Climate, Energy, Economy: Pick Two -- You can’t have your climate nice and ‘moderate’, your energy cheap and clean, and your economy humming along just fine all at the same time. You need to make choices. That’s easy to understand. Where it gets harder is here: if you pick energy and economy as your focus, the climate suffers (for climate you can equally read ‘the planet’, or ‘the ecosystem’). Focus on climate and energy, and the economy plunges. So far so ‘good’. But when you emphasize climate and economy, you get stuck. There is no way the two can be ‘saved’ with our present use of fossil fuels, and our highly complex economic systems cannot run on renewables (for one thing, the EROEI is not nearly good enough). It therefore looks like focusing on climate and economy is a dead end. It’s either/or. Something will have to give, and moreover, many things already have. Better be ahead of the game if you don’t want to be surprised by these things. Be resilient. But this is Nelson’s piece, not mine. The core of his argument is worth remembering: “Everything that is not resilient to high energy prices and extreme weather events will become economically unviable… …and approach worthlessness. On the other hand,… Investments of time, energy, and money in resilience will become more economically valuable…“  Here’s Nelson:

Carbon Capture and Storage: No Stone Unturned - Tim Taylor - Technologies for carbon capture and storage often don't garner much political support. Those who think rising levels of carbon in the atmosphere aren't much of a problem see little purpose for investments in technology to capture that carbon. Many of those who do think rising carbon emissions are a problem are emotionally wedded to a particular solution--reducing use of fossil fuels and growth of solar and wind power, combined with better batteries--and they sometimes view carbon capture and storage as an excuse to continue the use of fossil fuels. My own belief is that the risks of climate change (and other environmental costs of fossil fuel use) aren't likely to have one silver-bullet answer, and that all options are worth research and exploration, including not just non-carbon and low-carbon energy sources, but also energy conservation efforts and geoengineering, along with carbon capture and storage. The underlying idea here is to consider installing carbon capture technology at industrial or other facilities which use a lot of fossil fuels and where carbon emissions are especially high. The technology doesn't eliminate such industrial emissions, but holds some promise for reducing them substantially. The more recent estimates for potential of CCS seem to be at the very low end of what the IPCC discussed back in 2005. For example, the International Energy Agency produced a 2015 report called Carbon Capture and Storage:The solution for deep emissions reductions. When the title refers to "the solution," it dramatically oversells the actual content of the report. The conclusions are much  more measured, focusing on CCS as a contributor to reducing carbon emissions in specific industrial settings that lack cost-effective alternatives to fossil fuels: The Global CCS Institute keeps track of the projects that are actually underway and offers a summary in its report The Global Status of CCS 2015. The report counts seven large-scale CCS projects (that is, not counting pilot or research-level projects) operating globally in 2010, 15 operating in 2016, and 22 expected to be operating by 2020.

Climate scientists are under attack from frivolous lawsuits - Today’s climate scientists have a lot more to worry about than peer review. Organizations with perverse financial incentives harass scientists with lawsuit after lawsuit, obstructing research and seeking to embarrass them with disclosures of private information.On June 14th, an Arizona court ruled that thousands of emails from two prominent climate scientists must be turned over to the Energy & Environment Legal Institute (E&E), a group that disputes the 97% expert consensus on human-caused climate change and argues against action to confront it. E&E and its attorneys are funded by Peabody Coal, Arch Coal, and Alpha Natural Resources, coal corporations with billions of dollars in revenue.  Formerly named the American Tradition Institute, E&E has been described as “filing nuisance suits to disrupt important academic research.”E&E originally attacked Dr. Michael Mann, whose research shows a dramatic increase in recent temperatures in a graph popularly known as the “hockey stick.” In 2011, the group sued under Virginia open records laws to obtain six years of Dr. Mann’s emails from the University of Virginia—over 10,000 messages in total. The Virginia Supreme Court denied E&E’s claims and ruled that academic research correspondence should be protected because release would cause “harm to university-wide research efforts, damage to faculty recruitment and retention, undermining of faculty expectations of privacy and confidentiality, and impairment of free thought and expression.” E&E did not relent. Despite losing in Virginia, the group brought another open records case in Arizona to demand the same six years of emails—this time from Dr. Mann’s coauthor, University of Arizona professor Dr. Malcolm Hughes. Additionally, E&E sued for thirteen years of emails from UN Intergovernmental Panel on Climate Change (IPCC) lead author Dr. Jonathan Overpeck, also at the University of Arizona.

Asia's Urban Environmental Crisis: Urbanization is a key feature of Asia's development, as it was in Europe and North America in earlier times. But in Asia it is also very different, argues the Asian Development Bank (ADB). Asia's urbanization is much more rapid. Asia's transition from having 10% of its population living in urban areas to 50% (in 2025) will take only 95 years. This compares with 210 years in the case of Latin America, 150 years in Europe, and 105 years in North America. China made this urban transition in just 61 years. Overall, from 1980 to 2010, Asia added more than one billion people to its cities, with a further billion set to become city dwellers by 2040. Urban Asia has much higher population density. Eight of the world's most densely populated cities are in Asia -- Mumbai, Kolkata, Karachi, Shenzhen, Seoul, Taipei, Chennai, and Shanghai. Such high density makes their populations highly vulnerable to natural disasters. Asia also leads the world for megacities, cities with populations over 10 million. Eight of the world's ten biggest megacities are in Asia -- Tokyo, Shanghai, Jakarta, Seoul, Beijing, Guangzhou, Karachi, and Delhi (New York City and Mexico City are the only non-Asian cities in the top ten). And despite these mind-boggling statistics, we are little more than half way through Asia's potential urbanization process. About 46% of Asia's population are now urban-dwellers, compared with 89% for Australia and 93% for Japan. In other words, Asia's urbanization path still has a long way to go.

S.Korea to shut 10 old coal-fired power plants by 2025 | Reuters: South Korea plans to shut 10 ageing coal-fired power plants by 2025, as it ramps up efforts to curb the country's reliance on the polluting fuel and meet its pledge taken at last year's Paris climate summit to reduce greenhouse gas emissions. Coal accounts for 40 percent of South Korea's electricity supplies, but the country is hoping to tilt the balance of its energy mix towards cleaner fuels to reduce pollution. In fact, Seoul recently said it was targeting $37 billion in renewable energy investment by 2020. "In response to growing concerns over fine dusts, we will lower the share of coal power by shutting down old coal-fired power plants and restricting to add new coal-fired power plants in the future," the energy ministry said in a statement embargoed for release on Wednesday. The ministry expects the shutdown of the 10 old coal power plants, which have a combined capacity of 3.3 gigawatts, to lower fine dust levels by 24 percent by 2030, from 2015 levels. State-run utilities will spend 10 trillion won ($8.68 billion) for the closure and for the upgradation of existing power plants by 2030 to lower emissions, the statement added. Of the 10 plants that Seoul plans to retire, two will replace coal with biomass from 2017, it said. Among the country's remaining 43 coal power plants, eight that are more than 20-years old will be retrofitted with improved parts to curtail emissions, while the rest, operational for under 20 years, will get expanded emission-reduction facilities, the statement said. South Korea will build 20 new coal-fired plants by 2022 as planned, but no additional plants will be considered when the government maps out its power supply plan for 2017-2031 next year, the ministry said.

State regulators tentatively OK coal mine's growth plan (AP) — The Maryland Department of the Environment is giving tentative approval to a permit that would enable expansion of the Casselman Coal Mine near Grantsville. Documents obtained Tuesday by The Associated Press show that the agency made a tentative determination in June to approve a request by owner Corsa Coal Corp. of Canonsburg, Pennsylvania, to vastly increase the amount of treated water discharged from the mine into the Casselman River. The maximum permitted discharge would rise from 290,000 gallons per day to 2.2 million gallons per day, the anticipated flow rate for the life of the mining project. The agency says it will hold a public meeting on the application if it receives a written request by July 27. Written comments on the tentative determination will be accepted through Aug. 8.

Communities Uneasy As Utilities Look For Places To Store Coal Ash : NPR: "I take two inhalers twice a day," Holmes says. "And I have a nebulizer that I use four times a day, and I use oxygen at night."She says her asthma returned when she moved to Bokoshe, a decaying town of about 500 people that is flanked by old coal mines. The huge pits have now been filled with hundreds of thousands of tons of coal ash.  About 130 million tons of coal ash are produced every year. Power companies used to keep it in big, open holes called coal ash ponds. No lining was required to stop leakage, and no monitoring, to even know if it was leaking. Then, in 2008, a ruptured dike spilled more than a billion gallons of coal ash slurry from a pond operated by the Tennessee Valley Authority. The U.S. Environmental Protection Agency considered classifying coal ash as "hazardous waste." The utility industry lobbied hard — and successfully — to avoid the hazardous waste designation. So in 2014, EPA's new rules said coal ash was not hazardous. Now, power companies must recycle the ash, store it more securely on site, or send the ash to landfills. But in the towns where that ash is ending up, nobody is quite happy with those options.

Piles of Dirty Secrets Behind a Model ‘Clean Coal’ Project - — The fortress of steel and concrete towering above the pine forest here is a first-of-its-kind power plant that was supposed to prove that “clean coal” was not an oxymoron — that it was possible to produce electricity from coal in a way that emits far less pollution, and to turn a profit while doing so. The plant was not only a central piece of the Obama administration’s climate plan, it was also supposed to be a model for future power plants to help slow the dangerous effects of global warming. The project was hailed as a way to bring thousands of jobs to Mississippi, the nation’s poorest state, and to extend a lifeline to the dying coal industry. The sense of hope is fading fast, however. The Kemper coal plant is more than two years behind schedule and more than $4 billion over its initial budget, $2.4 billion, and it is still not operational. The plant and its owner, Southern Company, are the focus of a Securities and Exchange Commission investigation, and ratepayers, alleging fraud, are suing the company. Members of Congress have described the project as more boondoggle than boon. The mismanagement is particularly egregious, they say, given the urgent need to rein in the largest source of dangerous emissions around the world: coal plants. The plant’s backers, including federal energy officials, have defended their work in recent years by saying that delays and cost overruns are inevitable with innovative projects of this scale. In this case, they say, the difficulties stem largely from unforeseen factors — or “unknown unknowns,” as Tom Fanning, the chief executive of Southern Company, has often called them — like bad weather, labor shortages and design uncertainties.

Biggest private coal producer warns of cutting 80 percent of workforce, head blames Obama policies - Murray Energy Corp., the largest privately held coal miner in the U.S., has warned that it may soon undertake one of the biggest layoffs in the sector during this time of low energy prices. In a notice sent to workers this week, Murray said it could lay off as many as 4,400 employees, or about 80% of its workforce, because of weak coal markets. The company said it anticipates "massive workforce reductions in September." The law requires a 60-day waiting period before large layoffs occur. Layoffs 'due to the ongoing destruction of the United States coal industry by President Barack Obama, and his supporters, and the increased utilization of natural gas to generate electricity' - company statementThe American coal industry, especially in Appalachia, has languished as cheap natural gas replaces coal as fuel for power plants. World-wide demand for coal has also slumped, and new environmental regulations are making many coal mines unprofitable to operate. The Central Appalachian coal price benchmark is $40 a ton, or half its level from five years ago. Almost all of the biggest coal producers in the U.S. have declared bankruptcy in the past 18 months, including Peabody Energy Corp., Arch Coal Inc. and Alpha Natural Resources Inc. Robert Murray, the controlling owner of Murray, is a fierce opponent of President Obama and a supporter of Donald Trump. In a statement, the company said the potential layoffs were "due to the ongoing destruction of the United States coal industry by President Barack Obama, and his supporters, and the increased utilization of natural gas to generate electricity."

Coal groups worried about executive liability in ex-CEO case  (AP) — Coal industry groups are concerned that the conviction of former coal executive Don Blankenship could expose other industry leaders to criminal conspiracy charges. Coal Associations from Illinois, Ohio and West Virginia shared concerns in a brief Tuesday with the 4th U.S. Circuit Court of Appeals, which is considering Blankenship’s appeal. Blankenship is serving a one-year sentence for conspiring to willfully violate mine safety standards at West Virginia’s Upper Big Branch coal mine, which exploded in 2010, killing 29 men. The coal groups expressed worry that mine safety citations could be used to hold anyone at a coal company liable for criminal conspiracy in the event of future violations. They wrote that their brief isn’t intended to support either side, or say whether Blankenship’s conviction should be overturned.

Rio Tinto sells Australian coal mine for a dollar | Reuters: A small Australian miner on Monday bought Rio Tinto's Blair Athol coal mine in Queensland state for a token A$1, swooping in as big miners offload unprofitable assets after years of low coal prices. TerraCom Ltd, a subsidiary of Orion Mining Pty Ltd, said it will also receive A$80 million ($60.10 million) from the mining giant to meet rehabilitation costs at the site. Cameron McRae, TerraCom's chairman, said the mine represented a good opportunity despite weak thermal coal prices. "We believe that we can make a good return at the current coal prices," McRae said by telephone. "Any upside, is obviously good for us." Coal from Australia's Newcastle port was trading at around $52.85 per tonne last week, up from a low of under $50 earlier in June. The Blair Athol coal mine, which was closed in late 2012, is one of the oldest in Queensland and the second in the Bowen Basin to be sold for A$1 in the past year. In July 2015, Stanmore Coal paid Vale and Sumitomo Corp A$1 for the Issac Plains coking coal mine, which is about 100 kilometres (62 miles) from the Blair Athol mine. McRae, who worked at Rio Tinto for 28 years, said the Blair Athol Mine had a 30-year history of selling a high energy, low-in-cost coal to Asia. "Thermal coal is still going to be a large part of the energy mix in the future," he said.

The Future of Nuclear Power Is ‘Challenging,’ Says WNA Report -- The nuclear industry is celebrating breaking records that have stood for a quarter of a century—but a new update on its successes still fails to disperse the clouds over its future. Ten new nuclear reactors came on line last year worldwide and more new reactors are being built than at any time since 1990. According to the report by the World Nuclear Association (WNA), there were 66 power reactors under construction across the world last year and another 158 planned. Of those being built, 24 were in mainland China. In what it promises will be an annual update of the industry’s “progress,” the WNA presents a rosy picture of the future of the industry, which it hopes will produce ever-increasing amounts of the world’s power.  Currently, the industry provides 10 percent of the world’s electricity, but its target is to supply 25 percent by 2050—requiring a massive new build program. The plan is to open 10 new reactors a year until 2020, another 25 a year to 2030 and more than 30 a year until 2050.  The industry regards this as vital to ensure that the governments of the world keep to their plan of keeping the planet from passing the internationally-agreed limit of a 2 C rise in temperatures above pre-industrial levels. It says only a vast increase in new nuclear power, combined with renewables, can achieve this.  Despite its optimism, the WNA admits that the situation globally for the industry is “challenging,” particularly in Europe and the U.S., where low electricity prices are making nuclear power uneconomic.  The brightest prospect is China, where nuclear power is shielded from market forces. Eight new reactors were connected to the grid in 2015, with many more scheduled for construction as part of China’s bid to phase out coal and improve air quality.

A Stark Nuclear Warning by Jerry Brown -- I know of no person who understands the science and politics of modern weaponry better than William J. Perry, the US Secretary of Defense from 1994 to 1997. When a man of such unquestioned experience and intelligence issues the stark nuclear warning that is central to his recent memoir, we should take heed. Perry is forthright when he says: “Today, the danger of some sort of a nuclear catastrophe is greater than it was during the Cold War and most people are blissfully unaware of this danger.”1 He also tells us that the nuclear danger is “growing greater every year” and that even a single nuclear detonation “could destroy our way of life.” In clear, detailed but powerful prose, Perry’s new book, My Journey at the Nuclear Brink, tells the story of his seventy-year experience of the nuclear age. Beginning with his firsthand encounter with survivors living amid “vast wastes of fused rubble” in the aftermath of World War II, his account takes us up to today when Perry is on an urgent mission to alert us to the dangerous nuclear road we are traveling. Reflecting upon the atomic bombing of Hiroshima and Nagasaki, Perry says it was then that he first understood that the end of all of civilization was now possible, not merely the ruin of cities. He took to heart Einstein’s words that “the unleashed power of the atom has changed everything, save our modes of thinking.” He asserts that it is only “old thinking” that persuades our leaders that nuclear weapons provide security, instead of understanding the hard truth that “they now endanger it.” Perry does not use his memoir to score points or settle grudges. He does not sensationalize. But, as a defense insider and keeper of nuclear secrets, he is clearly calling American leaders to account for what he believes are very bad decisions, such as the precipitous expansion of NATO, right up to the Russian border,2 and President George W. Bush’s withdrawal from the Anti-Ballistic Missile Treaty, originally signed by President Nixon.

Bill Gates And Other Billionaires Backing A Nuclear Renaissance - Let’s for a second imagine a world without nuclear energy. A wonderful world, maybe? Probably not, because without nuclear energy we would have burned millions more tons of coal and billions more barrels of oil. This would have brought about climate change of such proportions that what we have today would have seemed negligible. Nuclear energy and uranium, which feeds it, are controversial enough even without any actual accident happening. Radioactivity is dangerous. Nobody is arguing against it. When an accident does take place, the public backlash is understandably huge. What many opponents of uranium forget to mention, however, are the benefits of nuclear energy and the fact that the statistical probability of serious accidents is pretty low. They focus on the “What if?” and neglect the other side of the coin. But let’s try to see both sides of the issue. The positive side of nuclear energy definitely deserves more attention than it’s currently getting. Uranium-fueled power is obscenely greener than fossil fuels. It’s also cheaper and, perhaps surprisingly for many, it is actually lower in carbon emissions than solar and biomass. This means that the construction of a nuclear plant, including materials used and the work itself plus the operation of the plant over its lifecycle, produces fewer greenhouse gases than the construction and operation of a solar farm. What’s perhaps more important is that nuclear energy is much more easily scalable than other low or zero-carbon energy sources. And that isn’t just some claim from the nuclear industry – that’s something climate scientists and environmentalists are saying. Here’s a public appeal by several such scientists, urging greater support for nuclear energy, noting that “While it may be theoretically possible to stabilize the climate without nuclear power, in the real world there is no credible path to climate stabilization that does not include a substantial role for nuclear power.”

Frick & Frack are back – Youngstown Vindicator -  Here's a not-so-friendly suggestion for the advocates of the nonsensical proposal to ban fracking in the city of Youngstown: Track down some of the Vallourec Star workers who have been laid off and tell them why they deserve to lose their well-paying jobs. Indeed, it would be fun to watch Dr. Ray Beiersdorfer, who has slopped at the public trough for many years, preach to those private- sector workers that their loss of income is for the greater good. It's easy to be a paragon of virtue when you have a cushy job as a professor at Youngstown State University, where the line between fantasy and reality is often blurred. Ray Beiersdorfer and his wife, Susie, have long been the driving force behind the effort to push through a charter amendment that would prohibit the use of fracking to extract oil and gas in the city of Youngstown. City voters have rejected the anti-fracking Community Bill of Rights charter amendment on five different occasions, but the Beiersdorfers and other members of FrackFree Mahoning Valley are undaunted. Consider this comment from Susie Beiersdorfer last week after she submitted petitions to get the charter amendment on this year's general election ballot: "We don't lose until we quit."

The only ‘fringe’ elements are those advocating fracking | Letters | Editor: It was good to see the coverage of last Tuesday’s public meeting in the June 30 Athens NEWS. I do take issue with oil and gas advocate Jackie Stewart’s comments, however. Firstly, Tuesday’s public meeting was much more than a “media stunt,” as she indicated. Secondly, the individuals present were not “a group of fringe activists.” There’s nothing fringe about a diverse group of concerned citizens speaking rationally about their desire to protect their community, trying to use their voices as citizens in a democracy to effect change (as opposed to using money to buy influence). There’s nothing fringe about being anti-fracking. A Gallup poll from March of this year shows a majority of Americans are opposed to fracking, and this percentage is growing every month. There’s nothing fringe about wanting to be informed by reading the ever-growing list of incredibly alarming, destructive, and deadly disasters caused by fracking, around the country and in Ohio. The attendees of Tuesday’s meeting and a growing number of Americans are discovering the threat fracking poses because they’re curious and concerned. The group of “fringe activists” that attended Tuesday’s public meeting represented all parts of Athens County and even various parts of Ohio. Not all of the people there would identify as activists. None of the people attending were being paid to make comments. Instead, unlike Jackie Stewart, their comments were motivated by something much more pure than dirty money from a dirty industry; they were motivated by a sense of hope for the future.

Ohio now has 1334 shale wells producing natural gas and oil - Through July 2, there were 2,187 permits issued for horizontal drilling and 1,755 horizontal wells drilled in the Utica and Point Pleasant shales, according to state figures released this week. There were 1,334 wells producing in the state, Ohio’s Division of Oil & Gas Resources reported. A permit was issued July 1 to XTO Energy Inc. for a well in Belmont County and a permit was issued June 27 to Antero Resources Corp. for a well in Noble County.

University retracts shale fracking air pollution study - Drilling - Ohio: The University of Cincinnati has retracted a study on shale fracking air pollution in Carroll County, pro-fracking organization Energy in Depth reports: "The University of Cincinnati (UC) has yet to publish the results of a now year-old study that found no water contamination from hydraulic fracturing in a scientific journal, despite scrutiny, media attention, and numerous calls from groups and elected officials to do so. "This indefinite delay is all the more interesting considering that UC couldn’t wait to publish the results of its 2015 study that claimed fracking was causing significant air pollution in Carroll County. That study appeared in Environmental Science & Technology just three months after it was completed. "But the UC researchers’ urgency has apparently come back to bite them as they have just retracted the study due to 'errors' and 'incorrect' calculations ..." The full EID story is here. The link to the retraction is here.

Probe Sought Into Government Suppression of Link Between Water Contamination and Fracking - Between The Lines -  For the past decade, Pennsylvania has been “ground zero” for fracking, the industrial fossil fuel extraction process that requires a million gallons of water, sand and hundreds of unknown chemicals for each gas well that is drilled. Families living near such wells have been complaining that fracking has contaminated their drinking water, but in most cases they haven't been able to prove it. A series of investigations – by ProPublica, the Center for Public Integrity, Harvard University, and others – all revealed problems with Pennsylvania’s Department of Environmental Protection's lack of enforcement and follow-through on suspected cases of water contamination linked to fracking. Last fall, Public Herald, a non-profit investigative news organization based in Pittsburgh, released a report that found nine different ways the state has kept complaints out of the public record. Between The Lines’ Melinda Tuhus spoke with Joshua Pribanic, executive editor of the Public Herald, who explains that after a court case was won by another news outlet, he and his partner were able for the first time to get access to 2,300 complaint investigations. The Herald is now calling for a federal investigation of both the Pennsylvania DEP and the federal Environmental Protection Agency, which in 2015 issued a report stating that there was no evidence of a serious problem with the state's drinking water due to fracking. However, the report did not cite any of the thousands of complaints in making its determination. Here, Pribanic discusses this investigation. [Rush transcript]

When Oil Boomtowns Go Bust - VICE -- One-third of energy used in the US comes from natural gas. In 2015, the US consumed 7.08 billion barrels of oil and other petroleum products-more than 20 barrels per person. Those numbers are mind-boggling, but stranger still when we imagine what it takes to pull that gas and liquid from the ground, and consider how much of it originates in America.  Thanks to technologies like hydraulic fracturing, which allows drillers to break up oil and gas-soaked rocks with a mixture of water and chemicals pumped thousands of feet beneath the surface, domestic gas and oil production is at an all-time high.  Oil production has been so brisk in the US and elsewhere, in fact, that prices have collapsed. In 2008, oil was trading for over $100 a barrel; today, it goes for less than half that. And that's led drillers to cut back, abandoning rigs in towns across the country, and sometimes even shuttering their operations completely. At least 130 North American oil and gas companies, representing tens of billions of dollars, have gone bankrupt since the beginning of 2015, and more will likely follow.  The quick rise and fall of US-based fracking and oil operations has left many towns temporarily prosperous, others on shaky financial footing, and many landscapes pockmarked with drilling rigs and compressor stations, crisscrossed by pipelines.   Nearly every state in the union produces some oil or gas, but there are a few regions that account for a lot more than others, and therefore have been hardest hit by the fluctuations in the market: the Marcellus, located in Pennsylvania and Ohio, the Bakken, located in North Dakota, and the Eagle Ford, located in Texas. The effects of the downturn are similar everywhere: The once-plentiful drilling rig jobs that often paid $100,000 a year have vanished, as have many of the people who came to oil and gas regions looking for those jobs.  But that doesn't mean the infrastructure that supports oil and gas production has disappeared. New refineries, which can pollute the communities that surround them, have been built across the country, especially in the Midwest and South, to process the oil and gas; new pipelines stretching from coast to coast to distribute the oil and gas have been built too. Wherever new oil and gas infrastructure has been built, water sources, the land, and the air have been polluted. Here's a look at how three of the US's biggest-producing regions are faring in this new age of oil and gas.

Pennsylvania power plant to draw on natural gas - (UPI) -- A Houston-based oil and gas company working primarily in U.S. shale basins said it signed a 10-year deal to supply natural gas for a Pennsylvania power plant. Cabot Oil & Gas Corp. signed a 10-year sales agreement to become the sole supplier to a 1,500-megawatt plant planned for Lackawanna County, Pa. Billed as one of the most efficient power plants in the country, the Lackawanna Energy Center power plant will start full-scale operations by the end of 2018. Dan Dinges, the company's top executive, said the agreement is unique in that it will power a state-of-the-art facility from natural gas "directly in our backyard." The announcement comes as the energy landscape is shifting away from coal. According to the Pennsylvania Coal Alliance, the state relies on coal for about 40 percent of its electricity. A federal report, however, finds the amount of coal produced in the United States is the lowest it's been since the early 1980s. Generating electricity accounts for nearly all of the coal use in the United States. Power plants during the fourth quarter received more coal than they consumed, leaving a net surplus of coal on the market. the primary source of electricity in the United States. Prior to April 2015, the total monthly share of electricity generated by coal had always been greater than gas, data from the U.S. Energy Information Administration show.

Feeding the Shell cracker plant is the worrisome part of this deal - Pittsburgh Post-Gazette --The Shell cracker plant commitment has brought so much excitement to Western Pennsylvania that I was compelled to think about what will happen in a decade or two after it’s up and running. First, I’m thrilled for the short term — the plant’s construction. Contracting companies, electricians, welders, tradespeople, real estate agents/​homeowners, and all nonfracking and petrochemical-related companies that will benefit from the plant’s construction will be great. The next five to six years will be exciting. The day the plant opens, however, will be looked at as the first day of the protracted death of our region. It’s frightening to think about all the fracking and drilling needed to feed that plant. That’s a whole other argument. I’m not an economist or actuarial scientist, but I am an investor, and I’ll be betting on pharmaceuticals, health systems/​hospitals, insurance companies, environmental remediation firms, asthma/​oncology, dermatology, water treatment, lumber (coffins), other funeral-related industries and the “pop-up” medical clinics that will be sprouting up everywhere. There will be lots of sick patients! Notice no mention of steel companies. The “patriotic” oil and gas companies import 60 percent of all pipe put in the ground in this country to save a few bucks, crippling our domestic pipe makers. Expect more cheap-imported-pipe spontaneous explosions!  Oh, and go eat dinner on Mount Washington, quickly. All of the fracking-related earthquakes will exacerbate the deterioration of an already crumbling mountainside. Sell your house before 2022!

PHMSA Increases Maximum Civil Penalties for Violations of Pipeline Safety Laws and Regulations ShaleEnergyLawBlog -  On June 30, the Pipeline and Hazardous Materials Administration (PHMSA) issued an interim final rule, effective August 1, 2016, titled “Pipeline Safety:  Inflation Adjustment of Maximum Civil Penalties.”  This interim rule increases the maximum administrative civil penalties that may be issued for a violation of the pipeline safety laws and regulations from $200,000.00 per violation per day up to $205,638.00, and from $2 million for a related series of violations up to $2,056,380.00.  The interim rule also increases the maximum for the additional civil penalties applicable to violations of PHMSA’s LNG regulations from $50,000.00 to $75,123.00 and increases the maximums for violations of the pipeline safety whistle blower protection laws from $1,000.00 to $1,194.00.  PHMSA issued the rule pursuant to the “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015” and used a multiplier of 1.02819 pursuant to guidance provided by the Office of Management and Budget in order to calculate the increase.

Fracking Foes Take Their Protest to Regulator’s Front Door -Tony Clark was wrapping up dinner with his family when the doorbell rang.  He didn’t need to answer. He already knew who it was. Anti-fracking activists had followed him home, taping “wanted-style” posters with his face plastered on them across his leafy suburban neighborhood outside of Washington. Coming up to his front door was the last straw. He called the police.  Clark is one of four members serving on the Federal Energy Regulatory Commission. It’s not the first time his agency has been the subject of high-profile attacks. In the aftermath of the California energy crisis, the panel took heat for failing to clamp down on power-market manipulation by the likes of Enron Corp. It has been so resented by opponents that they’ve used its acronym to say they’ve been “FERC’ed.” But at no time until now, as the commission oversees an unprecedented expansion of the U.S. natural gas pipeline network, have these campaigns been so personal.  Today, the commission is facing attacks on several fronts. Public Citizen, an advocacy group that bills itself as the people’s voice in Washington, has called out the agency for employing people who later left to take jobs at the companies it regulates. The Delaware Riverkeeper Network is accusing the panel of bias because its pipeline program is funded by industry. The agency denies the charge and says safeguards are in place to avoid conflicts of interest by staff. The commission barred the public from attending a meeting in May after the activists said they would step up their protests against the agency.  Beyond Extreme Energy, made up of people fighting an oil and natural gas drilling technique known as hydraulic fracturing, or fracking, have taken issue with the energy commission’s use of eminent domain, whereby the government has the right to seize private land for public use. They’ve brought the fight to the doorsteps of commissioners, said Ted Glick, a co-founder of the group, which has taken responsibility for orchestrating the protest at Clark’s home. “We would not be going to the commissioners’ homes if FERC was not enabling the taking of the land, and sometimes the destruction of the land, and the health, and the property values for easily thousands, if not tens of thousands,” Glick said.

Underwater Oil-Well Bolts Are Failing, Causing Alarm - WSJ: General Electric, oil drillers and U.S. regulators are scrambling to determine why massive bolts used to connect subsea oil equipment keep failing, prompting costly shutdowns and raising safety concerns about hundreds of wells in the Gulf of Mexico. Safety regulators at the Department of the Interior began investigating the matter in 2013, officials said in an interview, after a GE oil-exploration equipment business issued a global recall for faulty bolts on one of its components. The bolts have corroded and sometimes snapped, raising the possibility of a major oil leak. But the U.S. investigation and two recent bolt failures convinced regulators and industry officials that the problem goes beyond GE and its blowout preventers—safety gear used to halt oil-and-gas flow during a well emergency. Flaws also have been found in bolts made by GE’s two main competitors for blowout preventers— National Oilwell Varco and the Cameron unit of Schlumberger —and in bolts used in other areas on subsea wells, said Interior Department officials. “This is what we view as a very critical safety issue,” . “If your smallest component fails, you can’t expect a sophisticated many-million-dollar piece of equipment” to hold fast and prevent a leak. Like other equipment companies, GE said its bolts have come from subcontractors, which it hasn’t publicly identified. The company said the components are subject to rigorous safety testing before being delivered to customers.  The review has found bolt failures stretching back at least to 2003, regulators said. “This is a systematic industry problem that requires immediate attention,”

US ‘didn’t really study’ impact of toxic chemicals when allowing offshore fracking - US authorities “didn’t even know what they were allowing” when permitting companies to conduct offshore fracking and dump billions of gallons of chemicals into the ocean, a lawyer for an environmental NGO has told RT. “They were permitting fracking offshore in the Gulf of Mexico and […] the agencies didn’t know it was happening, they didn’t even know what they were allowing,” Kristen Monsell, a lawyer at the US-based Center for Biological Diversity (CBD), told RT on Thursday. In late June, the CBD released a report suggesting the Obama administration have issued over 1,200 offshore fracking licenses between 2010 and 2014. Controversial offshore fracking has been taking place in hundreds of wells in the Gulf of Mexico, including within the habitat of loggerhead turtles, CBD said in late June.   When deciding to license offshore fracking, the authorities “did so without conducting any real environmental analysis or any analysis on fracking-endangered species, without involving the public, and that’s just unacceptable,” Monsell said.  The US government “hasn’t really studied it before, they haven’t studied the impact of the chemicals that these companies are allowed to dump directly into the ocean including critical habitat and fracking-endangered species.”

Could Online Bidding for Offshore Drilling Undermine Protesters? -- Rep. Garret Graves wants lease sales for offshore oil and gas drilling to be held online to improve transparency and haul in more money for taxpayers. He said Wednesday he is not trying to undermine protesters who have swarmed previous in-person lease sales. “This has nothing to do with avoiding public input,” the Louisiana Republican said at a House Natural Resources subcommittee hearing. He added that he would personally support a “hybrid model” of lease sales, involving a live stream of an in-person and online sale. The White House isn’t opposed to online sales either, although agency officials quibble with some of what Graves is proposing. Graves’ bill, sponsored with Rep. Alan Lowenthal (D-Calif.), also includes transparency provisions requiring the Bureau of Ocean Energy Management to publicly disclose details of the leases. The purpose of the bill is to increase transparency and attract more bidders, which generally leads to higher bids and a better return for taxpayers, Graves said. Offshore drilling opponents, however, are skeptical that his proposal would do either. Oil and gas leases involve secret bids, rather than an auction-style format. If an organization is determined to win the lease, it may drastically overpay, not knowing what its competitors will offer. Online lease sales aren’t a totally new idea. The Bureau of Land Management plans to conduct an online lease sale for onshore production this fall. The Bureau of Ocean Energy Management already does online sales for offshore wind leases.

SEC Charges "Frack Master" Chris Faulkner, Shale CEO and Industry Advocate, with $80 Million Fraud - DeSmog (blog) At the start of June, Chris Faulkner, Chief Executive Officer of Breitling Energy, was a high-flying shale company executive and media darling, often interviewed on CNN, Fox Business News and even the BBC. During his most recent appearance on CNN on June 2nd, he weighed in on the financial prospects for drillers who survive low oil prices despite the spate of bankruptcies sweeping the shale industry. It was hardly the first time the Texas oilman aired his views on the national stage. "The era of coal is coming to an end," Mr. Faulkner told The New York Times in June 2014. "We are entering the era of natural gas." "Instead of rejecting promising new energy-extraction techniques, citizens should work with responsible energy companies to preserve the benefits of fracking, while stamping out current abuses," he said in the Wall Street Journal in August of the same year."I believe that strict compliance to current regulations is sufficient to protect the aquifer while allowing American companies to tap into rich U.S. reserves and free the nation from its dependence on foreign sources of energy," he wrote in the U.S. News and World Report in 2011. But behind the scenes, Mr. Faulkner's world - which according to the U.S. Securities and Exchange Commission amounted to little more than a house of cards - was already beginning to collapse by the time he made his June CNN appearance. In September, Breitling Energy had been forced to tell investors that its auditors had concluded that some of its prior financial statements "should not be relied upon". By April, Breitling could no longer keep up with its drilling obligations and had lost expensive drilling rights covering roughly 3,600 acres in Texas, the SEC says. And by May, federal investigators were closing in. On the last Friday in June, the authorities made their move. Mr. Faulkner and seven others at Breitling Energy Corp. and three additional related companies were charged with what the SEC says was a massive financial fraud that bilked investors out of $80 million.. Mr. Faulkner, 39, had personally used at least $30 million worth of investor money for his own "lifestyle of decadence and debauchery," according to the SEC lawsuit, including not only jewelry, fashionable clothing and fine dining, but also the frequent use of escort services.  

3.5 magnitude earthquake rattles parts of northern Oklahoma (AP) — The U.S. Geological Survey says an earthquake has rattled parts of northern Oklahoma. Geologists say a 3.5 magnitude temblor was recorded at about 12:21 p.m. Tuesday in Garfield County, about 16 miles west of Perry. The USGS says the earthquake was recorded at a depth of three miles. No damage or injuries were immediately reported. Geologists say damage is not likely in earthquakes below magnitude 4.0. The number of magnitude 3.0 or greater earthquakes in Oklahoma has risen from a few dozen in 2012 to more than 900 last year. Scientists have linked the increase to the underground disposal of wastewater from oil and natural gas production operations in the state. State regulators have instructed oil and gas producers to reduce volumes at their wastewater disposal well

Number of Oklahoma earthquakes down this year: state geologists - In recent weeks, the number of earthquakes felt in Oklahoma has decreased compared with this time last year, which might reflect measures state officials took earlier this year to severely limit the volumes of oil and natural gas wastewater injected into deep disposal wells, according to the Oklahoma Geological Survey. "The incidence of earthquakes is down, and that's attributed to decreased injections," OGS Director Jeremy Boak said in an interview. Year-to-date the state has seen 403 earthquakes of magnitude 3.0 or above, which puts it on pace to see fewer earthquakes of that magnitude than last year, when Oklahoma saw 907 temblors of 3.0 or higher. However, the current year is still likely to see more quakes than in 2014 when the state saw 569 such earthquakes. "We believe most of the earthquakes that have been happening since 2010-11 have been induced, although there are a few specific examples where we're not really sure yet," Boak said."In general most of the substantial earthquake activity is due to induced seismicity of deep injection of produced water," he said. If the upswing in earthquakes was due to injection, then the recent downturn in earthquake activity can be traced to the injection decrease, he said. Boak said there are about 1 million fewer barrels a day of wastewater being injected than before the Oklahoma Corporation Commission instituted limits on the volume of water being injected into the deep Arbuckle formation in a 10,000-square-mile area of interest, which covers much of the western and central regions of the state.

Record Cushing Storage; Update On PADD 2 Storage -- RBN Energy - RBN Energy: "I still haven't found all the crude storage I'm looking for -- PADD 2."  The famous Field of Dreams misquote “If you build it, they will come” certainly has proved true for the midstream companies that added a record 18.7 million bbls of crude oil storage capacity in PADD 2 in late 2015 and early 2016.  During that six-month period, crude inventories in PADD 2 blasted 24.4 million bbls higher to a record 155.6 million bbls.  And while PADD 2 oil stockpiles have been shrinking somewhat in recent weeks, they remain above 150 MMbbl—a mark the PADD had never seen before this year. Storage levels have been particularly high at the Cushing, OK, storage and distribution hub within PADD 2.  Why is so much crude being socked away?  Today, we continue our look at the new storage capacity being added in the U.S., and at why demand for storage has been so high.

Judge's Ruling to Halt Fracking Regs Could Pose a Broader Threat to Federal Oversight -- A federal judge in Wyoming recently struck down Bureau of Land Management rules to regulate hydraulic fracturing on public and tribal lands. But while the fate of the rules is far from final-with the Obama administration immediately indicating it would appeal-the implications of the controversial decision could extend far beyond fracking and the BLM, according to environmental, legal and policy experts. In the decision, released last week, U.S. District Judge Scott Skavdahl stated the BLM, which is overseen by the U.S. Department of the Interior, has no authority to regulate the most widely used process for extracting oil and gas resources on publicly owned land. Most of the approximately 100,000 active oil and gas wells on public and tribal lands are fracked.  The rules are a mix of regulations for disclosing the chemicals used in fracking, well casing requirements and the handling of related waste. "The Constitutional role of this Court is to ... determine whether Congress has delegated to the Department of Interior legal authority to regulate hydraulic fracturing. It has not," Skavdahl wrote in his ruling. Skavdahl, appointed by President Barack Obama in 2011, cites an exemption in the Safe Drinking Water Act, known as the "Halliburton loophole," to support his decision. "What the court is doing is taking a very narrow exemption of hydraulic fracturing from one act-the Safe Drinking Water Act-and suggesting that exemption applies to all other federal statutes," said Hannah Wiseman, an environmental law professor at Florida State University. "You could read the opinion to suggest that no federal agency has control over this activity...this is sort of an unprecedented decision."

US Crude Oil Reserves, Green River Formation, Global Impact Of US Energy In The 21st Century -- IBD -- July 7, 2016  The story that the US has more recoverable reserves than both Russia and Saudi Arabia continues to have "legs." This op-ed" in Investor's Business Daily: Anu Mittal, GAO director of natural resources and environment, in May 2012 told a stunned Congress that just one U.S. energy region -- the Green River Formation, which stretches across parts of Wyoming, Utah and Colorado -- contained an "amount (of oil) about equal to the entire world's proven oil reserves." With oil prices near $100 a barrel at the time, it was hard to believe. Dubbed our Persia on the Plains, the Green River Formation is estimated to have four times the proven reserves of Saudi Arabia, Mittal testified. While the formation's total reserves are 3 trillion barrels, even at the then-high prices for oil, recoverable reserves were about half that: 1.5 trillion barrels. Now, four years later, oil prices are down more than half -- in part, because global demand is much weaker than expected, but also because the U.S. fracking and petro-technology boom has created nothing less than an energy revolution. Rest assured: While much of the oil that the U.S. has underground is not recoverable under current market conditions, it will be there when we need it.  And it's also important to remember that 72% of the Green River Formation and much of the rest of our country's oil reserves lie under federal lands. So it will take a president and a Congress willing to "drill, baby, drill" to keep us supplied with energy for centuries to come.

Judge approves deal in methane pollution lawsuit (AP) — An agreement between the U.S. government and environmentalists who sued over greenhouse gas emissions from federal oil and gas leases in Montana has been approved by a judge. U.S. District Judge Sam Haddon issued an order on Thursday finalizing the agreement. It allows drilling to proceed on two dozen oil and gas leases with only minimal changes to current government approval practices. Attorneys for the Montana Environmental Information Center, WildEarth Guardians and Earthworks wanted the government to force companies to reduce emissions of methane from oil and gas fields. Federal officials agreed to consider such steps for two dozen federal leases in eastern Montana, but are not compelled to adopt them under terms of the agreement. Methane is a far more potent greenhouse gas than carbon dioxide. It gets into the atmosphere when pipelines leak and when companies vent or flare excess natural gas from oil production. The American Petroleum Institute and other industry groups that intervened in the case argued the U.S. Bureau of Land Management should not have settled. They said the government would have prevailed if the lawsuit had proceeded and the settlement means only minimal changes. “The plaintiffs asked this court to declare the federal defendant’s decision to issue the leases to be in violation” of federal environmental laws, said Hadassah Reimer, an attorney for the industry groups. “In short, the plaintiffs have not been afforded any relief on the merits of their claims.”

Sharp Decline In Bakken Production In April, 2016, Due To Temporary Conditions -- Rystad Energy -- From the Director's Cut for April, 2016, data and my comment: Crude oil production:

  • April, 2016: 1,041,007 bopd
  • March, 2016: 1,111,421 bopd
  • Month-over-month change: a decrease of 70,414 bopd.
  • Month-over-month change: a decrease of 6%.
  • Comment: that's as big a decrease as I can remember.
I don't know if folks were surprised by that or not. I took it in stride but did not think much about it. I missed the analysis by Rystad Energy which was posted June 23, 2016“Research shows that operators are now starting to complete wells that have previously been put on hold deliberately. This comes as more than 90% of the accumulated oil DUC inventory can be commercially completed at a WTI of 50 USD/bbl,” says Artem Abramov, Senior Analyst and product manager at Rystad Energy.  The recent extreme production decline - among the key crude producing states, North Dakota suffered from an all-time high historical decline rate of 70,000 bopd in April 2016 - fell far outside a natural 10,000 - 20,000 bopd range, which one would expect as a result of current completion activity and mature base production.  The significant decline acceleration appears to have come from older “low decline” wells brought on-line before 2016.  “It is not the first time such temporary shifts in base decline are observed, and they were caused by road restrictions imposed by the state over the month. This trend is unlikely to persist and should not be extrapolated to the US Shale industry in general,” says Abramov.

Post-oil boom, drug prices fall as gang trafficking increases - The Bakken oil boom may be over, but people on the front lines of fighting crime in western North Dakota say drug trafficking here is worse than ever. The price of drugs is dropping and an influx of out-of-state gangs are intensifying the problem, a lead agent with the North Dakota Bureau of Criminal Investigation says. "Because the oil industry has slowed down, people automatically assume the drug world has slowed down. What we've found out is that's absolutely not the case," said Rob Fontenot, a BCI agent and member of the Southwest Narcotics Task Force. "There's more dope here now than there ever has been."There's been a 75 percent drop in the price drug traffickers are getting for methamphetamine, Fontenot said. Plus, deadly fentanyl-laced heroin has spread from eastern North Dakota to the Bakken. The plummeting price of meth because of its prevalence in western North Dakota has led to it being trafficked and sold in greater quantities. Fontenot said meth that was going for $3,300 an ounce in the height of the oil boom is now worth about $800 an ounce on the street. "I never imagined in my law enforcement career-and I've been working dope for 14 years-that I would see meth for $800 an ounce," he said. U.S. Attorney for North Dakota Chris Myers said it's obvious by his office's caseload that drug cases in the Bakken aren't slowing down."There's a myth outside of our state," Myers said. "People believe that because oil activity has slowed, that the criminal activity has stopped. That's just not true.."

Multi-pad drilling in North Dakota -- One of many ways energy wizards are driving down the cost of drilling for oil is putting multiple wells on one site. Bakken multi-well pads getting bigger – The technique of drilling several wells from one site, called multi-pad drilling, is increasing. Both the number of pads and the number of wells per pad is going up.  For several years now I have noticed multiple pump jacks on one site. In September 2015, I saw a 15 well pad. It is a few miles west of Ross and about a mile and a half north of highway 2. You can see it on Google maps at coordinates 48.333785, -102.653962, although the satellite photo is really old. It shows only the middle six wells with pumps installed and a drilling rig working on the west row of wells. No progress on the east row of wells. Look around on Google maps a half mile north from that site and you will see a railroad trans-loading facility. Look to the east for a mile from there and you can pick out two medium-sized multi-pad sites and one site that is just being developed that is as large as the one with 15 wells. I’ll guess there will be 15 or 20 wells on that site eventually.Just one part of the efficiency is land usage. Article says a single well averages 3.35 acres of land. A large multi-pad operation reduces the land to an average of 1 acre or less, according to Lynn Helms.Consider how much easier and cheaper it is with 12 or 15 or 18 wells in one place to put in pipelines to gather the natural gas and get the oil to a terminal.  Article says Hess has an 18 well pad in Mountrail County. A line of nine wells each reach out 2 miles in one direction and nine wells go 2 miles in the opposite direction. That is 1,280 acres covered in each direction, or 2,560 acres worked from one site. There is another big multi-pad site at the southwest corner of Williston. The satellite photo at Google maps shows 14 wells. Using my negligible understanding of such things, it seems to me like there is room for another 6 or 7 wells eventually.

Obama toughens Arctic drilling rules | TheHill: The Obama administration rolled out a suite of new regulatory standards Thursday to strengthen offshore oil and natural gas safety in the unique, unforgiving Arctic Ocean. It’s the first time that the federal government has put forth specific safety rules for the Arctic, which is vastly different from more developed offshore drilling areas such as the Gulf of Mexico. The regulation from the Interior Department is meant in part to allay fears from environmentalists, Alaskan Native American tribes and others who believe drilling in the United States’s portion of the Arctic, off Alaska’s northern shore, is inherently risky, with a high chance of catastrophe. The standards, proposed last year, come despite the fact that no company is using offshore rigs to drill in Arctic federal waters, no company has any imminent plans to drill, and numerous companies have abandoned their drilling rights leases. President Obama is considering prohibiting new drilling  rights auctions through 2022. “The regulations we are issuing today support the Administration’s thoughtful and balanced approach to any oil and gas exploration in the Arctic region,” Janice Schneider, Interior’s assistant secretary for land and minerals management told reporters Thursday. “The rules help ensure that any exploratory drilling operations in this highly challenging environment will be conducted in a safe and environmentally responsible manner, while protecting the marine, coastal, and human environments, and Alaska Natives’ cultural traditions and access to subsistence resources,” she said.

PG&E closes gas storage field in delta after finding leaks - SFGate: Pacific Gas and Electric Co. has temporarily closed down its largest natural gas storage field, located beneath an island in the delta, after finding small leaks of the flammable fuel. The move comes amid heightened concern about the safety of California’s underground gas storage fields following an immense, four-month leak just north of Los Angeles that forced the evacuation of a nearby neighborhood. The leaks spotted by PG&E at its McDonald Island facility in the Sacramento-San Joaquin River Delta appear to be far smaller. According to the state’s oil and gas regulatory agency, the leaks range from 236 to 763 kilograms of gas per hour. Southern California’s massive Aliso Canyon leak, in contrast, peaked at more than 60,000 kilograms per hour. In a letter to PG&E, Kenneth Harris, supervisor of California’s Division of Oil, Gas and Geothermal Resources, called the amount of gas leaking from McDonald Island “similar to or only slightly above background levels at natural gas storage facilities.

Inside FERC Henry Hub July index up 96 cents to $2.92/MMBtu - The July bidweek US average natural gas price climbed 87 cents to $2.68/MMBtu, as prices in the Northeast and Southeast made the largest move higher, according to Inside FERC's Gas Market report Friday. The July bidweek price at the benchmark Henry Hub added 96 cents to average $2.92/MMBtu. That came as the NYMEX July contract settled at $2.917/MMBtu, up 95.4 cents from the June contract's close of $1.963/MMBtu. In the Upper Midwest, Chicago city-gates rose 86 cents to average $2.80/MMBtu. Elsewhere in the region, Consumers Energy and Michigan Consolidated city-gates tacked on 92 and 93 cents to average $2.89/MMBtu and $2.87/MMBtu, respectively. Toward Northeast markets, Transcontinental Gas Pipe Line Zone 6 New York traded higher, adding 86 cents to average $2.39/MMBtu.In New England, Algonquin Gas Transmission city-gates jumped $1.01 to average $3.12/MMBtu. Elsewhere in the region, Tennessee Zone 6 delivered saw an even larger move to the upside, adding $1.06 to average $3.08/MMBtu. Upstream in the Northeast producing regions, Dominion, Appalachia, advanced 59 cents to average $1.98/MMBtu. To the west, prices mostly moved higher as Northwest Pipeline-Rockies averaged $2.52/MMBtu after adding 74 cents. Cheyenne Hub also saw a similar move, adding 75 cents to average the same. Along the West Coast, SoCal gas climbed 95 cents to average $2.85/MMBtu. Elsewhere in the region, El Paso, Permian Basin, prices were up 75 cents to average $2.56/MMBtu.

Record Heat Wiping Out US Gas Glut Fuels Best Rally Since '08 - Rigzone A blistering start to summer is helping put U.S. natural gas futures on course for the biggest gain in eight years. Gas has surged 17 percent this year, rebounding from a 17-year low. Drillers, burned by earlier declines, are refilling storage at half last year’s pace as extreme heat boosts the use of air conditioners, increasing gas demand from power plants. By November, supplies will probably drop below the five-year average, the benchmark for normal levels, for the first time in 13 months, based on storage rates. Just four months ago, gas plunged after the warmest winter on record left the market with a glut large enough to last through the year. Instead, hot weather and a slowdown in shale production are eating into the surplus, signaling an era of higher prices as gas exports rise and electricity generation cuts into excess supply. “We’re moving toward a potentially serious deficit in the supply-demand balance for this coming winter,” said one analyst. Gas inventories were 25 percent above the five-year average in late June, down from 54 percent in April. An extended slide in production would erase the surplus by the end of the year, leaving stockpiles at a deficit to normal levels for the first time since May 2015 and pushing prices to $3 this month.

Natural Gas Prices Tumble After Scoring One-Year High: Natural gas futures experienced a large sell-off on Tuesday, with the commodity losing 7% during the session, making it the worst performing energy commodity of the day, which was saying a lot given the sell-off that the energy sector experienced, as a whole. Tuesday’s sell-off came as all market participants returned from the holiday weekend. Last Friday, before the long weekend, natural gas futures closed at a one-year high after adding 12% to its value over the course of the week. On Tuesday, traders took the fact that the commodity recently soared to such lofty levels, and that MDA weather services forecast cooler weather in the next ten days to sell their positions. However, Tuesday’s reaction was seen as a bit of a knee-jerk reaction. The commodity’s recent strength has been due to hot weather, which has boosted air conditioning use and therefore the demand for natural gas by utilities to generate electricity. Another pressuring factor on Tuesday was the sentiment that US natural gas production is rebounding. According to Platts Analytics, since the start of July US natural gas production has averaged 70.8 billion cubic feet a day, an increase of 350 million cubic feet a day from June’s average. This week, market participants will pay close attention to the US natural gas storage data. Expectations are that the addition will be less than usual for this time of year due to the recent string of hot weather. Natural gas prices are up nearly 50% since late May.

Natural Gas Rebounds from One-Week Low - WSJ: Natural gas prices inched up Wednesday, rebounding from losses just after prices dipped to a one-week low. Natural gas for August delivery settled up 2.2 cents, or 0.8%, at $2.786 a million British thermal units on the New York Mercantile Exchange. It rebounded from losses of 7.5% on Tuesday, which had been the biggest one-day decline since October. That made gas relatively cheap for this time of year, said John Woods, a Nymex trader. Demand often rises in the summer to fuel power plants as people turn up their air conditioners during hot weather. And forecasts for the rest of the summer still show above-normal temperatures. “We’re gonna go right back up again,” Mr. Woods said.   Mr. Woods and some analysts do, however, think the rally has limited potential, maybe capped at around $3/mmBtu. Power generators have been burning more coal in recent weeks as gas prices moved higher. They consumed more natural gas, too, but largely because of unexpected declines in output from nuclear, wind and hydropower units, which analysts had warned might be temporary. Natural-gas demand started July down 7% from the last week of June at 61.6 billion cubic feet a day, according to Platts Analytics, a forecasting and analytics unit of S&P Global Platts. Weather has cooled about 1.5 degrees Fahrenheit in that time, hurting demand for gas-fired electric power to run air conditioners, which fell 12% from the last week of June, Platts said. “The bulls are spooked currently, as the first indications of July demand…were pretty poor,”

Natural Gas Weekly Update (EIA): Overview: (For the Week Ending Wednesday, July 6, 2016)

  • Natural gas spot prices fell at most locations this report week (Wednesday, June 29, to Wednesday, July 6). The Henry Hub spot price ended five weeks of increases, falling by 18¢ from $2.93/MMBtu last Wednesday to $2.75/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the August 2016 contract also declined, falling from $2.863/MMBtu last Wednesday to $2.786/MMBtu yesterday.
  • Net injections to working gas totaled 39 billion cubic feet (Bcf) for the week ending July 1. Working gas stocks are 3,179 Bcf, which is 20% above the year-ago level and 23% above the five-year (2011-15) average for this week.
  • According to Baker Hughes, for the week ending Friday, July 1, the natural gas rig count declined by 1 to 89. Oil-directed rigs increased by 11 to 341, the largest weekly increase in the rig count since December 2015. The total rig count increased by 10 over the week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 3¢, closing at $5.41/MMBtu for the week ending July 1. The price of natural gasoline fell 2%, but the prices of all of the other natural gas liquids products rose. Propane and isobutane each rose by 1%; and butane and ethane rose by 2%.

Natural Gas Price Bounces Higher After Storage Report - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 39 billion cubic feet for the week ending July 1. Analysts were expecting a storage addition in a range of 36 billion to 46 billion cubic feet. The five-year average for the week is an injection of around 77 billion cubic feet, and last year’s storage addition for the week totaled 87 billion cubic feet. Natural gas inventories rose by 37 billion cubic feet in the week ending June 17. Natural gas futures for August delivery traded up about 0.7% in advance of the EIA’s report, at around $2.80 per million BTUs, and they traded near $2.83 after the data release. Natural gas closed at $2.79 per million BTUs on Wednesday, after dropping from $2.99 on Tuesday.  The 52-week range for natural gas is $1.99 to $3.18. One year ago the price for a million BTUs was around $3.04. Cooler weather both earlier this week and forecast into next week east of the Mississippi has weighed heavily on natural gas prices. Tuesday’s price drop was the largest single-day decline in eight months. Warmer weather continues to be forecast for the West and Southwest, raising demand for natural gas across the country to moderate to high levels. Stockpiles are about 20% above their levels of a year ago and more than 23% above the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 3.179 trillion cubic feet, around 599 billion cubic feet above the five-year average of 2.58 trillion cubic feet and 538 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 2.641 trillion cubic feet for the same period a year ago.

What's Going On? - Supply/Demand Factors Driving Natural Gas Price Volatility  -- June was somewhat of a game-changer for the 2016 U.S. natural gas market. Summer weather finally arrived and U.S. consumption, particularly from power burn, was at record highs, as were exports to Mexico. Meanwhile, production volumes sagged, flattening and even declining versus year-ago levels in recent weeks. The market response to all of this was swift. The CME/NYMEX Henry Hub prompt futures contract ripped nearly $1.00 higher over the last five weeks to flirt with the $3.00/MMBtu mark. In fact, the U.S. natural gas market was behaving downright giddy — a bit like it the oversupply problem was ancient history. That is, until yesterday. On Tuesday the market returned from the long, holiday weekend to higher production, weaker temperature-adjusted demand and the likelihood of higher storage injections than previously expected. The resulting price action led the August contract to whipsaw back down more than 20 cents from Friday to a settle of $2.764. So where do the fundamentals really stand? Today, we provide an update of the supply/demand balance this summer to date, what’s driving the volatility and the potential risks to prices in July trading.

Canadian natural gas exports to US to continue decline: study - - Canada has the potential to continue its role as a net exporter of natural gas to the US through 2037, despite dramatic increases in US production, particularly in the Appalachian Basin, over the past several years, according to a recent study by Canadian Energy Research Institute. However, the Canadian Natural Gas Market Review finds that Canadian exports to the US will continue to decline over the next several years, as gas from the Marcellus Shale finds its way into US markets once supplied by Canada. "The production that's coming out of US gas plays, particularly the shale gas coming out of the Marcellus and Utica, is impacting the export markets," Dinara Millington, CERI vice president of research, said in an interview Wednesday. "The Marcellus is now shipping their gas into markets that were traditionally sourced from western Canadian gas-producing regions," said Millington, one of four authors of the report. "While historically Canada's exports to the United States vastly exceeded its imports from the United States, this gap is shrinking as advances in the US Marcellus Shale bring lower-priced gas onto the market," the CERI study states. "The demand for Canadian gas is shrinking as Marcellus gas displaces it in the market, primarily in eastern Canada." "Millington added that even though the market share held by western Canadian gas has started to fall off, there is still room for Canadian natural gas exports through the end of the study period, which extends to 2037.

Second US LNG cargo heads to Europe, set to reach Spain July 22: sources - A new cargo of US LNG is headed for southwestern Europe, only the second cargo to target the European market since US LNG exports began at the end of February. According to shipping sources and cFlow, Platts trade flow software, the Sestao Knutsen LNG tanker left the Sabine Pass liquefaction facility on Monday and is set to arrive at Spain's Mugardos LNG import terminal at the port of Ferrol on July 22 or earlier. If the cargo is indeed delivered to Spain, it would be the second to land in Europe after the Creole Spirit offloaded at Portugal's Sines terminal at the end of April.A total of 13 US LNG cargoes have been delivered from Sabine Pass since February, with the majority, nine, sent to the South American countries of Brazil, Argentina and Chile. Two cargoes were delivered to the Middle East -- Dubai and Kuwait -- while one went to India. Much industry attention is being focused on how much US LNG will come to Europe given increasing competition for buyers in the oversupplied European market. The fact that Portugal and Spain are the first European countries to import LNG from the US is telling. The Iberian peninsula is considered an "island market" with poor interconnection to the rest of Europe, so the delivery of US LNG into the region is not likely to be seen as a sign that US LNG will take hold in the wider European market. In addition, the biggest suppliers to Europe -- Russia and Norway -- do not supply the Iberian market with their pipeline gas so they are likely to be non-plussed about US LNG headed to southwestern Europe.

Can a new set of buyers reinvigorate the LNG market?  With liquefaction capacity and supply of liquefied natural gas on the rise and LNG demand flat, prices for super-cooled, liquefied gas are low and may well stay low into the early 2020s. That’s a concern for LNG suppliers, who (like all suppliers) would prefer it if demand was soaring and supply was a little tight. There are some rays of hope, though, in what many have seen as a gloomy time for the LNG sector. After all, with spot LNG prices below $5/MMBtu (far lower than they were 30 months ago) and ample supplies of LNG available, a growing list of nations are looking either to become LNG importers or to significantly expand their LNG imports. Today, we continue our review of the LNG market with a look at the new demand that may be spurred by supply surpluses and low prices.

The Shale Boom's New Winner: Propane - WSJ: The U.S. is exporting record volumes of propane, another way in which the shale boom has made the nation a more dominant force in the global energy trade. Foreign sales are surging as U.S. producers capitalize on higher prices overseas. That in turn is causing U.S. prices to rise, making Fourth of July barbecues a bit more expensive than cookouts a few months ago. In a first, U.S. oil-and-gas companies are on track this year to export more propane than the next four largest exporting countries combined-OPEC members Qatar, Saudi Arabia, Algeria and Nigeria, which have long dominated the trade-according to analytics provider IHS. U.S. exports already account for more than a third of the overall market for waterborne shipments, IHS said.  Propane exports hit an all-time high of 884,000 barrels a day in February, according to the U.S. Energy Information Administration. Platts Analytics, an energy data provider, projects that a new record was set in May, for which government data isn't yet available. The exports have been enabled by a new network of pipelines, shipping terminals and tankers that doubled capacity from a year ago. "It's been a major source of investment and one of the big success stories,"  After the shale boom made propane more plentiful, exports became a widely sought solution because it is much easier to bottle and ship than other fuels. About half of all U.S. exports wind up in Latin America, while the rest goes to northwest Europe and Asian markets. In 2013, the U.S. overtook Qatar as the world's top propane shipper.

Petroleum product exports riding high --We are getting into the peak summer driving season and gasoline demand has been hitting all-time highs. You might think that inventories would be drawing down and that the U.S. would need to import more gasoline and gasoline blending components. But not so. U.S. refineries are cranking out the products. Gasoline stocks are up 10% from a year ago—15 million barrels (MMbbl) higher than the top of the five-year range—and last week gasoline inventories made a contra-seasonal move upward, increasing by 1.4 MMbbl.  Net exports for the first quarter were up almost five times the same period in 2015. But what does all this mean for refined product markets in general, and gasoline balances in particular? Today, we examine the state of U.S. petroleum product markets. The upswing in U.S. gasoline demand is nothing new. RBN blogged about it this time last year in King of the Road (Again) and covered issues related to delivering gasoline, diesel and jet fuel to Northeast markets a few weeks back in Move It on Over. In the Energy Information Administration’s (EIA) June 2016 Short-Term Energy Outlook, gasoline consumption this summer was projected to average 9.5 MMb/d, a solid 1.9% higher than the summer of 2015, which was a strong demand season itself.  What really stands out, though, is that even with high domestic demand for gasoline, net U.S. export volumes remain impressive. Figure 1 shows EIA net exports of gasoline (exports less imports of finished motor gasoline and motor gasoline blending components) and net exports of distillates (exports less imports of distillate fuel oil and kerosene-type jet fuel). The graph on the left is the total of net gasoline and distillate exports, showing the huge shift of the U.S. from a net importer of about 1.5 MMb/d in 2006 to a net exporter of about 1.2 MMb/d over the past six months. The graph on the right in Figure 1 focuses on the 2012-16 timeframe and splits net exports into gasoline (green line) and distillates (brown line).

America's "Soaring" Gasoline And Oil Demand Was Just An Illusion: How The EIA Fooled The Algos -- When it comes to "real-time" measurements of crude demand and supply, the data is notoriously bad (and perhaps, according to some, intentionally manipulated). We pointed this out most recently in early March when we that according to IEA data, crude oil production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015. Of this 1 billion barrels which the IEA said was produced but not consumed, some 420 million are said to be stored on land in OECD member countries and another 75 million can be found stored at sea or in transit by tanker somewhere from the oil fields to the refineries. This means that as of this moment, about 550 million "missing barrels" are unaccounted for "apparently produced but not consumed and not visible in the inventory statistics."  However, it is not only data at the annual level that is flawed: monthly, and especially weekly data is just as, if not even more distorted. In fact, as Bloomberg's oil energy analyst Julian Lee asks, "could it be that the U.S. demand that's helped drive a near doubling of oil prices since mid-February was illusory?" Lee is referring to a major discrepancy in DoE reporting which through the Energy Information Administration, produces two sets of U.S. demand data that drive sentiment and influence trading. The first shows monthly figures. They're two months out of date, but they give the most accurate assessment of what's going on in the world's largest oil-consuming country. The second set of numbers come out each Wednesday, giving preliminary estimates for the previous week. For crude markets these weekly figures - though less reliable - are arguably more important, largely because they're bang up to date. As Lee puts it, "It's the discrepancy between the two sets of data that gives cause for concern."He adds that "when taking the weekly figures, it looks like U.S. gasoline demand is soaring. According to those data, it's been on a steady upward path all year, reaching a record high of 9.8 million barrels in the week ending June 17, with the summer driving season barely started." But the latest monthly data, showing the numbers for April, paint a very different picture. They show U.S. gasoline consumption falling between March and April and imply a downward revision of April demand of 260,000 barrels a day, or 2.7 percent, from the preliminary figures.

Cruel summer for U.S. refiners as margins tank | Reuters: Summer driving season is in full swing and American motorists are filling their tanks at a healthy clip, but that is not swelling the profit margins as much as usual at U.S. independent oil refiners such as PBF Energy and Valero Energy Corp.  In April, executives shrugged off the industry’s lousy first quarter as an aberration that would be remedied this summer. “We still are bullish gasoline and bullish octane," PBF CEO Tom Nimbley told investors in an earnings call back then. “The driving season really hasn't hit that hard yet.” Nimbley was right about the surging summer demand. But refiner margins are still being squeezed as gasoline and diesel inventories stubbornly sit well above five-year averages. Summer gasoline demand usually fattens margins for refiners with seasonally high levels for the crack spread, the premium of a barrel of gasoline over a barrel of crude oil. That will not happen this year, said analysts who expect the situation to remain bleak in the weeks ahead unless there are large drawdowns in inventories. Late on Wednesday, the American Petroleum Institute, an industry group, assuaged some of those concerns, reporting a 3.6-million-barrel drawdown in gasoline stocks. Yet inventories remain much higher than they were last year at this time, and analysts have slashed earnings estimates for big U.S. refiners who report second-quarter results in coming weeks. The situation is so dire that U.S. East Coast refineries have been cutting production. Refiners on the East Coast, known as "PADD 1" by the U.S. Energy Department, are typically the first to feel a profit pinch, because their margins tend to be thinner than those of other regions.

With oil price near $50, resilient U.S. shale producers eye new chapter | Reuters: Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency. That shale giants Hess Corp (HES.N), Apache Corp (APA.N) and more than 25 other companies have beaten back OPEC's attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared. To regain market share, the Organization of the Petroleum Exporting Countries in late 2014 pumped more oil despite growing global oversupply. It aimed to drive prices lower and force higher-cost producers out of the market, with shale oil seen as especially vulnerable. The pain was acute. Industry revenue fell more than 30 percent in 2015 from the previous year, the U.S. drilling rig count dropped by more than 70 percent from when oil was still above $100 per barrel, stock valuations plunged and scores of small producers filed for bankruptcy. But so far no U.S. producer that pumps more than 100,000 barrels per day (bpd) has gone bankrupt. The survival of these big producers partly explains why overall U.S. production has slipped only about 10 percent since peaking at 9.69 million bpd. Their agility - which required slashing costs in half while doubling down on improved techniques to squeeze more oil from each new well - is now allowing the industry to cautiously focus on growth again. But this time, U.S. producers say they will stay focused on capital returns, having abandoned a culture of maximizing production regardless of costs.

Big Oil Could Spark A Renaissance In U.S. Shale - - The collapse of oil prices has killed off any appetite that the oil industry had for megaprojects that cost tens of billions of dollars. With scarce resources, oil companies have shifted their focus, pouring resources into short-cycle projects, which often means shale drilling.  Liam Denning over at Bloomberg Gadfly put some numbers to the phenomenon, using data from Oslo-based Rystad Energy. The data is revealing, painting a portrait of an industry that has scaled down the size of new oil projects. Intriguingly, the focus on smaller oil fields began before the plunge in oil prices, although the price crash is accelerating that trend. Spending on oil fields that hold more than 1 billion barrels of reserves rose by 12.5 percent annually between 2000 and 2014. However, spending on oil fields between 30 million and 1 billion barrels increased by 15 and 16 percent each year. Moreover, spending on these smaller fields will grow by 12.5 percent per year through the rest of the decade, double the rate of investment in the mega oil fields.  There are several reasons that the oil industry have shifted resources into smaller oil plays. One is that there just are not that many massive oil fields left to develop that are not under national control. Also, with so many megaprojects suffering from cost inflation, delays, and technical problems, they are no longer attractive to either oil executives or their shareholders.  Another reason that oil investment has backed out of megaprojects is the rise of shale drilling, which opened up a tidal wave of investment into smaller fields. Low oil prices will likely ensure this trend continues. Arctic drilling is now off the table in most parts of the world aside from a few exceptions; deepwater projects will likely be deferred for several years; and expensive forms of oil such as oil sands will also see investment dry up.

U.S. Oil Industry May Soon Face Rig And Worker Shortages -- Coming on the heels of the last few articles about DUCs (drilled uncompleted wells) another discussion that is beginning to occur between analysts and companies is the shortage of equipment and manpower. Since pricing began to slide in 2014 over 350,000 people have lost their jobs across the United States and around the world from service companies, E&P’s, etc. While these cuts were necessary due to the cuts in CAPEX and D&C budgets. The question is what occurs if pricing and liquidity in the commodities market opens up allowing for E&P’s to begin drilling and completing wells again? According to the IEA’s outlook oil market is set to balance in second half of 2016 begging the question of whether this shortage will occur sooner rather than later. By using DrillingInfo’s rig analytics and DUC monitor we overlayed strip pricing by month to see how the number of DUC’s compares to that of pricing. The question that remains is what pricing will it take to begin completing these DUCs; strip or hedged? Through price swings up and down, the general trend is that as things pick up more field workers are hired and crews get back to work. There is some lag time as equipment needs to be fixed and prepared to get back to work and workers need to be retrained on equipment. This shortage creates a small price pop due to increased demand of services and a shortage of equipment and people that generally fixes itself over a relatively short time frame. A price rebound today might be different than those of past; the main reason DUCs. The number of DUCs around the country is topping 3,304 (as of 6/12/2016; taking into account a 6 month time lag in accurate reporting) across multiple basins and hundreds of operators as seen in the figure below. While there is enough HP in the market currently to serve the wells that are being completed what will occur when operators begin completing DUCs and drilling at the same time?

Revving Up Oil Fields Won’t Be So Easily Done - WSJ: Oil-field-services companies are depleted after slashing prices and laying off workers, and their slow recovery could crimp the energy industry’s overall ability to bounce back from the oil bust. The workhorses of the energy sector, the services companies, which range from giants, such as Schlumberger, to small family-run operations, provide much of the muscle and specialty know-how needed to extract oil and gas. They pioneered the technologies that allowed producers to unlock massive volumes of oil and gas trapped in shale-rock formations, and marshal critical equipment and people to drill and pump wells from remote corners of North Dakota to platforms miles offshore.  But they have borne the brunt of two years of belt-tightening in the oil patch, leaving them short on cash and manpower as prices slowly rebound and companies need them again to increase production. IHS Energy estimates that nearly 70% of fracking equipment in the U.S. has been idled, and 60% of field workers involved in fracking have been laid off. Roe Patterson, chief executive of Fort Worth, Texas-based Basic Energy Services Inc., which fracks wells in the Permian basin and other shale formations, said shortages of experienced workers could hamstring a recovery in its early days. Many of the thousands laid off have found other jobs, and the best will have to be lured back with higher wages that companies can ill-afford, he said. “It’s scary to think what a drag and what a headwind finding experienced labor is going to be this time around,” Mr. Patterson said, adding that while his fracking fleet is still in good shape, a lot of equipment isn’t. “Pop the hood on your car and let it sit for a year. I guarantee the car won’t be in the same condition.” Larger and better-financed oil-field-services companies were better positioned to weather the drop in business and are now poised grab market share from smaller competitors that had to make deeper cuts, analysts said..  Halliburton has laid off more than 28,500 workers—one third of its labor force. But the company has been careful to hold on to employees with specialized skills.

US holds more oil reserves than Saudi Arabia, Venezuela, new study shows - The US holds the world's biggest recoverable reserves of oil putting it ahead of OPEC giants Saudi Arabia and Venezuela as well as Russia, according to an independent study by Norwegian research group Rystad Energy. In estimates which include potential reserves in recent discoveries and in yet to be discovered fields, US reserves total 264 billion barrels, ahead of 256 billion barrels in Russia and 212 billion barrels in Saudi Arabia. For the US, more than half of the remaining oil reserves are made up of unconventional shale oil with Texas alone holding over 60 billion barrels of shale oil, Rystad said Monday citing the new data. Under a more conservative measure based on proven and probable reserves in existing fields, however, the US holds 40 billion barrels of oil, well below Saudi Arabia's 120 billion barrels but almost double Venezuela's 22 billion barrels, the Rystad figures show. Rystad differentiates its estimates from those such as BP's closely-watched Statistic Review, which are based on reporting from national authorities often using an "opaque" set of reporting standards. Some OPEC countries like Venezuela, for example, report official reserves apparently including yet undiscovered oil, Rystad noted, while others like China and Brazil report conservative estimates based only on existing fields. Rystad's own figures include just crude and condensate, whereas BP's figures also include natural gas liquids.

US oil reserves surpass those of Saudi Arabia and Russia -  The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world’s biggest exporting nations, according to a new study.   Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia’s 212bn and Russia’s 256bn in reserves.  The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.   Recoverable reserves — those barrels that are technologically and economically feasible to extract — are analysed by the energy industry to determine company valuations and the long-term health of an oil-producing nation’s economy.  Conventional oil producers, such as Saudi Arabia, have traditionally used their huge resource riches to wield power globally, particularly among big consumer countries such as the US.  This relationship has been disrupted in recent years by hydraulic fracturing and other new technologies that have helped the US unlock vast reserves and enabled it to become more energy independent. “Three years ago the US was behind Russia, Canada and Saudi Arabia.”  More than half of the US’s remaining oil reserves are in unconventional shale oil, Rystad Energy data show. Texas alone holds more than 60bn barrels of shale oil.   Other global oil reserves data, like the closely watched BP Statistical Review that is based on official reporting from national authorities, show the US still ranks behind countries such as Saudi Arabia, Russia, Canada, Iraq, Venezuela and Kuwait.

Report: US is now world’s largest oil reserve but global supply still small - The United States has surpassed Saudi Arabia and Russia as the global leader in oil reserves, according to a report by a Norwegian consultancy firm. “We have done this benchmarking every year, and this is the first year we’ve seen that the US is above Saudi Arabia and Russia,” Per Magnus Nysveen, head of analysis at Rystad Energy, said. He credited the rise to a sharp increase in the number of discoveries in the Permian basin in Texas over the past two years. The report found that many, especially members of the Organization of Petroleum Exporting Countries, exaggerated the size of their reserves in self-reported surveys. Rystad Energy came to the conclusion by only recording each country’s economically viable reserves. Rystad found that the US had 264bn barrels of oil in reserve, ahead of Russia at 256bn barrels and Saudi Arabia at 212bin barrels. The study also painted a grim picture for the future of oil globally. A press release accompanying the findings said, at the current rate of production oil supplies will only last 70 more years, while the number of cars will double in the next 30 years. With this in mind, the release added, “it becomes very clear oil alone cannot satisfy the growing need for individual transport”. American oil reserves have grown dramatically in the past two years due to improvements in technology for extracting shale. Increased productivity has cut the cost of extracting oil in half in the past two years, when compared to the price per barrel.

240 years of US energy use -- With the 4th of July weekend about to begin, the US Energy Information Administration decided to look back to our nation's founding. So it plotted the country's energy use starting from 1776. Most of the result isn't a surprise: biomass had a long run before fossil fuels took over and stayed on top. But recent years have seen the biggest change since nuclear was added to the mix. Biomass spent nearly a century on top of the US energy mix before being displaced by coal, although it never went above providing four quadrillion Btus (each Btu is a bit over 1,000 Joules). But biomass never entirely went away, and its resurgence this century puts it at its highest level ever. With nuclear holding steady and renewables surging to nearly the same level as hydropower, fossil fuels are on the verge of dropping below 80 percent of the US' energy mix.  Fossil fuels haven't been that low a percentage for over a century.  Biomass' comeback is mirrored by the decline of coal. Coal was the US' dominant form of energy for roughly 75 years, until the rise of automobiles allowed petroleum to displace it. It saw another surge as the electric grid expanded starting in the 1960s, and coal's percentage of the mix continued to grow even as nuclear power expanded dramatically. But in the last few years, coal has dropped dramatically, in part due to a huge rise in the use of natural gas. The EIA also includes projections out to 2040, but these tend to be of limited utility, as they assume no additional energy policies will be enacted.

Oil Demand Might Peak By 2030 -- McKinsey -- July 6, 2016 - These are the highlights of a recent McKinsey study as reported by the Oil & Gas Journal:

  • The energy demand growth rate worldwide will slow to 0.7%/year through 2050—30% slower than the firm originally forecast. Energy demand will grow in emerging and developing countries and decline in Europe and North America.
  • Chemicals will grow twice as fast as energy demand while demand for light vehicles peaks around 2023.
  • Demand for electricity will grow at twice the rate of nonelectric energy. Solar and wind will account for almost 80% of net added capacity and 34% of generation by 2050.
  • The fossil-fuel share of total energy will decline to 74% in 2050 from 82% at present. Gas will grow at almost twice the rate of total energy demand, while coal peaks by 2025. Oil demand growth will slow to 0.4%/year.
  • Carbon dioxide emissions related to energy will flatten and start to subside about 2035 as efficiency of combustion engines improves, electric vehicles increase in number, and power generation shifts to wind and solar.
  • Through 2035, the analysts say, 70% of growth in demand for liquid hydrocarbons will be for petrochemical feedstock.

Alberta oil sands producers will eye new projects at $55-$60/b WTI: execs - Investments in additional oil sands production capacity in Alberta will be boosted with a WTI price hovering between $55/b and $60/b even as producers spare no effort to reduce their capital costs, executives said Wednesday. "It is still tough out there, but in the past year we have dropped operating and capital costs by 17% and 30%, respectively, with our focus still being on consolidation and optimization," Lyle Stevens, Canadian Natural Resources executive vice president, told the 2016 TD Securities Energy Calgary Conference. CNR is adding 23,000 b/d of oil equivalent of heavy and light oil output in Western Canada over the coming six months at a cost of C$17,000 ($13,120)/flowing barrel and is also three months away from adding 45,000 b/d of bitumen output at its Horizon facility in northern Alberta, he said. Flowing barrel costs include construction costs and sustaining capital and operating expenditure."We're feeling a lot better this year than last year and have also been successful in cutting costs by 40% primarily due to the application of new technologies and deflation in the service sector," Harbir Chhina, executive vice president of oil sands development with Cenovus Energy, told attendees of the same event. Cenovus will restart three projects that were put on the backburner last year due to low oil prices. But the company would seek "price sustainability" before taking a final investment decision, Chhina said.

How a Quebec island became the centre of a debate over oil and gas exploration - Montreal - CBC -- Plans to drill for oil and gas on an island in the Gulf of St. Lawrence has made Premier Philippe Couillard the target of environmentalists, with one group calling his decision to go ahead with the project "illogical and unacceptable." Couillard has repeatedly said he's bound by an agreement signed by the previous Parti Québécois government to allow for testing in Anticosti, a rocky, 200-kilometre stretch of land known for its salmon fishing. The deal with Quebec City-based Petrolia Inc. was inked shortly before the 2014 election.   "The contract is there. We have to follow it," Couillard said Tuesday at a news conference in Montreal. "It doesn't mean that we're happy. We're going to protect that unique ecosystem, I can tell you that."  The exploratory drilling involves fracking, a controversial practice where a mixture is pumped deep underground in order to crack rocks and release natural gas, which risks affecting the water table. In a statement, Petrolia said Wednesday it's committed to working with Anticosti residents and being completely transparent about its plans.  The province's Environment Ministry confirmed this week that Petrolia will be allowed to draw a total of 30 million litres of water at three testing sites.

Chevron Approves $37 Billion Expansion of Kazakh Oil Field - — Bucking the trend of conserving cash at a time of low oil prices, the American oil giant Chevron said on Tuesday that it would go ahead with a $37 billion expansion of a gargantuan oil field on the Caspian Sea in Kazakhstan.Giving the green light to such an expensive project, called Tengiz, looks on the face of it to be an unusual move, but analysts say the field has been lucrative and important for Chevron and its partners, who include Exxon Mobil.Tengiz, which began producing oil in 1993, has been Chevron’s star, earning the company as much as $50 a barrel when prices were more than $100 a barrel, estimates Iain Reid, a London-based oil analyst at Macquarie, an investment bank. Prices were about $46 a barrel as of midday Tuesday.In a telephone interview, Todd Levy, a Chevron regional president, said that the company believed that, contrary to conventional wisdom, now “is a good time in the industry to proceed.” Chevron figures it can obtain low prices from suppliers, who might otherwise be idle.In recent years Chevron has invested heavily in big undertakings like the $54 billion Gorgon liquefied natural gas project off Australia, but lower oil and gas prices have left Chevron and other companies with costs that are too high in comparison to current revenue.AdvertisementContinue reading the main story In April, Chevron reported a $725 million loss for the first quarter of 2016, in contrast to a $2.6 billion profit in the same period a year earlier.The company also had little choice but to move forward in Kazakhstan, which has become a cornerstone of its business. The company, which is based in San Ramon, Calif., obtains about one-sixth of its global oil production from Kazakhstan.

Petrobras' Indian Partners Fight Delay In Troubled Brazil Oil Project - Rigzone  - Petrobras has warned its Indian partners in a huge offshore project to not expect oil from the site until 2022, a fresh sign of how low oil prices and the state-owned company's corruption scandal and mountain of debt are dragging on Brazil's energy industry. The previously unreported, four-year delay in the "super-giant" discovery off the northeastern coast of the Brazilian state of Sergipe is forcing India's Oil and Natural Gas Corp and IBV Brasil Petroleo Ltd to seek ways to speed up the Petrobras-led project which has cost them $2.1 billion with no return in sight. The delay and pressure from the Indian partners is just one of many challenges for new Petrobras Chief Executive Pedro Parente, named by Brazil's interim-President Michel Temer in late May amid an ongoing financial crisis. In the face of a massive bribery and kickback scandal and Petrobras' $126 billion of debt, Parente has pledged to run the company in a more market-friendly way but has declined to comment on individual projects. He has also promised a revamped investment plan by the end of October - though it is unclear whether it will address the Sergipe offshore standoff. In April, Petrobras told IBV, a 50-50 joint venture between state-owned Bharat Petroleum Corp and privately held Videocon Industries Inc, that there will be no oil output from Sergipe "until at least 2022," an IBV executive told Reuters. A year ago, Petrobras' promised first oil by 2018.

Key Oil Upside Catalyst Gone, As Niger Delta Avengers Twitter Account Suspended -- Over a month ago we declared, somewhat tongue-in-cheek, that the group that "holds the price of oil in their hands" is the quixotic, and formerly completely unknown Nigerian militant group the Niger Delta Avengers, or NDA, whose generous source of funding remains to this day unknown (although one can make some very astute assumptions as to who would benefit from the price of oil rising as a result of relentless supply disruptions). Then, just last week, in the aftermath of the NDA going rather quiet, Goldman once again chimed in, this time predicting that the recently signed "tentative" ceasefire between the Nigerian government and the NDA could lead to downside risk to the bank's $50 target: If sustainable, this ceasefire would pave the way for higher output, with the government optimistically aiming for a return to normal production by end-July. A normalization in production, even over several more months, would create downside risk to our $50/bbl 2H16 price forecast as it would bring the global oil market close to balance over that time period. This Day later reported that "the relative peace that attended the federal government’s offer of dialogue-for-peace initiative to the militant group in the Niger Delta, the Niger Delta Avengers (NDA), snapped at the weekend as the group resumed hostilities breaching major crude oil pipelines in parts of Delta State. The militant group yesterday said it had bombed Chevron’s two major oil wells 7 and 8 close to Abiteye flow station in Warri South West Local Government Area of the state." None of this was unexpected, and has been in fitting with the NDA's modus operandi to date. Yet, a big surprise emerged just a few hours ago, when Twitter did something it has not done before: it suspended the (unconfirmed) account of the Niger Delta Avengers: What is very surprising about this move is that Twitter had no problem with the NDA's account for the past 2 months when the militants were announcing the destructive exploits on Twitter, often without official confirmation, and often resulting in spikes in crude oil (as their tweets would be without fail indicative of further Nigerian oil infrastructure damage). And yet, something changed in the past week, just days after Goldman created a narrative in which the NDA would no longer be an upside price catalyst and, if anything, lead to the unwind of the "production disruption" trade. Why do it now? According to Bloomberg, Twitter’s press office didn’t immediately reply to an email seeking comment, however we will be very curious to see the official explanation as to who may have complained about the NDA's account, and just who is no longer axed in a way to benefit from further NDA-induced oil upside.

African Energy Outlook: Fresh attacks cast doubt on Niger Delta oil recovery --Barely 10 days after a 30-day ceasefire deal with the Nigerian government, militants claimed a round of fresh attacks in the country's Niger Delta over the weekend of July 2-3, marking a major setback after weeks of respite that allowed Nigeria's oil output to rebound. Nigerian oil rebel group Niger Delta Avengers said on July 3 its fighters carried out five separate attacks on oil pipelines operated by state-owned Nigerian Petroleum Development Co. and US firm Chevron over July 2-3. The group said its fighters had earlier on July 2 bombed two NPDC major crude oil trunk lines close to Batan flow station in southern Delta state, and also blew up a trunk line owned by state energy firm Nigerian National Petroleum Corp. that transports crude to the 125,000 b/d Warri refinery. However, by the midday July 4, the group's Twitter account had been suspended, and there were no reports of these attacks on the group's website. The attacks represents a major blow to peace and stability in the oil rich region, after the government and the militants agreed to a 30-day truce almost two weeks ago, allowing President Muhammadu Buhari's administration more time to come up with a comprehensive plan to tackle militancy in the Niger Delta. When the news of ceasefire was announced, however, the Niger Delta Avengers appeared to deny that it was part of such a truce. There was no immediate comment from Chevron, which had seen its facilities the most attacked in the recent waves of violence launched by the militant group. A NNPC spokesman said that a team of engineers had been dispatched to investigate the incident. But a spokesman for the ethnic Ijaw Youth Council Udengs Eradiri on July 4 confirmed the attacks, which he said was due to the breakdown of the talks between the government and the rebel group.

Nigerian oil militants claim attack on Agip pipeline (AP) — Nigerian oil militants say they have blown up a crude oil pipeline belonging to Italian oil company Agip in Bayelsa state. The Niger Delta Avengers made the claim on their website Friday. Such attacks targeting the oil industry in the Niger Delta have caused Nigeria to lose its position as Africa’s largest oil producer. Desmond Agu, Bayelsa state commandant of the Nigerian Security and Civil Defense Corps, said his colleagues exchanged gunfire with heavily armed youth in two speedboats who attacked the pipeline early Friday. The Tebidaba-Brass pipeline is the major pipeline leading to the Agip Brass crude oil terminal with a carrying capacity of 3.2 million barrels. Agip has not commented on the attack. The militants say they want a greater share of Nigeria’s oil wealth for local communities.

Things just got a lot 'messier' for Africa's largest oil producer -- Angola announced last week that it wanted to discontinue talks with the International Monetary Fund about getting a loan.  Africa's largest oil producer had first turned to the Washington-based lender back in April amid ongoing stresses from lower oil prices.   The decision to abandon the talks has folks worrying about possible negative effects in the struggling oil producer's economy.  "The Angolan government's decision to discontinue talks with the IMF on a potential loan increases risks to the sovereign's external financial position if no other sources of external funding are available," a statement by Fitch Ratings said.   "We've long held a below-consensus view on Angola, but Luanda's decision to abandon an IMF bailout has increased the risk of a messier crisis," "A recession and accompanying debt crisis are now possible," he continued, noting that his team estimated that the country's account deficit would be about 12% of gross domestic product in 2016.   Angola is one of many oil producers to struggle over the past year and a half. The country relied on oil for about 70% of government revenues and 97% of its export revenue in 2014; lower prices therefore were not exactly a welcome surprise.  Over the past year, Angola's currency has lost about 35% of its value against the dollar, foreign-exchange reserves have declined to about $22 billion from $32 billion, and the government has imposed new currency controls, which have only helped to drive up the cost of key imports, as RBC Capital Markets' Helima Croft previously observed. Plus, inflation hit 29.2% in May — the highest level since January 2005.  So without getting a loan from either the IMF or Beijing, it will be difficult for authorities in the country to be able to do much to tackle the problem.

Why oil is still headed as low as $10 a barrel - A. Gary Shilling – I’m sticking to my call for prices to decline anew to $10 to $20 per barrel. Recent gains have little to do with the fundamentals that led to the collapse in the first place. Wildfires in the oil-sands region in Canada, output cuts in Nigeria and Venezuela due to political unrest, and hopes that American hydraulic fracturing would run out of steam are the primary causes of the recent spurt. But the world continues to be awash in crude, and American frackers have replaced OPEC as the world’s swing producers. The once-feared oil cartel is, to my mind, pretty much finished as an effective price enforcer. Even OPEC’s leader, Saudi Arabia, is acknowledging the new reality by quashing recent attempts to freeze output, borrowing from banks and preparing to sell a stake in its Aramco oil company as it tries to find new sources of non-oil revenue. The Saudis and their Persian Gulf allies continue to play a desperate game of chicken with other major oil producers. Cartels exist to keep prices above equilibrium, which encourages cheating as cartel members exceed their allotted output and other producers take advantage of inflated prices. So the role of the cartel leader, in this case Saudi Arabia, is to cut its own output, neutralizing the cheaters to keep prices up. But the Saudis suffered market-share losses from their previous production cuts. OPEC has effectively abandoned restraints, with total output soaring to as high as 33 million barrels per day at the end of last year: Iran, freed of Western sanctions, plans to double output to 6 million barrels a day by 2020, which would make it the second-largest OPEC producer behind Saudi Arabia. Russia continues pumping to support its economy after the collapse in oil prices devastated government revenue and export earnings. War-torn Libya is also ramping up production as best it can.

Oil Dragged Lower By Crashing Gasoline Futures | Crude prices are again coming under downward pressure as economic concerns swirl and uncertainty swells. That said, dollar strength was much more apparent earlier in the day; as the dollar eases from its highs, oil is paring its losses – ahead of weekly inventory data tomorrow, and Nonfarm Friday the day after.  As we zoom past the 4th July holiday, with a record number of people hopping in their cars and putting the pedal to the metal, realization has dawned that we are in the midst of a gasoline glut, regardless of what demand is doing. As as we reach the peak demand plateau of the summer driving season, gasoline prices recently have been getting a good ole fashioned drubbin’. We highlighted on our Twitter account last week that a number of gasoline cargoes (such as the Torm Neches – see image) are being diverted away from the U.S. East Coast, while we also highlighted on CNBC how we are seeing vessels anchored outside of New York Harbor. These views have been affirmed elsewhere in recent days.  The fundamental weakness in gasoline markets is being exemplified by the Rbob crack spread, which is closing in on levels which could encourage refiners to dial back on runs. In fact, already starting to see signs of this; Delta has cut production rates by ~16 percent at its Trainer refinery – likely given the drop in refining margins. As the chart below illustrates, the 1st month Rbob crack spread has been dropping since April, whereas last year it gradually increased through the peak summer demand period. We find ourselves dropping below $15/bbl, now less than half the profitability seen at this time last year:

OilPrice Intelligence Report: Crude Crashes On Global Economic Woes --Oil prices fell sharply on Tuesday, down more than 4 percent as the U.S. rig count shot up at the end of last week. Ongoing fears about economic turmoil in Europe are also weighing on WTI and Brent. An assessment from Genscape also predicted that oil inventories increased in Cushing, a bearish sign that excess supply remains. $50 oil remains elusive once again, after a brief period of time above that threshold in June. U.S. has more oil reserves than Saudi Arabia. A new assessment from Oslo-based Rystad Energy finds that the United States has the world’s largest oil reserves, not Saudi Arabia or Venezuela. The U.S. is sitting on an estimated 264 billion barrels of reserves, compared to Russia’s 256 billion barrels, and Saudi Arabia’s 212 billion barrels. More than half of the U.S. reserves are located in shale. Venezuela is commonly thought to have the world’s largest reserves, but Rystad says that much of that is not discovered. Venezuela pays bond holders as country falls apart. Venezuela’s economy is melting down, but the government has prioritized meeting bond payments even as food riots spread across the country and medical supplies and other basic items run dangerously low. Bloomberg notes that in the recent past, other countries have defaulted on bond payments long before the crisis has blown up to the extent it has in Venezuela. The situation is curious, especially for a socialist government. But a much bigger test looms later this year when larger debt payments fall due. Between the sovereign and the state-owned PDVSA, a combined $5.8 billion in debt payments will fall due in the second half of 2016. As Barclays noted in a recent research note, there are very large downside risks to Venezuela’s oil production – with several hundred thousand barrels per day of output at stake.

Crude Crashes Most In 9 Months -- WTI Crude is down over 5% to $46.50 - its biggest daily drop since early September 2015... With East Coast gas inventories at a record high... Sparking selling in crude.. Crude dropped with equities on a gloomy outlook for the global economy and amid signs that oil stockpiles remain ample. Nigerian oil output rose last month following repairs to infrastructure that had been damaged by militant attacks, a Bloomberg survey showed, while gasoline supplies on the U.S. East Coast reached a record, the government said. Gasoline futures dropped to the lowest price in more than two months. "The path of least resistance is lower," said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. "The long-term picture remains bullish but in the short-term, crude is coming back from the disruptions. We have a lot of crude to work off as well."

Oil ends down nearly 5 pct on Brexit worry, supply builds | Reuters: Oil prices tumbled nearly 5 percent on Tuesday as investors worried that Britain's exit from the European Union would slow the global economy, making it unlikely energy demand will grow enough to absorb a supply glut. Brexit worries hit Britain's property market and drove the pound to a 31-year low. A flurry of data from China in coming weeks is likely to show weaker trade and investments. Traders also cited data from market intelligence firm Genscape showing a build of 230,025 barrels at the Cushing, Oklahoma storage hub for U.S. crude futures, during the week to July 1. "There are risk-off trades across the board," said David Thompson, executive vice-president at Washington-based commodities broker Powerhouse. "Stocks, commodities, sterling are all off while U.S. bonds and T-bills are soaring." Brent futures settled down $2.14, or 4.3 percent, at $47.96 a barrel while U.S. crude fell $2.39, or 4.9 percent, to end at $46.60. Oil prices are up almost 80 percent from 12-year lows of around $27 for Brent and $26 for U.S. crude in the first quarter. The rebound was fueled by supply outages from Canada to Nigeria that created the perception that a two-year-old supply glut may be easing.

Oil Prices Lower; Oversupply Concerns Linger - Crude-oil prices headed south in early Asia trade Tuesday as more supply from Nigeria and Libya is likely to return online, which would slow down the pace of a rebalance in a well-supplied market. Trading volume is expected to be thin as U.S. markets were closed Monday for Independence Day. Global oil prices got a boost on Monday after Saudi Arabia's Energy Minister Khalid al-Falih said oil prices are starting to settle around current levels, as the market is starting to find a new balance between supply and demand. The upbeat sentiment is echoed by U.S. Energy Secretary Ernest Moniz, who said last week that the markets would be balanced by next year. The downtrend in U.S. domestic crude production has been an integral catalyst in pulling prices out of the 13-year low back in February. But analysts worry the pace of the rebalance could be hindered as some supply disruptions around the world are showing signs of ending. In Nigeria, despite months of militant attacks on the country's oil facilities, the country's output rose last month. In Libya, rival oil companies have finalized a deal to merge, a development that removed a key obstacle to the unification of a conflict-torn country. The merger could mean reopening of ports in the east and fields in the Sahara. "This could see Libya's output double to 700,000 barrels a day if the agreement progresses smoothly," said Stuart Ive, a client manager at OM Financial.

Oil rises in post-settlement trade after API report: Oil rose in post-settlement trade after a report that U.S. crude oil stocks fell. Crude inventories fell by 6.7 million barrels in the week to July 1 to 520.9 million, compared with analysts' expectations for a decrease of 2.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 80,000 barrels, American Petroleum Institute said. U.S. crude was last up $1.17, or 2.53 percent, at $47.78, after it settled at $47.43 a barrel, up 1.78 percent, or 83 cents. The contract fell 5 percent to end at $46.60 on Tuesday. Global benchmark Brent futures were up 76 cents at $48.72 a barrel after a 4.1-percent drop on Tuesday. Before the report, oil prices had risen after a two-day decline lured buyers back, although analysts cautioned the market will likely remain under pressure from a U.S. gasoline glut and economic worries over Britain's exit from the European Union. Gasoline futures were up a quarter of a percent after hitting a 3-month low. Profit for turning crude oil into gasoline, known as the gasoline "crack," fell to a February bottom below $13 a barrel as oversupply in the motor fuel forced U.S. refiners to cut output.  Vessels carrying gasoline-making components could not unload at New York Harbor this week due to a glut.

Oil Spikes After Biggest Inventory Draw In 13 Months -- After six straight weeks of drawdowns and against expectations of a 2.5mm barrel build, API reported a massive 6.736mm barrel drawdown - the biggest since June 2015. Distillates and Gasoline also saw major draws.  The result - unsurprisngly - is a surge in crude, extending the day's gains, even though Cushing saw a modest 80k build. API

  • Crude -6.736mm (-2.5mm exp)
  • Cushing +80k
  • Gasoline -3.603mm
  • Distillates -2.305mm

This is the biggest drawdown since June 2015 and 2nd biggest since July 2014...

Crude Tumbles As Inventory Draw Disappoints Despite Production Plunge - Following last night's larger-than-expected API-reported biggest drawdown in 13 months, DOE reported a mere 2.2mm draw (well below API's 6.7mm draw and expectations of a 2.5mm draw). Perhaps even bigger was the very small 122k draw in gasoline stocks compared to API's 3.6mm draw and WTI is tumbling in reaction. However, crude production plunged by 2.25% last week - the biggest drop since Sept 2013. DOE:

  • Crude -2.223mm (-2.5mm exp)
  • Cushing -82k
  • Gasoline -122k
  • Distillates -1.57mm

The breakdown by region, in which it is notable that PADD 3 crude imports rose to 3.86m b/d last wk, highest since Dec. 11 as total U.S. imports of crude 8363k b/d vs 7555k.

  • PADD 1 837k b/d vs 764k
  • PADD 2 2037k b/d vs 2138k
  • PADD 3 3858k b/d vs 3072k
  • PADD 4 305k b/d vs 299k
  • PADD 5 1324k b/d vs 1282k

Canad imports dropped as imports from most other regions jumped.

  • Canada imports 2618k b/d vs 3037k
  • Saudi Arabia 990k b/d vs 738k
  • Venezuela 670k b/d vs 702k
  • Mexico 803k b/d vs 613k
  • Colombia 738k b/d vs 578k

This is the 7th weekly draw in a row but notably below API... Additionally, Gulf coast gasoline inventory up 1.8 million, east coast down 600k

Oil products fill storage tanks and cast doubt over crude demand | Reuters: The levels of diesel, gasoline and heating oil in storage tanks in Europe this week are so high they are causing delivery backlogs and are casting doubt on whether demand for oil to be refined can be sustained. High levels of oil product stocks have plagued the market for months but the increase seen this week in Europe has come despite a series of factors that should be reducing gasoline and distillate inventories. French refineries have been hit by strikes over the past few weeks causing shutdowns, it has become unprofitable to ship diesel to Europe from the United States and demand typically climbs in the summer months as holidaymakers take to their cars. However, PJK International, a Dutch consultancy that tracks independent storage in Amsterdam-Rotterdam-Antwerp (ARA) hub, said gasoil stocks rose by more than 4 percent this week. Industry monitor Genscape also recorded a nearly 4 percent rise this week, putting all ARA gasoil stocks at 6 million tonnes, or 34 percent above the level this time last year. Genscape's data put stocks of gasoline, naphtha and blending components at 2.9 million tones, or a 2 percent rise this week. "There is so much stock in the system," Steve Sawyer, head of refining at FGE Energy, said. "We had almost 600,000 barrels per day of refining capacity out in France and margins barely moved." Strikes across France in May crippled its energy sector, shutting half its refineries. At least two, Total's Donges and Gonfreville, were still getting back to full capacity this week, according to Genscape. Yet storage tanks for diesel and heating oil are already so full in Germany, Europe's largest diesel consumer, that barges looking to discharge their oil product cargoes along the Rhine are being delayed, sources told Reuters. "Inland inventories are quite full," PJK International analyst Patrick Kulsen said, adding there is "no tankage left".

Oil prices skid as traders worry there's a fuel glut  (AP) — Oil prices fell nearly 5 percent on Thursday after a government report on fuel stocks reinforced worries about an oil glut. The report said that crude inventories are declining at a slower pace than expected. Stockpiles of oil and gasoline remain high, even though people drive more during the summer. A country awash in fuel has stalled an oil-price rally that began in February. The Energy Information Administration said Thursday that inventories fell by 2.2 million barrels to 524.4 million barrels last week. S&P Global Platts had forecast a decline of 2.6 million barrels, while the American Petroleum Institute estimated a drop of 6.7 million barrels. Gasoline stockpiles also declined by less than Platts expected. They had risen the week before, pointing to production that is outpacing even the stronger demand for gas in summer. Benchmark U.S. crude slid $2.29, or 4.8 percent, to settle at $45.14 on the New York Mercantile Exchange. Brent crude, the international price, fell $2.40, or 4.9 percent, to $46.40 a barrel. Oil prices skidded to a 13-year low in February but have since rebounded by more than 70 percent. There are fewer new wells coming into service. That means overall production is likely to continue falling, but only gradually. That is likely to push prices higher. Producers in U.S. shale formations from Texas to the Northeast have reduced output, and pumping has been interrupted in some foreign fields. The American Petroleum Institute estimated that in the second quarter, the number of completed U.S. oil wells — those that drillers had finished making and were ready to produce oil or gas — plunged by 69 percent in the second quarter compared with a year earlier. That’s a sign that domestic production is likely to continue slipping.

"PADD 1 Is A Holy Mess" - Is This What Finally Drags Crude Oil Lower -- 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. Sure enough, now that summer is here, this prediction is playing out just as expected and as Reuters reports, summer driving season is in full swing and American motorists are filling their tanks at a healthy clip, but that is not swelling the profit margins as much as usual at U.S. independent oil refiners such as PBF Energy and Valero Energy Corp. How come?  As it turns out, the optimism that refiners had in the spring that the gasoline excess would clear out has not materialized. During the first quarter earning season, refining executives shrugged off the industry’s lousy earning as an aberration that would be remedied this summer. “We still are bullish gasoline and bullish octane," PBF CEO Tom Nimbley told investors in an earnings call back then. “The driving season really hasn't hit that hard yet.” It has now, and while Nimbley was right about the surging summer demand, refiner margins are still being squeezed as gasoline and diesel inventories stubbornly sit well above five-year averages. Nowhere is the situation more dire than the US East Coast, where refineries have been forced to cut production, just as we forecast several months ago they would have to as the relentless supply in crude did not balance out the demand for refined product. As Reuters points out, refiners on the East Coast, also known as "PADD 1" by the U.S. Energy Department, are typically the first to feel a profit pinch, because their margins tend to be thinner than those of other regions. “PADD 1 is a holy mess,” said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut. “It is very unusual. If a market becomes extremely oversupplied, like PADD 1, they are going to have to cut runs.” That is another way of saying refiners will have to stay shut, which in turn will force crude to  build up in various on and offshore storage locations.

OilPrice Intelligence Report: Demand Concerns See Oil Fall To 2 Month Lows: Oil prices touched two-month lows on Thursday, with WTI falling to around $45 per barrel. The catalyst for the large sell off this week was a much weaker than expected draw on U.S. oil inventories. Industry estimates called for a drawdown of roughly 6 million barrels but the EIA revealed a weaker 2.2 million barrel reduction, disappointing oil traders. Meanwhile, gasoline stocks, still at elevated levels, barely budged. Coming on the heels of a downward revision for U.S. gasoline demand from the EIA for April, the demand side picture does not look quite as good as once thought. WTI and Brent were heading for a weekly loss of around 7 percent this week, but edged up in the early trading hours on Friday. Large U.S. production drop off. The fundamentals are not all bad. Nigeria may not be able to return as much oil as was expected just a few weeks ago (more on that below), and the EIA revealed an extremely large decline in weekly U.S. oil production. The weekly estimates should be taken with a grain of salt since they are less accurate than the retrospective monthly figures, but the EIA believes U.S. production fell by 194,000 barrels per day last week to just 8.43 million barrels per day (mb/d). A few more weeks of data will help clear up what is going on, but if that figure proves to be reliable, it would mean that U.S. output is down about 1.2 mb/d from the peak in April 2015.

Oil rig count climbs for a 2nd straight week - The US oil rig count this week rose by 10 to 351, the highest count since April 15, according to oilfield-services giant Baker Hughes. The number of gas rigs fell by 1 to 88, and miscellaneous rigs were unchanged at 1, taking the total up 9 to 440. Last week, the oil-rig count jumped by the most in six months. It climbed by 11, as the gas rig count also fell by 1, taking the total up by 10. The increase in oil rigs last week was driven by a rise in the more efficient horizontal rigs, as well as in vertical rigs, amid a small decline in directional rigs. Crude oil prices slipped to a two-month low on Thursday after data from the Energy Information Administration showed that inventories fell last week by less than analysts had estimated. Ahead of the rig-count data on Friday, West Texas Intermediate crude futures in New York are up 0.4% to $45.33 per barrel. Here's the latest chart of oil rigs:

U.S. Oil Rig Count Higher, Sees Biggest 2-Week Rise In A Year | The U.S. oil rig count rose by 10, while natural gas lost one rig, week-on-week, bringing the total rig count increase last week to 9, for 440 rigs in play, according to Baker Hughes. The new rig count represents the biggest two-week rise since this same time last year. According to the Baker Hughes’ rig count, released today, while the U.S. count was up 9 in total, with 10 new oil rigs on the scene, Canada made even further gains, with 21 new rigs.  More specifically, the data shows that the U.S. now has 351 active crude oil rigs. In the U.S., gains were made in Texas’ Permian basin, with the addition of 4 new oil rigs, and in Williston, with the addition to 2 new oil rigs. The Permian now has 158 oil rigs in operation, while Williston has 28 oil rigs in operation. Internationally, however, the counts fared poorly as of the latest count, in June, with 28 fewer oil rigs compared to May, dipping down to a total of 927 oil rigs globally, but 1,407 oil and gas rigs combined—up two from the previous month.   Latin America lost 10 rigs—the biggest drop recorded. Oil futures gained a bit in early morning trading today (8 July) on data showing the lowest level of U.S. production in over three years, and despite the increased rig count were still holding steady by the early afternoon. West Texas Intermediate (WTI) was up 1.6 percent at the open this morning, trading at US$45.87 per barrel after having fallen 4.8 percent at the close yesterday to the two-month low of $45.14 after the Energy Information Administration (EIA) came in with crude inventory data showing a smaller-than-expected draw.

International oil rig numbers fall 36% in two years: Baker Hughes - The number of rigs targeting oil outside North America fell by 36% to 677 in the two years to June 2016, continuing to slide after a brief uptick in May, data from service company Baker Hughes showed Friday. Latin America and to a lesser extent Africa have led the fall in rig numbers during the last two years of oil price weakness, the data confirmed, with the count for Latin American rigs targeted at oil less than half what it was two years earlier, at 151. In Brazil the number of rigs targeting oil has fallen from 43 to 13 since June 2014, while in Argentina, where the industry is mainly onshore, the number has fallen from 88 to 56, and in Colombia from 43 to seven. In Africa, the number of rigs targeted at oil has fallen from 95 to 58 over the two years, with reductions in Nigeria, Libya, Gabon and Angola. However the reduction for the first six months of this year, at 11%, is less steep than for the corresponding six months in 2015, when oil rig numbers fell 30%.Rig numbers have also fallen in the Middle East, with 284 targeted at oil across the region in June 2016 compared with 339 two years earlier. However the reduction is mainly accounted for by Iraq, where the number of oil rigs fell from 96 to 41. By contrast, Abu Dhabi has increased its oil rig count from 30 to 42 over the period, Kuwait from 27 to 35 and Oman from 50 to 55, with Saudi Arabia virtually unchanged on 66. Baker Hughes does not provide numbers for Iran or Russia.

Saudi Arabia's oil reserves: how big are they really? - Kemp | Reuters: “How much oil lies beneath the desert sands of Saudi Arabia and how long will it last before running out?” is a question that has intrigued and confounded oil experts for five decades. The kingdom has proven reserves of 266 billion barrels according to government estimates submitted to the Organization of the Petroleum Exporting Countries (“Annual Statistical Bulletin”, OPEC, 2015). If these numbers are correct, Saudi Arabia’s reserves will last for another 70 years at the average production rate of 10.2 million barrels per day reported for 2015. But there is widespread scepticism about the official estimates, which were abruptly raised without explanation from 170 billion barrels in 1987 to 260 billion in 1989 ( Official reserves have remained constant every year since then at 260-265 billion barrels, even as the country has consumed or exported another 94 billion barrels (“Statistical Review of World Energy”, BP, 2016). If the government data is accurate, the kingdom has managed the remarkable feat of exactly replacing each produced barrel with new discoveries or increased estimates of the amount recoverable from existing fields. But most of the country’s giant and super-giant oil fields were discovered between 1936 and 1970 and no comparable discoveries have been made since then. The problem is that field-by-field production profiles and reserve estimates are state secrets known by only a small group of insiders, making it impossible to test or verify them.

Is Russia Winning The Oil Export War Against The Saudis? -- Russia is on track to set a new record in crude oil exports this year, and Iran is boosting exports to Europe, intensifying competition on the continent, which is a key market for both countries. As noted at the beginning of June, Russia has surprised analysts time over time by keeping oil production at near-record levels throughout the rock bottom of the oil bust. Not only has Russia managed to keep output at high levels, it has actively increased its exports to China and has managed to maintain its market share in other key markets. Russian Energy Ministry figures reveal a 4.9 percent increase in exports to 5.55 million barrels a day during the first half of 2016 when compared to the same period last year. In June, the country’s output rose 1.14 percent from a year earlier, with total crude export figures on the rise during every month since summer 2014.“If production remains steady, then it will likely be a record year for exports,” said Christopher Haines, head of oil and gas at BMI Research told Bloomberg. “This should mean competition is strong, es pecially with Iran sending more oil into southern Europe.” Russia – also known as the world’s most prolific energy producer – said earlier this year that it would fund a spike in crude production after members of the Organization of Petroleum Exporting Countries (OPEC) failed to agree on a plan to reduce the existing glut in oil and gas markets. Iran has also been increasing production as it aims to regain market share after international sanctions against it were lifted earlier this year.

Saudi Strategy Working: OPEC Captures Largest Market Share Since 1975 -- OPEC has captured its largest share of the oil market since 1975, which could be seen as avindication of the cartel’s strategy over the past two years. But it also creates vulnerabilities for the U.S. and others, who are once again increasingly dependent on the Middle East for oil. OPEC and its de facto leader Saudi Arabia have pursued market share over the past two years, and with great success. Rather than curtailing production in order to prop up prices, OPEC members ran horrific budget deficits and kept output elevated. That crushed crude oil prices, and has forced many high-cost drillers out of the market – and continues to do so. Even though the overall benefit to OPEC is questionable given the huge revenue losses, OPEC has emerged with its largest market share in forty years. That might be viewed as a win in Riyadh, but it creates problems elsewhere – the world is at risk of being overly dependent on the Middle East for oil, warns the executive director of the International Energy Agency, Fatih Birol, in an interview with The Financial Times. Oil producers in the Middle East now have 34 percent of the global market share at 31 million barrels per day, the highest share since it had 36 percent back in 1975. By comparison, during the oil price bust in the 1980s, a time when new supplies came online in the North Sea, the Middle East’s share fell to 19 percent. The U.S. has lost 900,000 barrels per day since April 2015 because low oil prices forced shale companies to bring drilling to a halt. Meanwhile, OPEC members Iraq, Iran, and Saudi Arabia ramped up output. “The Middle East is reminding us that they are the largest source of low-cost oil,” Fatih Birol told the FT.

The Persian Gulf’s Huge New Export: Debt - WSJ: The energy-producing states of the Persian Gulf are issuing bonds at the fastest clip ever, showing how the oil bust is reshaping the region’s finances despite a near doubling of crude prices this year. The Gulf Cooperation Council states of Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Qatar and Oman together have raised a record $18 billion in 2016, according to Dealogic, helping refill coffers depleted by sharp revenue declines. Investors expect issuance to increase further, as governments brace for lower prices than they were budgeting only a few years ago. Saudi Arabia is expected to raise up to $15 billion more in the coming weeks, and total issuance by the Gulf nations could reach $35 billion this year, according to J.P. Morgan Chase & Co., more than doubling the previous high set in 2009.The issuers are paying slightly higher costs than other emerging countries with similar ratings, reflecting uncertainty over how successful they will be in opening up their economies, the region’s geopolitical risks and the murky outlook for oil prices, analysts and portfolio managers said. But the bond sales generally have been successful, driven by strong demand from local investors and banks, improving market sentiment due to the oil rebound, and a persistent decline in global interest rates that is putting a premium on securities with better yields. In May, Qatar raised $9 billion in an offering that drew more than twice that sum in orders. The five-year notes issued by the nation of 2.5 million trade at 2.13%. That is more attractive when compared with 1.83% on the comparably rated bonds issued by Korea National Oil Corp., according to Anita Yadav, head of fixed-income research at Emirates NBD.

Multiple suicide blasts hit Saudi Arabia (AFP) - At least four people died in suicide bombings in Saudi Arabia on Monday following attacks elsewhere in the region before the end of the Muslim holy month of Ramadan. There were no immediate claims of responsibility for the three attacks one of which, at the Prophet's Mosque in Medina, left four members of the security forces dead and others wounded. Since late 2014 Saudi Arabia has been hit by bombings and shootings claimed by the Islamic State group but multiple attacks on the same day are unusual. The Prophet's Mosque, in the west of the kingdom, is one of Islam's holiest sites -- where Mohammed is buried and which attracts millions of visitors each year. "Security forces suspected a man who was heading towards Al-Masjid al-Nabawi (the Prophet's Mosque) as he passed through a visitors' parking lot," the interior ministry said in a statement. "As they tried to stop him, he blew himself up with an explosive belt causing his death, and the death of four security personnel," said the statement, adding that five others were injured. The two other blasts occurred in the Red Sea city of Jeddah near the US consulate and in Shiite-populated Qatif on the Gulf coast of the country.

Saudi king vows to fight religious extremists after bombings | Reuters: The king of Saudi Arabia warned his country would strike with an "iron hand" against people who preyed on youth vulnerable to religious extremism, a day after suicide bombers struck three cities in an apparently coordinated campaign of attacks. In a speech marking Eid al-Fitr, the holiday that celebrates the end of the Islamic holy month of Ramadan, King Salman said a major challenge facing Saudi Arabia was preserving hope for youth who faced the risk of radicalization. "We will strike with an iron hand those who target the minds and thoughts... of our dear youth," Salman, 80, said. Four security officers were killed in Monday's attacks that targeted U.S. diplomats, Shi'ite Muslim worshippers and a security headquarters at a mosque in the holy city of Medina. The attacks all seem to have been timed to coincide with the approach of the Islamic Eid holiday. The U.N. human rights chief on Tuesday described the bombing outside the Prophet Mohammed's Mosque in Medina as "an attack on Islam itself" and many Muslims expressed shock that their second-holiest site had been targeted. No group has claimed responsibility but Islamic State militants have carried out similar bombings in the U.S.-allied, Sunni Muslim-ruled kingdom in the past year, targeting minority Shi'ites and Saudi security forces.

Iraq PM orders removal of British-made fake bomb detectors - For the past nine years, Iraq’s security forces have tried to stop car bombs with a British-made bomb detector wand that was long ago proven to be fake. A day after a car bomb killed at least 157 people in central Baghdad, the country’s prime minister, Haidar al-Abadi, has demanded their withdrawal.  After the single deadliest attack in Iraq this year, Abadi also ordered a renewed corruption investigation into the sale of the devices from 2007-10, which cost Iraq more than £53m and netted the Somerset businessman James McCormick enormous profits, as well as a 10-year jail sentence for fraud. The cost to the Iraqi public will remain incalculable: the vast majority of the bombs that have killed and maimed at least 4,000 people since 2007 have been driven straight past police or soldiers using the devices at checkpoints.  Their withdrawal follows years of insistence by interior ministry officials, who bought the wands at vastly inflated fees, that they were effective in sensing odours from explosive components. Near the scene of Sunday’s bomb attack in the suburb of Karrada, which was claimed by Islamic State, Iraqis reacted with derision at the ban, which follows years of complaints from citizens and warnings by both the British government and US military that the wands have no scientific value.

Islamic State Extends Reach as It Suffers Defeats - WSJ: During a rare spate of attacks in Jordan recently, Western officials in the capital Amman intercepted messages from Islamic State leaders urging supporters to spread terror at home rather than join militants across the border in Syria. That call, which was sent to all the group’s affiliates, and a similar appeal in a public speech by an Islamic State spokesman were followed by attacks outside the boundaries of its self-declared caliphate in Syria and Iraq. In the past week, supporters with suspected or confirmed ties to Islamic State have launched deadly strikes in Turkey, Iraq and Bangladesh. Islamic State is increasingly reverting to less expensive but spectacular guerrilla maneuvers, calling on supporters to launch assaults while its costly makeshift army faces retention problems and casualties, Western officials said. It is expanding its global scope, inspiring groups and individuals spread across several continents, even though they may have different agendas and operational methods. The frequency of attacks outside Syria and Iraq has increased in tandem with battlefield and territorial setbacks that have deprived the militants of key sources of income such as oil. The group’s shift in tactics has been prompted by those territorial losses, U.S. officials and security advisers say. Because its territory and finances continue to be pressed by competing U.S. and Russian-led military campaigns, Western and Arab officials say they expect more attacks with varying degrees of sophistication and links.

Washington Post: Bombing makes them hate us, but let’s bomb away – Legally Graphic: (Legally Graphic)  Never underestimate the propensity for Washington post to embarrass itself with cutting edge analysis such as “killing people makes them hate you.”  If you are so inclined, read the entire gem here:  Four reasons why killing insurgents in Syria might backfire – The Washington Post The cutting edge analysis may have been reasonable if left to the obvious conclusion. Unfortunately, Washington Post must come in the aid of good old military imperialism, thereby turning it into a comic, self-parody of an article. Here comes my meta-analysis of their ridiculous article. The astute analysis starts with “bombing kills people.” Indeed, bombing does kill people. But of course, they choose to cloak the killing in euphemistic terms for the delicate western eyes.I wish I had a chrome extension that would change collateral damage to its real definition: dead, innocent, brown people. In case, my definition isn’t clear enough. I have included a handy visual guide to what they describe as “collateral damage.”  Click Here to See Collateral Damage  Even if they choose not to take up arms, civilians who lost a friend or family member to a military strike may begin to harbor attitudes that favor militancy, especially if they view these deaths as unjust….. may begin to harbor sympathies for terrorists Civilians, by definition, are people who are not actively taking up arms. Of course, it is unjust to kill a civilian. This anti-coalition sentiment can persist even when militants themselves kill civilians and damage civilian infrastructure. A recent study of violence in Afghanistan showed that attacks by International Security Assistance Forces (ISAF) that harmed civilians reduced local support for ISAF, but equivalent attacks by the Taliban did not result in similar declines in support for the Taliban.

Qatar LNG to South Asia up near 50% year on year in H1 2016 - The amount of LNG volume delivered to South Asia (India, Pakistan) from Qatar during the first half of the year climbed almost 50% year on year, taking advantage of weaker demand from East Asia (Singapore, Malaysia, Taiwan, Thailand, Japan, South Korea, China) and higher Qatari output, data from Eclipse Energy, an analytics unit of S&P Global Platts, showed Tuesday. Qatari LNG volume deliveries to South Asia hit 7,138,785 mt during January-June, up 46% in comparison with the first six months of last year. Increases in deliveries from the world's largest LNG-exporting country were split between India and Pakistan at 6,045,886 mt and 1,092,899 mt respectively for the first six months of 2016.In India, this was largely driven by a reworked supply contract between Petronet, the country's largest gas importer, and Qatar's Rasgas. In December last year, the two companies renegotiated an existing 25-year supply deal for the delivery of 7.5 million mt/year after Petronet lifted 30- 32% below its contractually levels to September 2015, as previously reported by Platts. Under the revised agreement, contracted volumes not taken in 2015 would need to be bought during the remaining term of the contract, and an additional 1 million mt/year was added to the total contract volume going forward. Similarly, the uptick in deliveries to Pakistan was attributable to a new 15-year agreement with Qatargas for up to 3.75 million mt/year with was singed in February.

Analysis: Japan's appetite for Iran oil rebound to pre-sanctions levels - Japan's crude oil imports from Iran rebounded to pre-sanction levels for the first time in May and will likely hover around that level, at least in the near term, as the Middle Eastern producer intensifies its efforts to regain market share with an aggressive pricing policy. For the second consecutive month, in June Japan's oil imports from Iran are estimated to be more than 300,000 b/d -- the amount Japan used to buy before sanctions were imposed -- as Tehran battles to win back its market share in Japan, which was about 10% before sanctions. "While taking into account physical restrictions [for taking Iranian cargoes] and our relationship policy for other producers, we intend to consider maximizing [taking Iranian crudes] as long as Iran maintains its current OSP pricing policy," a Japanese refining source said.Japanese industry sources said Japan's crude imports from Iran are expected to continue hovering at near pre-sanction levels at least over the June-July period, as some importers find Iran Heavy crude more attractive than similar medium sour crudes from the Persian Gulf.

Saudi Arabia's Falih seeks to expand oil cooperation with China, South Korea - Oil | Platts News Article & Story: Just two months after his appointment as Saudi Arabia's oil minister, Khalid al-Falih last week visited China and South Korea, seeking ways to expand trade flows and explore investment prospects, in a sign that OPEC's top producer is intensifying efforts to expand its presence in key Asian oil buyers. Falih, who was only appointed oil minister in early May, wasted little time in visiting the kingdom's leading buyer, China, and held meetings with several high-ranking officials during the G20 Energy Ministers Meeting in Beijing. These included Chinese Vice Premier Zhang Gaoli, who extended an invitation to the Saudi Deputy Crown Prince Mohammed bin Salman, to visit China later this year, Saudi Arabia's oil ministry said in a statement Friday. China and Saudi Arabia discussed growth prospects and areas of cooperation and found mutual interests in crude oil storage, logistics, infrastructure, industrial development, mining, technology, energy, renewables and sovereign wealth funds, according to the ministry statement.Falih assured Beijing that Saudi Arabia was ready to help China to meet its future energy needs, and called for new areas of partnership between Beijing and Riyadh.  Saudi Arabia is stepping up efforts to find opportunities to grow its oil sale volumes as it plans to raise its global refining capacity to 8 million-10 million b/d, from 5.4 million b/d currently.

China spends more on economic infrastructure annually than North American and Western Europe combined – infographic - Source: McKinsey

This economist thinks China is headed for a 1929-style depression -  Andy Xie isn’t known for tepid opinions. The provocative Xie, who was a top economist at the World Bank and Morgan Stanley, found notoriety a decade ago when he left the Wall Street bank after a controversial internal report went public. Today, he is among the loudest voices warning of an inevitable implosion in China, the world’s second-largest economy. Xie, now working independently and based in Shanghai, says the coming collapse won’t be like the Asian currency crisis of 1997 or the U.S. financial meltdown of 2008. In a recent interview with MarketWatch, Xie said China’s trajectory instead resembles the one that led to the Great Depression, when the expansion of credit, loose monetary policy and a widespread belief that asset prices would never fall contributed to rampant speculation that ended with a crippling market crash. China in 2016 looks much the same, according to Xie, with half of the country’s debt propping up real-estate prices and heavy leverage in the stock market — indicating that conditions are ripe for a correction. “The government is allowing speculation by providing cheap financing,” Xie told MarketWatch. China “is riding a tiger and is terrified of a crash. So it keeps pumping cash into the economy. It is difficult to see how China can avoid a crisis.” Xie’s viewpoints have at times attracted unwelcome attention. In 2006, when he was a star Asia economist at Morgan Stanley, a leaked email to colleagues in which he said money laundering was bolstering growth in Singapore led to his abrupt departure from the bank.In early 2007, he termed China’s surging markets a “bubble” that could lead to a banking crisis,” and in 2009 he likened them to a “Ponzi scheme.”

China central bank says to keep reasonable growth in credit, social financing | Reuters: China's central bank reaffirmed on Friday that it will maintain reasonable growth in bank credit and social financing as the economy still faces downward pressure. Some Chinese provinces and municipalities "have relatively big reliance on real estate and infrastructure investment", the central bank said in a report on regional financial operations. Debt levels were rising rapidly in some regions, it said. The authorities will take steps to ward off regional and systemic financial risks, the central bank added.

Yuan fix hits new low, capital flight intensifies - Tracking overnight markets the PBOC yuan fix has hit a new daily low today:   Interesting given the US dollar fell last night. The devaluation is, if anything, accelerating.  And so is capital flight, from Goldman:  China capital flows update—sources how cross-border RMB flow might mask outflow pressures:

  • We have updated our estimates of sources of China’s capital n outflows. Our analysis suggests net capital outflows at $123bn in Q1 (vs. $504bn in Q3-Q4 combined last year).
  • Of the Q1 net outflows, about 70% was due to Chinese residents’ accumulation of foreign assets; 40% to repayment of FX liabilities; and -10% to foreigners’ demand for RMB assets (i.e., foreigners were a source of net inflows in Q1). This composition is broadly similar to our earlier estimates for 2015 H2.
  • Separately, we flag a large $170bn net RMB flow from onshore to offshore since last October, which has helped reduce FX reserve drawdown and put downward pressure on CNH forward points. This flow  cannot be readily explained by marketbased factors in our view, and did not seem to result in an increase in foreigners’ CNH holdings. We think it might have masked the true FX outflow pressure in China, on the order of some $20bn (or 50%) per month in recent months.
  • Going forward, we think it will be important to also track cross-border RMB movement to get a fuller picture on China’s underlying flow situation.

While according to the BOP the pace of capital outflows has slowed in Q1, it might not have in fact slowed by as much as the data suggest. We have in the past discussed various caveats to interpreting official flow and reserve data, and in the following we add one more, in light of a large unusual cross-border RMB flow in recent months that we believe could have masked the true outflow pressure in China.  A $170bn flow of RMB to offshore…

China’s Asymmetric Basket Peg - The implications of Brexit understandably have dominated the global economic policy debate. But there are issues other than Brexit that could also have a large global impact: most obviously China and its currency. The yuan rather quietly hit multi-year lows against the dollar last week. And today the yuan-to-dollar exchange rate (as well as the offshore CNH rate) came close to 6.7, and is not too far away from the 6.8 level that was bandied about last week as the PBOC’s possible target for 2016.*The dollar is—broadly speaking—close to unchanged from the time China announced that it would manage its currency with reference to a basket in the middle of December.* So the yuan might be expected to be, very roughly, where it was last December 11. December 11 of course is the day that China released the China Foreign Exchange Trade System (CFETS) basket. Yet since December 11, the yuan is down around 1.5% against the dollar, down about 5 percent against the euro and down nearly 19 percent against the yen. The reason why the renminbi is down against all the major currencies, obviously, is that managing the renminbi “with reference to a basket” hasn’t meant targeting stability against a basket. As the chart above illustrates, over the last seven months the renminbi has slowly depreciated against the CFETS basket. The renminbi has now depreciated by about 5 percent against the CFETS basket since last December, and by about 10 percent since last summer.  How? No doubt there are many tricks up the PBOC’s sleeve. But one is straightforward. When the dollar goes down, China hasn’t appreciated its currency by all that much against the dollar. And when the dollar goes up, China has depreciated against the dollar in a way that is consistent with management “with reference to a basket.”

China Destabilizes Global Economy by Exporting Deflation Through Currency Devaluation -- Yves Smith - If Brexit and wobbly Italian banks weren’t enough to worry about, another major economic risk, that of deflation, is only getting worse. The Telegraph’s Ambrose Evans-Pritchard has warned for some time that if China were to devalue the renminbi, it would add considerably to already dangerous deflationary pressures.  It’s not surprising that China would reduce the value of the renminbi vin the wake of the Brexit vote as the pound has plunged and the euro has weakened. in 2013, the EU was China’s biggest export market but by 2015, it had fallen to its second largest market, which could make Chinese officials concerned about further erosion of their position. As Evans-Pritchard stresses, the Chinese are presumably using the furore over Brexit to execute this move when officials are distracted.   But the rationale for this measure is to shore up an unsustainable mercantilist growth model. As many analysts have stressed, China has for years has had investments and exports consist of an unheard of level of over 50% of GDP. China desperately needs instead to have a much larger consumption share of GDP. But in the wake of the criss, it instead ramped up investments that have been mainly funded by borrowing, with the boost in GDP from each dollar of borrowing falling over time. So the investment-driven model is nearing its sell-by date, yet the economic mandarins are doubling down.  And as Evans-Pritchard outlines, the result of this last-ditch effort to preserve Chinese growth will be to kill its export markets. Germany, the world’s other relentless exporter, is achieving a similar result by insisting on running trade surpluses, refusing to fund its counterparts (which is inherent to running trade surpluses) and insisting that the problem is that their partners aren’t competitive enough and inflicting crushing austerity and labor-squeezing policies on them.

Face-off looms over South China Sea | Bangkok Post -  Next Tuesday, the International Tribunal for the Law of the Sea will issue its ruling on China's claim to practically all of the South China Sea. And already the main military contenders are moving more forces into the region. China's Maritime Safety Administration announced that Chinese naval and air forces will carry out seven days of exercises in an area extending from Hainan to the Paracel Islands off the Vietnamese coast. The exercises will end on Monday, just one day before the tribunal's ruling is released, so they will still be around if things get more exciting after that. They might well get more exciting, because the US Navy's Task Force 70, including the aircraft carrier USS Ronald Reagan, has now moved into the South China Sea. Its task, according to its commander, Rear-Admiral John D Alexander, is "to maintain the seas open for all to use". The Chinese Defence Ministry's spokesman, Col Wu Qian, warned last Thursday that this is "an act of militarisation in the South China Sea and it endangers regional peace and stability. But I'd like to say that the US side is making the wrong calculation. The Chinese armed forces never give in to outside forces". And on Friday President Xi Jinping declared that China will never compromise on sovereignty and is "not afraid of trouble".So the stage may be set for a serious US-Chinese military confrontation if the Hague tribunal rules against China's claim next week as expected. The US military fear that China may respond by declaring...

China Warns Of "Price To Pay" In South China Sea - After all of the posturing that the US and China have been doing in recent months as it relates to the South China Sea, the time is drawing near for The Hague to issue a decision on one of the main sources of the tension, namely a maritime complaint that the Philippines filed against China back in 2013. As a quick reminder, many countries have claims that overlap each other in the South China Sea, and China in particular has decided that its claim trumps any others. In June, US Defense Secretary Ash Carter went to Singapore and made it known that the US was going to "remain the most powerful military and main underwriter of security in the region for decades to come, and there should be no doubts about that", adding that China was in danger of "erecting a Great Wall of self-isolation" if it continued its actions. Subsequently Chinathreatened to leave the UN Convention on the Law of the Sea if The Hague didn't side with China in its ruling, saying that type of ruling would be the worst outcome of the dispute.Against that backdrop, The Hague is set to release its ruling on July 12, and Beijing is preparing fully for the decision, as it announced that it will be conducting military drills between July 5 - July 11 in the disputed waters. "The drills are a very symbolic expression of China's resolve. It is definitely also responding to the recent American warships patrolling in the South China Sea." Zhu Feng, dean of the Institute of International Affairs at Nanjing University said.

Japan's June flash manufacturing PMI contracts for fourth straight month | Reuters: Japanese manufacturing activity contracted in June at roughly the same pace as the previous month, a preliminary survey showed, but concerns remain due to supply chain disruptions from an earthquake in April and falling exports. The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 47.8 in June, little changed from a final reading of 47.7 the previous month. The index remained below the 50 threshold that separates expansion from contraction for the fourth straight month. The preliminary index for new orders was 45.8, higher than 44.7 in the previous month, but still showing five consecutive months of contraction. "Latest survey data pointed to a further deterioration in manufacturing conditions in Japan. Both production and new orders declined at marked rates, led by a sharp drop in international demand," Markit said. It said the earthquakes in April continued to have a negative impact on the PMI data. Strong earthquakes struck the southern manufacturing hub of Kumamoto in mid-April, which destroyed houses, triggered landslides and disrupted production at electronics and car parts factories in the area.

After Losing $100 Billion On Terrible Stock Investments, The World's Largest Pension Fund Is Doubling Down --  Back in December 2014, we first learned that Japan was willing to risk hundreds of billions in Japanese pensions to boost and prop up the domestic stock market -- by shifting cash out of bonds and into stocks in the country's gargantuan (and world's biggest) $1.4 trillion Government Pension Investment Fund, or GPIF.  As the WSJ wrote then, "Japan’s $1.1 trillion government pension fund is betting that a long-term recovery and rising corporate profits will push Tokyo stock prices higher, helping the fund increase returns for the nation’s retirees.  The fund decided in October to shift its portfolio to seek higher returns, slashing its target allocation to domestic bonds almost in half while nearly doubling that of domestic and foreign equities." Expectations that Mr. Abe’s policies will succeed have already helped double Japan’s benchmark stock index since late 2012. Further gains would no doubt benefit GPIF’s ¥23.9 trillion ($202 billion) domestic stock portfolio. Oops. Less than 2 years later, Abenomics is in tatters, the Japanese economy yoyo's from recession to negligible growth, while the stock market has slid into a bear market having lost a quarter from its recent highs as a result of a surge in the Yen as the BOJ has largely wiped out all of its credibility with the now widely mocked decision to unleash negative rates. And while all of the above is terrible news for Japan, whose demographic implosion assures a deflationary black hole no matter how much money the BOJ prints, those most impacted by Abe's reckless decision are the country's pensioners. Because as we concluded in December 2014, "Abenomics better work, or else all your pensions are toast." Sadly, this process is now in play. Late last week, Morgan Stanley's Yohei Iwao calculated that after suffering ¥5 trillion in losses in the year ended March 31, the GPIF has started off the new year with a another anti-bang, losing another ¥4.4 trillion in losses in the first quarter, or a total of just under $100 billion.

BOJ to discuss cutting inflation forecasts after dismal data | The Japan Times: In light of recent dismal data on prices, the Bank of Japan is expected to discuss cutting its inflation forecasts at its next monetary policy meeting, scheduled for July 28 and 29. The central bank will possibly lower its inflation projection for this fiscal year to zero to 0.5 percent, down from 0.5 percent. After the next policy review, the BOJ is scheduled to release updates to its quarterly Outlook for Economic Activity and Prices, which was semiannual before this year. Government data released Friday showed that core consumer prices, excluding fresh food prices, dropped 0.4 percent in May from a year earlier, marking their largest fall since April 2013, when the BOJ launched a massive easing campaign. In a BOJ survey released Monday, the average inflation forecast by companies one year later fell 0.1 percentage point from the previous survey three months before to 0.7 percent. Inflation appears to be losing upward momentum due to smaller pay hikes by companies in shunto spring labor-management negotiations, as well as the yen’s appreciation against other major currencies following Britain’s decision to quit the European Union.  The BOJ is also expected to consider cutting its fiscal 2017 inflation estimate from 1.7 percent and pushing back the anticipated date that inflation will reach the bank’s target of 2 percent, currently seen in fiscal 2017.

Something Huge Is Coming From Japan -- Pretend, for a minute, that your country responds to the bursting of a credit bubble by borrowing unprecedented amounts of money and using it to prop up banks and construction companies. This doesn’t work, so you create record amounts of new money and push interest rates into negative territory in an attempt to devalue your currency. But this - amazingly - doesn’t work either. Your currency soars and the inflation you’d hoped to generate never materializes. Now what? Is there even anything left to try, or is it simply time to stand back and let the current system melt down? Those are the questions facing Japan, and the answers are not obvious. Here, for instance, is its inflation rate two years into the largest major-country money creation binge since Wiemar Germany: Deflation is to be expected and even desired in a well-run country where debt is minimal, money is sound and rising productivity makes things continuously cheaper. But in an over-indebted financial system, deflation is death because it magnifies the debt burden and raises the odds of an existentially threatening financial crisis. To continue to borrow money under such circumstances is to court disaster. And yet Japan is still at it:  What we’re witnessing, in short, is a catastrophic loss in the currency war. Contrary to every mainstream economic theory, debt monetization and full-throttle currency creation have resulted in a rising yen and falling prices. Here’s an excerpt from a recent — and really gloomy — Financial Times analysis of Japan’s situation:

Meanwhile, in Japan, Household Consumption Continues to Fall - Brad Setser - Japan’s May household consumption data, based on the demand side household data, surprised to the down side.* And the trend here is, alas, clear. Real household consumption has fallen ever since Japan started its fiscal consolidation in 2014. 2016 does not look to be any different: 2016 consumption is running about 6 percentage points lower than in 2013.  I consequently do not think there is any real mystery as to why Abenomincs is floundering a bit.   It is not primarily a result of the difficulties the Bank of Japan (BoJ) faces keeping the yen weak without breaking the G-7 currency peace through direct intervention. A weak yen on its own did not prove to be a boon to internal demand in 2015. Rather, Japan’s troubles stem from a series of policy choices that had a fairly predictable negative impact on household demand. One of Abe’s main structural reforms was to shift the incidence of tax away from firms and toward households. Corporate income tax rates were reduced, while the consumption tax was raised. This meant the already high-savings corporate sector got a break, while the low-saving household sector got more of the tax burden.  A weaker yen in the first instance also lowers household income while raising corporate income. Higher prices on imported food and energy tend to be passed on, lowering household’s real income when nominal wages are flat. The profits of Japanese firms with strong export franchises go up, but that only raises household income if Japanese firms respond by increasing investment and bidding up wages. The yen’s post-2012 depreciation has produced a modest upturn in export volumes. But most of the windfall profit from the yen’s 2012-2015 down move seems to have been saved. Firms clearly have not been willing to bid up wages. Nominal wages in May were down year over year.**

BOJ gloomier on consumption, warns of hit from Brexit - The Bank of Japan cut its assessment for two of Japan's nine regions and said the market turmoil sparked by the Brexit vote could hurt consumer sentiment, signaling concern a strong yen and weak spending could derail a fragile economic recovery. The central bank also warned that an increasing number of Japanese firms were delaying price hikes on slumping demand, acknowledging that its massive money printing has not eradicated Japan's sticky deflationary mindset. "Some companies worry that recent market instability, including recent yen rises and stock price falls, could further dent consumer sentiment," the BOJ said in a quarterly report on the regional economy on Thursday. BOJ Governor Haruhiko Kuroda maintained his optimistic view of the economy and reiterated readiness to expand stimulus if needed to achieve his 2 percent inflation target. "Japan's economy is expected to expand moderately as a trend," Kuroda told a quarterly meeting of BOJ regional branch managers. But the BOJ cut its economic assessment for two regions, including the southern Kyushu area hit by a devastating earthquake in April, in the report, issued after the meeting, that covers the past quarter.

Japan policymakers to meet on markets, Bernanke to talk with Abe -  Senior Japanese policymakers will discuss global market developments today and former Federal Reserve chairman Ben Bernanke will have talks in Tokyo next week with officials including Prime Minister Shinzo Abe, government sources said. The meetings underscore the concern government officials have about damage that the recent market rout, triggered by the Brexit vote, could inflict on Japan’s fragile economic recovery. Officials from the Ministry of Finance, Financial Services Agency and the Bank of Japan will meet today to exchange views including on how the government should respond to the yen’s appreciation, the sources said. The last time they met was on June 25, shortly after Britain voted to leave the EU, a decision that jolted financial markets and boosted investors’ demand for the safe-haven yen. Separately, Bernanke, who led the Fed through the global financial crisis in 2008, will be in Japan next week. It has been arranged for him to meet officials including Abe and Bank of Japan governor Haruhiko Kuroda, according to a government official speaking on condition of anonymity. Bernanke is expected to discuss Brexit and the BOJ’s negative interest rate policy with Abe and Kuroda, the official said. Some market players speculate Kuroda might decide, in a surprise, to provide “helicopter money” – a term coined by American economist Milton Friedman and cited by Bernanke, before he became Fed chairman, when talking about how central banks might finance government budgets as a way to seek to fight deflation. The BOJ governor has repeatedly denied that the BOJ would adopt such a policy, saying it is an “impossible” option under current law separating the government’s role in fiscal policy from the BOJ’s in monetary policy.

Asian Millionaires Now Control More Wealth Than Those In North America [Infographic] - Forbes:  The amount of wealth owned by the globe's millionaires continues to rise every year. Between 2014 and 2015, the wealth controlled by millionaires across the world grew 4 percent to $58.7 trillion, according to finance firm Capgemini. The global HNWI population (high net worth individuals controlling assets of $1 million or more) is also increasing, having expanded 4 percent in 2015 to 15.4 million. Asian millionaires now control more wealth than those in North America, primarily driven by financial services, technology and healthcare. Capgemini found that Asia's millionaires were worth $17.39 trillion at the end of 2015, slightly ahead of North America's $16.61 trillion. Japan and China were the engines of global HNWI growth in 2015, with both registering double-digit increases in their millionaire populations. The two countries also drove almost 60 percent of HNWI population growth worldwide last year. Under the most aggressive growth scenario, the amount of wealth controlled by the planet's millionaires could reach $100 trllion by 2025, almost three times the 2006 amount. *Click below to enlarge (charted by Statista)

Dhaka Terrorists Were From Affluent Families, Studied in Elite Schools - News18: The terrorists involved in the Dhaka cafe massacre were all young men from affluent families and had studied in elite schools in the city, sources in the Bangladesh government said on Sunday. The men were all aged 20 or 21 years old and were students of Dhaka's North South University, the sources told CNN-News18 in Dhaka. All of them had passed out of top-notch schools in the city like Scholastica and the Turkish International School, confirming concerns that students from elite educational instituions were being lured into terror.Meanwhile, Islamic State released names and pictures of men whom they claimed were behind the attack and warned even more severe attacks on citizens of "crusader countries." The names given were Abu Omar, Abu Salmah, Abu Rahim and Abu Muharib Al-Bengal. The names and pictures were yet to be confirmed by the Bangladesh government. The claim comes even as Home Minister Asaduzzaman said the jihadists were not from ISIS but members of the banned local militant group Jamaeytul Mujahdeen Bangladesh. "They have no connections with the Islamic State," Asaduzzaman told AFP adding that all the attackers came from wealthy families. "They are all highly educated young men and went to university. No one is from a madrassa," the minister said. 22 foreign nationals, including an Indian girl, were hacked to death by the terrorists after they stormed a restaurant in an upmarket Dhaka locality on Friday night. Hours later Bangla police commandos gunned down six of the terrorists and arrested and interrogated the seventh one.

Did Turnbull Just Torpedo The TPP? - One thing that is certain after Saturday’s election, the Trans-Pacific Partnership (TPP) is dead, and along with it the Coalition’s economic agenda and narrative. The free trade agreements that Andrew Robb signed with China, Korea, and Japan were some of Tony Abbott’s proudest achievements, yet they are exactly the sort of deals that Pauline Hanson, Nick Xenophon, and Jacqui Lambie believe cost Australian manufacturing workers jobs. And thanks to Malcolm Turnbull’s new Senate voting rules and double dissolution election, Hanson, Xenophon, and Lambie are now the block of votes that the Coalition will need to win over to pass their legislation when the ALP and Greens are opposed. The National Party will feel the pain most acutely. Described by some as the big winners last night, the Nationals have always struggled in head to head policy debates with the likes of Hanson. While the Nationals have always been willing to sign trade deals that hurt manufacturing in exchange for helping beef or sugar producers, Hanson has been less sanguine about throwing blue collar workers under the bus in the interests of big agri-business. Xenophon has already forced the Coalition to do a hasty U-turn on building submarines in Adelaide after Tony Abbott’s Defence Minister, David Johnson, said he wouldn’t trust the South Australian based ASC to “build a canoe”. Xenophon, who will soon have two senate colleagues on his team and at least one member in the lower house, is now on the hunt for an assistance package for the struggling Arrium Steel to ensure Whyalla isn’t wiped out.

Olympics 2016: Rio police warn tourists - The Olympic Games are 31 days away -- and Rio de Janeiro is in crisis. Violence is on the rise, and police officers are at loggerheads with the Rio state government after claiming they've not been paid for months. The message from police to tourists is clear: We won't be able to protect you. The state's police officers vented their anger Monday with a sign saying, "Welcome to Hell," outside Rio's main airport. "Police and firefighters don't get paid, whoever comes to Rio de Janeiro will not be safe," the sign said. And it's not just those coming from abroad who may be in danger -- locals are losing patience, too.  That's the harsh reality in the favelas around Rio, according to one resident, as the city gears up to host the 2016 Olympics amid increasing concerns over police brutality and the officers' ability, and desire, to keep people safe. "It seems like there is an order (from authorities) to put fear in people so they stay calm, so they don't cause trouble in the city because the foreigners can't see that the city is chaotic," Higor da Silva, a resident of the Mare favela, told CNN.  "They (state police) don't care if there is a child in the middle -- they shoot their target."

Brazil's Olympic Catastrophe - IT'S official: The Olympic Games in Rio are an unnatural disaster. On June 17, fewer than 50 days before the start of the Games, the state of Rio de Janeiro declared a "state of public calamity." A financial crisis is preventing the state from honoring its commitments to the Olympic and Paralympic Games, the governor said. That crisis is so severe, he said, it could eventually bring about "a total collapse in public security, health, education, mobility and environmental management." The authorities are now authorized to ration essential public services and the state is eligible for emergency funds from the federal government. Measures like these are usually taken for an earthquake or a flood. But the Olympics are a man-made, foreseeable, preventable catastrophe. I went to Rio recently to see how preparations for the Games are going. Spoiler: not well. The city is a huge construction site. Bricks and pipes are piled everywhere; a few workers lazily push wheelbarrows as if the Games were scheduled for 2017. Nobody knows what the construction sites will become, not even the people working on them: "It's for the Olympics" was the unanimous reply, followed by speculation about "tents for the judging panels of volleyball or soccer, I guess." I asked the Rio 2016 press office for a tour, but it olympically ignored me. Almost all venues are still under construction. I managed to see part of the Barra Olympic Park, which will host many of the events, after buying a last-minute ticket to a Volleyball World League match. Although construction for the Games is progressing, it appears far from "97 percent complete," as the organizers claimed recently. I also saw most of the Deodoro Olympic Park, which is apparently open to anyone who wants to see it. I walked straight in and found half-built grandstands abandoned in the middle of a Friday afternoon. The few projects that have been completed don't inspire much confidence. In April, a newly built bike path along Rio's seashore collapsed, killing two people.

Brazil New Vehicle Sales Fall 25.4% in First Half Amid Poor Economy - --New vehicle sales in Brazil plunged in the first half of the year, as the country's economic recession persisted in the period, hurting consumer confidence. Sales of cars, light vehicles, trucks and buses fell 25.4% in the first half from a year earlier to 983,599 units, the national auto dealers association, known as Fenabrave, said late Monday. According to economists, the combination of the country's poor economic activity and high inflation and interest rates is discouraging buyers from making big-ticket purchases. Brazil's economy contracted 3.8% last year, and it is expected to shrink 3.35% this year. The drop in vehicle sales so far this year has pushed some auto makers in Brazil to lay off employees, implement voluntary severance programs and force mandatory vacations. The largest auto makers in Brazil by sales are General Motors, Fiat Chrysler and Volkswagen. Complete figures for vehicle sales, production and exports for June and for the first half of the year will be released in the next several days by auto-maker association Anfavea.

Exports to Brazil drop 24% in 6 months -  The impact of the deep recession in neighbouring Brazil on Argentine businesses has been fully exposed — data from a consultancy firm revealed yesterday that exports by the local industrial sector to Latin America’s biggest economy have slumped by a staggering 24 percent over the last six months. The alarming plunge, illustrated in the data released by the Abeceb consultancy agency yesterday, confirms that Argentina’s businesses are struggling in their search to find markets for their exports, with sales to Brazil — the country’s main outlet — falling to US$4.2 billion in the first half of the year. That, in turn, has a knock -on effect on Argentina’s trade deficit with Brazil, which has soared to US$2.3 billion, more than twice the figure of a year ago. The drop comes as Brazil continues to struggle with a deep recession, which has caused demand to tank and imports to contract steadily as a result. “Over the first half of the year, sales to Brazil amounted to US$4.2 billion, down by 23.9 percent on the year. Exports fell even when compared with periods in which they had also registered losses: when seen against figures from 2013’s first half, which stood at US$8.8 billion, exports have been slashed by half,” a report from the Abeceb consultancy agency analyzing Brazil’s most recent data said yesterday. Brazilian overall imports fell by 28.9 percent on the yearly comparison, close to the figure seen in Argentine trade specifically.

Mexico Economic Growth Surprises on the Upside in First Quarter - Dallas Fed - Mexico gross domestic product (GDP) grew faster than expected in the first quarter. Nevertheless, the May consensus 2016 GDP growth forecast remained unchanged at 2.4 percent. More recent data suggest that growth continued into the second quarter. Retail sales, employment and exports grew, but industrial production fell. Inflation remained at record lows, and the peso lost ground against the dollar in May.  Mexico’s GDP grew at a 3.3 percent annualized rate in the first quarter—faster than the 2.2 percent increase in the fourth quarter (Chart 1). Service-related activities (including trade, transportation and business services) rose 3.2 percent, while goods-producing industries (including manufacturing, construction, utilities and mining) grew 5 percent in the first quarter. Agricultural output expanded 14.7 percent. Annual growth for 2015, or the four-quarter change, came in at 2.4 percent. Exports rose 2.4 percent in April after falling for five consecutive months. However, three-month moving averages show continued declines in oil exports and a slowing in manufacturing exports (Chart 2). Oil exports were down 42 percent in the first four months of 2016 compared with the same period a year ago. Manufacturing exports fell 5.5 percent this year through April versus the same period last year. Mexico’s industrial production (IP) edged down 0.2 percent in March after dipping 0.5 percent in February. Three-month moving averages show growth continued in 2016, although at a slower pace than the same period last year (Chart 3). Total IP, which includes construction, oil and gas extraction, and utilities, has been growing slower than manufacturing IP since mid-2014. U.S. IP grew 0.6 percent in April after falling for two consecutive months. Retail sales expanded 3 percent in March after edging up 0.3 percent in February. The three-month moving average shows deceleration during fourth quarter 2015, with a sharp rebound in first quarter 2016 (Chart 4). Sales were up 8.4 percent year over year in March. Consumer confidence also improved in April and May.

28,000 People Missing in Mexico in the last Decade: Report -- More than 28,000 people have disappeared in Mexico in the decade since the country began its war on drugs, according to a report published Friday by the Mexican Commission for the Defense and Promotion of Human Rights.  Unlike the disappeared from Argentina's Dirty War, and other campaigns of state repression in Latin America during the Cold War period, the reason 28,161 people are listed in the Missing or Disappeared People National Registry is not necessarily tied to any leftist activism. But just as state officials in Argentina, Paraguay, Chile, Honduras, Guatemala and elsewhere were slow to investigate the disappearances, so too have Mexican officials been reluctant to account for the missing. "Today, people without social or political activism are victims of enforced disappearance,” the commission said in a statement. “The causes and reasons are not clear, and no authority has been able to explain beyond speeches denying it or stigmatizing the victims." The commission says that it is unaware of any current or ongoing state investigations into any of the 28,000 who have vanished.  The most infamous disappearance over that period is the 2014 disappearance of 43 undergraduate students at a teachers college from the city of Iguala in southwestern Mexico. According to a 608-page report by the Inter-American Commission on Human Rights, the students were headed to a ceremony in Mexico City to commemorate the 1968 massacre of as many as 300 students when they were intercepted by municipal police officers. With military intelligence, and federal law-enforcement officers nearby, the report said, the students were forced at gunpoint into a convoy of police cars and never seen again.

Canada Post lockout: work stoppages and unsustainable pension plans need to end - With unionized Canada Post workers on 72-hours notice for a lockout, the Canadian Federation of Independent Business (CFIB) is encouraging the postal service to find a solution to their growing pension problem and urging a quick settlement before any mail disruption. CFIB issued a letter to Canada Post president and CEO Deepak Chopra last week, calling for a settlement, but stressing that unfunded liabilities in Canada Post's pension plan are not a trivial issue, with a $6.2 billion solvency deficit. Pension costs must to be lowered to ensure plans are sustainable and don't force rate hikes or service cuts on customers. "While Canada Post must take steps to address its pension liabilities, the threat of a prolonged work stoppage has many small business owners worried." said CFIB president Dan Kelly . "There are a growing number of alternatives each year but many small firms continue to rely on Canada Post for package delivery, invoicing clients and paying suppliers." "Taxpayers and Canada Post customers can no longer afford to pay for gold-plated pensions that they themselves could only dream of," Kelly added. "Rather than accepting the new, generous pension arrangement, it seems bizarre that the postal union would not accept a generous offer and instead choose to disrupt their customers, motivating even more to look at alternatives, likely never to return to Canada Post. We urge both parties to work quickly to reach a settlement with a focus on ensuring the ongoing sustainability of our postal service."

ΤΤΙP, Democracy and Europe - Last week's Brexit vote was a great shock to many of us. But it was also a wake-up call for democracy in Europe. If citizens are not taken seriously, political unity unravels and with it, the capability for progress. "We want our rights respected and our voices heard. Voices that the president of the European Commision, Jean-Claude Juncker, is pointedly ignoring. Juncker has just announced that CETA - the EU-Canadian trade agreement similar to TTIP - could go ahead with just the approval of EU leaders and the European Parliament, bypassing national parliaments. This directly contradicts EU law, which says that CETA (like all agreements that affect national legislation) should also be decided on by national parliaments. This is an outrageous attempt to undermine our democratic rights. Things are moving fast. This Tuesday the College of Commissioners will set out their proposal for how CETA will be adopted - through our national elected representatives or EU bodies alone. Juncker is in a hurry - he knows that if the controversial deal were to go to national parliaments, it would fall through. But our heads of government can overrule Juncker. Several government have already stated that there will be no CETA without national parliament involvement. If we can keep the pressure up now, they will have to make good on their statements.

Desperately Trying to Salvage Canada-EU Trade Pact after Brexit, EU Escalates Assault on Democracy -The European Commission, it seems, will never learn. Despite the existential crisis caused by Britain’s decision to leave the EU and the serious questions being raised about the EU’s gaping lack of democratic legitimacy, the European Commission just escalated its assault on European democracy. This week the Commission announced that it would ratify CETA, the controversial trade deal between Canada and the EU, as a unilateral EU agreement, not as a so-called mixed agreement.  What that means is that the national parliaments of the 27 remaining EU member states will have no influence whatsoever over the approval process, even though (or more likely because) the trade agreement will have huge, sweeping effects on the society, governance, and economy of all the nations concerned. In other words, the EU’s democratic deficit, one of the decisive factors in Britain’s decision to sever the cord from Brussels, just got a whole lot bigger. Yet it was barely reported in the press. Here’s more from Euractiv, one of the few English-language media outlets that actually bothered to cover the story: Commission President Jean-Claude Juncker reportedly told EU leaders on Tuesday (28 June) that the Commission considers the Comprehensive Economic and Trade Agreement (CETA) an “EU-only” agreement and would propose next week (5 July) a simple approval procedure…“The agreement we have made with Canada is the best agreement the EU has ever made,” Juncker said, insisting that the Commission had come to the conclusion that CETA was not a mixed agreement, after a detailed analysis. “But if the member states decide legal opinions are not valid in politics then I am the last person that would stand in their way.” Juncker went on to say that it was a false debate. “None of the member states have a problem with the content of this agreement,” he insisted, adding he had asked the leaders this individually while they were here in Brussels. And that is how democracy works — or better put, doesn’t work — in Europe today.

US Sends Another 1,000 Troops To Poland As Part Of NATO Effort To Counter Russia --President Obama is in Warsaw, Poland today where NATO members are holding a summit to show the alliance will stand firm against new threats, including a “resurgent Russia.” The Warsaw meeting is being held in a district of the capital, Praga, that Poles view as a symbol of Russian betrayal of their nation.  In the meeting, Obama called on NATO to "stand firm" against Russia, terrorism and other challenges even as a key member, UK, retrenches from Europe. In an op-ed published in the Financial Times on Friday, Obama says the U.S. and European nation "must summon the political will, and make concrete commitments" to affirm European cooperation. “This may be the most important moment for our transatlantic alliance since the end of the Cold War,” Obama wrote. “Russia’s aggression against Ukraine threatens our vision of a Europe that is whole, free and at peace.” The US president added that “NATO will once again send a very clear message that we are here.”

Deflation Is Blowing In On An Eastern Trade Wind -- Ilargi -- Brexit is nowhere near the biggest challenge to western economies. And not just because it has devolved into a two-bit theater piece. Though we should not forget the value of that development: it lays bare the real Albion and the power hunger of its supposed leaders. From xenophobia and racism on the streets, to back-stabbing in dimly lit smoky backrooms, there's not a states(wo)man in sight, and none will be forthcoming. Only sell-outs need apply. The only person with an ounce of integrity left is Jeremy Corbyn, but his Labour party is dead, which is why he must fight off an entire horde of zombies. Unless Corbyn leaves labour and starts Podemos UK, he's gone too. The current infighting on both the left and right means there is a unique window for something new, but Brits love what they think are their traditions, plus Corbyn has been Labour all his life, and he just won't see it. The main threat inside the EU isn't Brexit either. It's Italy. Whose banks sit on over 30% of all eurozone non-performing loans, while its GDP is about 10% of EU GDP. How they would defend it I don't know, they're probably counting on not having to, but Juncker and Tusk's European Commission has apparently approved a scheme worth ?150 billion that will allow these banks to issue quasi-sovereign bonds when they come under attack. An attack that is now even more guaranteed to occcur than before. Still, none of Europe's internal affairs have anything on what's coming in from the east. Reading between the lines of Japan's Tankan survey numbers there is only one possible conclusion: the ongoing and ever more costly utter failure of Abenomics continues unabated. 

Emergency measure that feeds Greek crisis -- Call it the law of unintended consequences -- a measure to save Greece from the abyss of a default and crashing out of the eurozone now holds its economy in a stranglehold preventing its recovery. Cast back a year: Greeks had been taking out more and more of their savings from banks, with 20 percent gone when during the night of June 26 to 27 Tsipras shocked the world by announcing he would put the bailout conditions to a referendum vote. In order to prevent a run on banks, Greece imposed capital controls, limiting cash withdrawals to 420 euros ($465) per week. The restriction is still in place, and it's having a long-term impact on the economy. Consumption was down 1.3 percent in the first quarter of this year compared with the same period in 2015, even though prices have been falling in Greece. Overall, the Greek economy, which had begun growing again at the end of 2014, shrank by 1.4 percent in the first quarter of 2016. -- For many Greeks the 420-euro weekly limit was not too much of a brake on spending as they had already been progressively tightening their belts since Greece's first 110-billion-euro international bailout in 2010.  'Who has 420 euros?'  However the impact has been greater on businesses, as trade figures show: imports plunged by 12.8 percent and exports by 11.7 percent. The controls, which hampered the ability to import goods and conduct business abroad, added to the "tax pressure and collapse of the social security system" of recent years, said Thanassis Kalabalikis, president of the Athens Manufacturers Federation. "Small entrepreneurs, who before the crisis were the backbone of the Greek economy, had already taken a blow from seven years of recession, and capital controls just added to the sluggishness," he told AFP. Some 26,000 Greek businesses of all sizes have shut their doors since capital controls were introduced.

Meanwhile In Greece, Homeless Family Of 5 Lives In Carton Boxes -- Just when you think, you’ve seen and heard everything possible and impossible in Greece with regard austerity and the crisis... there comes this incredible human story: a family of five living in carton boxes in the city of Patras in western Greece. As details, the family ended up on the streets after a labor accident of the father. The family has no income. For the last 8 months, the two adults and the three children live in a provisional “shelter” made of carton boxes they have places in a corner of an abandoned and half-constructed building. The parents need to feed two toddlers aged 1.5 and 3.5 years old and an older child from the father’s previous marriage. The family receives no disability pension or any allowance from the state that can help them make a living. “They tell their children that living in boxes is a game,” local media reports. The father is unable to work. The family’s relatives cannot help them as they are also in dire economic situation. They get meals from the local church, a neighbor to the building gives them from time to time the opportunity to take a bath. Basic sanitary conditions are non-existent, the smell where these people live is beyond any description. The father has been unemployed for the last 3.5 years. His leg was badly cut during works with a chainsaw. Speaking to, the father said, he wished to have space in a plot to put a tent for his family and two hens in order to have something to feed his children. And a job. “Anything that will help me be back on track.”

Life in a Modern-day Debt Colony: The Truth about Greece  - In May, likely for the first time in the post-war history of the Western world, a national parliament willingly ceded what remained of its country’s sovereignty, essentially voting itself obsolete. This development, however, did not make headlines in the global news cycle and was also ignored by most of the purportedly “leftist” media. The country in question is Greece, where a 7,500-page omnibus bill was just passed, without any parliamentary debate, transferring control over all of the country’s public assets to a fund controlled by the European Stability Mechanism, for the next 99 years. This includes all public infrastructure, harbors, airports, public beaches, and natural resources, all passed to the control of the ESM, a non-democratic, supranational body which answers to no parliamentary or elected body. Within this same bill, the “Greek” parliament also rendered itself voteless: the legislation annuls the role of the parliament to create a national budget or to pass tax legislation. These decisions will now be made automatically, at the behest of the European Union: if fiscal targets set by the EU, the IMF, and the ESM are not met, automatic “cuts” will be activated, without any parliamentary debate, which could slash anything from social spending, to salaries and pensions. In earlier legislation, the Greek parliament agreed to submit all pending bills to the “troika” for approval. For historical precedent, one needs to look no further than the “Enabling Act” passed by the Reichstag in 1933, where the German parliament voted away its right to exercise legislative power, transferring absolute power to govern and to pass laws, including unconstitutional laws, to Chancellor Adolf Hitler.

After Greece, Slovenia takes a taste of the European Financial Dictatorship! failed It appears that more and more countries inside and outside eurozone start to realize its true nature, which is actually a financial dictatorship. After ECB's financial coup against Greece on summer 2015, the euro-monster showed its real, ugly face.  It was pointed back then that “Despite all the mistakes made by the Greek government during the last six months in the war with the creditors and their local supporters, it was proven that Tsipras had very few choices. Especially after the direct blackmail through the capital controls and the closed banks which led one step before the total death of the economy, the European financial dictatorship (EFD) representatives showed that they are determined even to drop the last pretexts in order to reach their targets.” and “Tsipras managed to expose completely the real face of this "remarkable" union. The response of people in social media was characteristic, speaking even about a coup against Greece. The turn of the public opinion, taking now the side of Greece, is obvious, as Europeans can see clearly their dark future inside EFD. This open blackmail by the bureaufascists against Greece with the help of the ECB makes people in potential future eurozone members to think twice their entrance in this financial dictatorship. Double damage for plutocrats' plans.” t was the turn of Slovenia to face ECB and Draghi, who has questioned country's right to investigate central bank's 'Abaton' for illegal actions. From The Press Project : Slovenian police conducted an investigation in four locations in Ljubljana on Wednesday, including at the central bank, collecting evidence in a pre-criminal investigation related to possible irregularities during a bank overhaul in 2013. Seized equipment contains ECB information and such information is protected under directly applicable primary EU law" Draghi said in a letter to the Slovenian State Prosecutor General. "The ECB will also explore possible appropriate legal remedies under Slovenian law" he added.

Surprise: Refugees Are Making The Military Industrial Complex Even Richer - As Europe comes to terms with a Brexit vote fueled in large part by anti-immigrant hate-mongering, a new report exposes how war profiteers are influencing EU policy to make money from unending Middle East conflicts as well as the wave of refugees created by that same instability and violence. The report (pdf), Border Wars: The Arms Dealers Profiting from Europe’s Refugee Tragedy, released jointly by the European Stop Wapenhandel and Transnational Institute (TNI) on Monday, outlines arms traders’ pursuit of profit in the 21st century’s endless conflicts.“There is one group of interests that have only benefited from the refugee crisis, and in particular from the European Union’s investment in ‘securing’ its borders,'” the report finds. “They are the military and security companies that provide the equipment to border guards, the surveillance technology to monitor frontiers, and the IT infrastructure to track population movements.”The report shows that “far from being passive beneficiaries of EU largesse, these corporations are actively encouraging a growing securitization of Europe’s borders, and willing to provide ever more draconian technologies to do this.” In the past decade, the report says, corporate players have viewed intractable Middle East warfare as a windfall: “Several large international arms companies cited instability in the Middle East to assure investors about future prospects for their business. The arms companies are assisted by European governments, which actively promote European arms in the region and are very reluctant, to say the least, to impose stricter arms export policies.” Indeed, “from 2005 to 2014, EU member states granted arms exports license to the Middle East and North Africa worth over 82 billion euros,” according to the report.

Refugees who cannot pay people smugglers 'being sold for organs' - Migrants who are unable to pay people smugglers for their journey from Africa to Europe are killed for their organs, a former smuggler has said. Nuredein Wehabrebi Atta, who has been sentenced to five years in prison for his involvement in moving migrants, told Italian police that migrants who couldn't pay for journeys across the Meditteranean “were sold for €15,000 to groups, particularly Egyptians, who are equipped for harvesting organs". His testimony has helped break open a transnational network dedicated to migrant trafficking with Italian police confirming they have detained 38 people suspected of being involved - 25 Eritreans, 12 Ethiopians and one Italian. Interior Minister Angelino Alfano said the authorities had dealt "a harsh blow" to the criminal network, which used Rome for its financial transactions hub. Palermo police said in a statement that an Eritrean man who was arrested in 2014 collaborated with authorities, providing for the first time "a complete reconstruction of criminal activities" of migrant trafficking involving operations both in North Africa and Italy. Mr Atta is the first foreigner to be granted witness protection in Italy. He said the shocking number of deaths among migrants attempting to cross the sea is what led him to confess, "The deaths that we were aware of were a small part of it," Mr Atta told police, according to local media. "In Eritrea alone there have been victims in eight out of 10 families." He said that migrants who can not afford to pay the smugglers are then sold to organ traffickers.

Swiss Interest Rates Plunge To Negative Out To 50 Years -- With the short-end of the Swiss yield curve yielding below -100bps, it was only a matter of time before things went entirely mad at the long-end and today for the first time in history Swiss 50Y yields have tumbled below zero (trading as low as -2.7bps) as US Treasury yields tumble to fresh record lows. As Bloomberg notes, rising concern about the outlook for economic growth and inflation effectively means that investors are paying the Swiss government for the privilege of lending to them out to 50 years. Britain's vote to leave the European Union has darkened the economic outlook beyond Britain's shores and increased investor demand for safe-haven government bonds, even when the yield is below zero. That's because investors expect further interest rate cuts and monetary easing from central banks around the world in response to the increased uncertainty. "It's a reflection on the very bad prospects for the European and global economy,"

Is this nuts? Swiss 50yr is negative - Nothing to see here:  SWISS 50-YR GOVT BOND TRADES AT NEGATIVE YIELD, LAST -0.01% - MNI.  As of a few days ago (updated to note it went negative for the first time on Friday) the entire stock of Swiss bond yields went negative. And below the break is the yield curve for future generations to look at and wonder how did it all get so nuts?/ why we ever thought this stuff was weird? Do delete according to bias — the related links might help sort yours out.

More on the Short-Run Macroeconomics of Brexit - Paul Krugman I've received several thoughtful responses from economists I respect, all making a particular argument about the effects of Brexit-induced uncertainty. It goes like this: right now, firms don't know how closely Britain will be tied to Europe, so it makes sense for them to postpone investments until the situation clarifies. This is an interesting and defensible argument - basically, that the unclear shape of Brexit creates an option value to waiting. But I have three questions about it. First, is this really the argument underlying all of these dire post-Brexit forecasts? My guess is that very few people reading news reports, or even briefing papers, about Brexit are hearing this; what they're getting is much closer to the notion that uncertainty = increased probability of bad things. That is, this argument is a lot more nuanced and subtle than anything I previously heard in this discussion. Second, doesn't this argument imply a later investment boom once the uncertainty is resolved in either direction? That is, once Prime Minster Farage and President Le Pen have engineered the demise of the EU, there's no reason to wait, and all the pent-up investment comes roaring back, right? But I haven't heard anyone arguing that the contractionary effect of Brexit will be followed by a compensating boom once things settle down. Third, doesn't this argument suggest essentially the same effects from any policy negotiation whose end result isn't known? Why don't we say that the possibilities of TPP or TTIP are contractionary, because firms have an incentive to postpone investment decisions until they know whether these agreements actually happen? Somehow, though I've never heard anyone argue for the depressing effects of pending trade liberalization. Again, I'm not trying to defend Brexit. But I worry that the urge to condemn it has led to a lowering of intellectual standards.

Paul Krugman on Brexit and falling investment -- I think there is a pretty simple story here.  Brexit increases uncertainty, both in the mean-preserving sense, and in the "very bad outcomes are now more likely" sense, and that lowers investment.  That in turns shifts back the aggregate demand and aggregate supply curves, and a recession may result.  Less than a year ago, MIT economist Olivier Blanchard published a major paper on capital inflows being expansionary, and now of course we are seeing the reverse.  Toss in some negative wealth effects for further transmission.  I was at an event in The City a few days ago where the anecdotal data about postponed or cancelled deals seemed pretty overwhelming, and this is consistent with what one reads in the papers as well, not to mention with basic economic theory.  It is true of course that we don't know how large these effects will be, but the more purely British measures of equity value are still down quite a bit. Krugman is usually an exponent of the "don't make things too complicated" approach, but here in this blog post he wants to.make things too complicated: Second, doesn't this argument imply a later investment boom once the uncertainty is resolved in either direction? That is, once Prime Minster Farage and President Le Pen have engineered the demise of the EU, there's no reason to wait, and all the pent-up investment comes roaring back, right? But I haven't heard anyone arguing that the contractionary effect of Brexit will be followed by a compensating boom once things settle down. Third, doesn't this argument suggest essentially the same effects from any policy negotiation whose end result isn't known? Why don't we say that the possibilities of TPP or TTIP are contractionary, because firms have an incentive to postpone investment decisions until they know whether these agreements actually happen? Somehow, though I've never heard anyone argue for the depressing effects of pending trade liberalization. It is true investment might bounce back if Brexit were essentially undone, but that is hardly an argument for Brexit.  The UK economy is about 85 percent services, those are currently "passported" into the rest of the EU, and it is very very hard to negotiate a new free trade agreement for services in anything like a timely manner, even when passions are not inflamed and there are no considerations of punishing other possible EU-defecting countries.  So if you read someone writing ".after Brexit, the UK will face an average tariff rate of only xxx." that is a sign they are not thinking hard enough about how trade agreements for services really work.

Short-run effects of the Brexit shock -- The Governor of the Bank of England's opening remarks at the release of today's Financial Stability Report were stark: At its March meeting, the FPC judged that “the risks around the referendum [were] the most significant near-term domestic risks to financial stability.” Some of those risks have begun to crystallise.  The Governor was admirably calm and balanced in his press conference. But nevertheless there was a degree of schadenfreude about his remarks. Prior to the referendum, the Bank of England was severely criticised by the Leave campaign for scaremongering. It was accused of overstating the economic risk in order to support the Remain campaign. But it is already clear that the Bank's analysis was accurate, as least as far as the near-term risks are concerned.  The principal risks identified by the Bank of England are threefold. Firstly, the financing of the UK's current account deficit is coming under pressure as inward investment flows slow down or reverse. Secondly, the UK's commercial real estate market - already overstretched and far too reliant on external funding - is suffering severe outflows and sharp valuation adjustments. And thirdly, over-indebtedness in the household sector raises the possibility of an aggregate demand shock and pressure on the housing market. Yippee.  The most obvious indication of the pressure on the current account is the fall in sterling. Sterling fell sharply on the night of the referendum results, as the Bank of England's chart shows:

Bill Black: BREXIT - Tony Blair - naked capitalism. Yves here. Bill Black is running a series that shreds the logic of some prominent articles criticizing the Brexit vote. Just the way Blairite members of the Labour Party used the Brexit vote as the excuse for executing a long-standing plot against Jeremy Corbyn, so are other politicians and pundits using the results to anchor pet narratives. Tony Blair, who if he had any sense of decency would disappear from politics and try to rehabilitate himself through humanitarian projects, instead is becoming a leading voice in promoting the idea that the elites need to squash populism firmly. Bear in mind that Blair has also volunteered for being the chief Brexit negotiator with the EU.

How Brexit Has Crippled TTIP:   Reports coming out of Brussels and Washington suggest that the Transatlantic Trade and Investment Partnership, otherwise known as TTIP, has been crippled, possibly killed, by Brexit. Informed sources suggest that TTIP will be parked until Britain's Article 50 negotiations have been completed and that there is now a possibility that the deal will never be concluded. Officially, Brussels is denying there is a problem, but a source close to the TTIP negotiations has said that the European Union won't admit anything is wrong to avoid giving the impression that it is in disarray after the Brexit vote. Some members of the European Parliament are concerned that if the EU cannot fulfil its central purpose of concluding trade deals there may be contagion as more member states seek to follow Britain's lead.Influential Washington figures warn that Britain represents 16% of the EU market and that the deal must be put on hold. Until Britain's relationship with the EU is finalised, there is no way to assess the nature and scale of the reduction in the EU's market, making it impossible to value. Others in the US are worried about the loss of a liberal, free-market EU member, and wonder how difficult it will be to conclude a deal with some of the more protectionist states that remain.Officially, the EU Ambassador to the US, David O'Sullivan, has reiterated the intention to complete TTIP by the end of 2016, "The most important thing now is to reach a conclusion between the negotiators this year, and that is how we will go forward, and then it will be for the UK to decide what kind of trade relationship it wants with the United States."

The exits epidemic - the US empire must be furious - After the vote for Brexit prevailed, a series of European Union countries expressed their true feelings about the Union. As the ghost of the Far-Right is taking over the continent after EU's complete failure to handle the refugee issue efficiently, several countries threaten the rotten EU structure with an exits epidemic. From :The Hungarian Prime Minister's [Viktor Orban] right hand man has said he does not want to remain in the European Union (EU) as it fails to protect European values. Janos Lazar's shock revelation on Thursday afternoon came as a growing number of EU members have joined a queue to back leaving the bloc after Britons voted to leave last week. The Minister for the Prime Minister's office, said: "I couldn't vote whole-heartedly for Hungary to stay in the EU. "Europe does not equal the EU. The EU is not able to protect the rights and values of Europe." [...] Hungary, which joined the EU in 2004, has become part of a core group of rebels, including Poland, the Czech Republic and Slovakia, who threatened today to draw up their own plans for a less centralised EU. Poland, which also joined in 2004, is leading the rebellion by nine former communist countries after accusing the old guard - Belgium, France, Italy, Germany, Luxembourg and the Netherlands - of monopolising EU discussions after holding private talks in Berlin over the weekend. [...] Mr Orban also said the EU's failure to manage the migrant crisis was to blame for Britain voting to leave the EU and warned further referendums could follow. He added: "The important question is what lessons to draw from what happened, for us Europeans who are still members of the European Union and want to stay in. "If the EU cannot solve the migration situation then such challenges as we saw in the case of the United Kingdom will increase."

Brexit revives ghost of crisis past - QE | Reuters: When central banks first embraced quantitative easing in 2009 to lift the world economy from the ashes of the Great Recession, it was only half-jokingly dubbed "QEternal" given that it could be a process that would last years. After the Brexit shock, few are laughing now, and another wave of QE that will see tens of billions of pounds, euros, yen - and perhaps even dollars - pumped into the system is imminent. Bond yields around the world have plunged since the landmark vote, some to multi-year lows and some to their lowest on record. Over $11 trillion of bonds now yield less than zero, according to Fitch Ratings. And they look set to fall further, turning the screw even tighter on banks, pension funds and a wide range of investors who are seeing their returns evaporate almost by the day. The Bank of England is expected to reactivate its bond-buying QE programme, which stands at 375 billion pounds and has been dormant for four years, and the European Central Bank and Bank of Japan to extend and expand their current programmes. BoE governor Mark Carney on Thursday that further stimulus in the coming weeks to help cushion the UK economy from the Brexit shock is "likely". Even the Federal Reserve might be forced to consider "QE4" if the economy fares sufficiently worse than policymakers expect.

Pound Halts Worst Two-Week Drop Since 2009 Amid Stimulus Hints -- The pound halted its biggest two-week drop in more than seven years, after U.K. authorities flagged measures to mitigate the impact on the economy of the vote to leave the European Union. Sterling rose against the dollar for the first time in three days during the U.S.’s Fourth of July vacation. U.K. Chancellor of the Exchequer George Osborne told lawmakers Monday that more money might be made available to banks for lending to companies, and in an interview with the Financial Times floated the idea of a lower corporate tax rate. Bank of England Governor Mark Carney outlines the available macroprudential tools on Tuesday. “The prompt response by officials is reducing the risk of a severe downturn and that’s positive for some sterling-denominated assets,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London. Still, risks remain, he said, because he doubts “investors will discount the Brexit risk to such a degree as to adopt a constructive view on sterling.” The pound rose 0.4 percent to $1.3317 at 4:40 p.m. in London, following a two-week, 7.6 percent slide. It was the worst performer in June among 31 major currencies tracked by Bloomberg. Sterling gained 0.2 percent to 83.67 pence per euro after tumbling more than 3 percent last week. 

ECB Spends 85.1 Billion Euros on QE in Brexit-Blighted June -- The European Central Bank bought 85.1 billion euros ($94.8 billion) of debt in June as it boosted its asset-purchase program before the summer holiday period, and as officials considered how to handle the fallout from the U.K.’s decision to quit the European Union. Holdings of public and private-sector debt climbed to 1.08 trillion euros as of June 30, data on the ECB’s website showed on Monday. The period includes the week after the U.K. sent shockwaves through the financial system with its Brexit vote. While the ECB had initially signaled that its quantitative-easing program was unlikely to be adjusted or extended over the summer months, President Mario Draghi must now decide whether the impact of the U.K. decision warrants a response. Policy makers are said to be concerned that the pool of securities eligible for QE has shrunk after investors piled into the region’s safest assets and pushed down yields on some sovereign debt too far to meet current criteria, Bloomberg reported last week. The pace of buying in June was similar to May’s 85.2 billion euros and compares with a target of 80 billion euros a month. Holdings of sovereign and agency debt climbed by 72.1 billion euros last month, the ECB data showed. Corporate-bond purchases, under a program that started on June 8, were 6.4 billion euros. Covered bonds rose by 6.1 billion euros and asset-backed securities by 532 million euros. The ECB didn’t accelerate purchases after the U.K. vote. Holdings of public sector debt rose by 9.7 billion euros versus 17.1 billion euros increase in the previous week. Buying of covered bonds and corporate debt also slowed. ABS purchases picked up slightly.

Roadmap Plan for UK Departure from the EU - Nigel Farage - Highlighted policy topics include:

  • UK access to the EU marketplace
  • International trade agreements to go in place of EU trade agreements
  • Rights of EU nationals working in the UK
  • Status change for Brits living in other EU member countries
  • New UK health and safety standards to go in place of EU policy
  • Foreign direct investment in the UK, and EU financial services
  • UK access to international security intelligence
  • Potential second referendum on Scottish Independence

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UK Independence Party chief Nigel Farage quits - The head of the U.K. Independence Party, Nigel Farage, resigned Monday as party leader, the latest political leader to tumble amid the political turmoil following the country's vote to leave the European Union.Farage's departure makes him the third major political figure to announce plans to step aside rather than take ownership of the tumultuous times ahead as the country navigates its departure from the single market of some 500 million people. An odd power vacuum has replaced the staid if boisterous predictability normally typical of British politics since the June 23 EU referendum."During the referendum campaign, I said I want my country back. What I'm saying today is I want my life back, and it begins right now," Farage told reporters.Farage joins Prime Minister David Cameron, who said he will step aside to allow a successor to deal with the negotiation process. The favorite to replace him, prominent "leave" campaigner Boris Johnson, declined to stand. The opposition Labour Party has troubles of its own, with leader Jeremy Corbyn clinging to office despite having lost a no confidence vote by his party's lawmakers.Farage was instrumental in the campaign to have Britain leave the trading bloc, championing the issue of immigration. A much-criticized campaign poster featuring thousands of migrants massed at the border alongside the words "Breaking Point," typified fears that fueled some Brits' decision to vote for a British exit, or Brexit."The victory for the 'leave' side in the referendum means that my political ambition has been achieved," Farage said. "I came into this struggle from business because I wanted us to be a self-governing nation, not to become a career politician."Farage said he would retain his seat in the European Parliament to see out the negotiations for Britain's exit from the EU. He defended his taunting of other lawmakers in the chamber last week, arguing he wanted Britain's voice to be heard.

The money Jeremy Corbyn received from Iran demands an explanation -- You can respect Jeremy Corbyn for being a man of principle. . And you can respect the fact that, daily, he has to deal with a hostile Conservative tabloid press that has spread the most bizarre lies and distortions about him.   But his relationship with Press TV, the state TV media arm of Iran, just looks plain wrong. Business Insider writer Adam Payne reported yesterday that Corbyn made a series of paid appearances on Iran's Press TV despite the fact that Press TV reporters had filmed the forced confession of a torture victim, broadcast in Iran. Corbyn even appeared on Press TV after it had been investigated and banned from the UK by Ofcom, the government TV regulator, for its links to the torture-confession broadcast.   We have repeatedly requested an explanation of Corbyn's relationship with the Iranian state broadcaster and his team declined to comment. We welcome their input if Corbyn changes his mind. In the meantime, this is just plain weird. Most of us, left or right, get through our entire lives without cashing cheques from Iran. Most of us have entire careers without working for companies that are banned from the UK over their links to torture.   But not Corbyn.  Prior to the Ofcom ban, Corbyn had a partial excuse. All he did was go on TV, and debate with others there about Middle East politics. He probably had no idea that other staff at Press TV were filming Maziar Bahari, detained in the Evin prison for more than 100 days, answer a series of fake questions on camera in order to escape further beatings. Corbyn's excuses ran out in January 2012. That was when Ofcom banned Press TV and fined the organisation £100,000 ($132,695) for broadcasting Bahari's forced confession and because its editorial decisions were being made in Tehran and not by independent journalists in the UK, a broadcast licence requirement. Press TV didn't pay the fine.  Yet Corbyn returned to Press TV in June of that year, and took another payment from the state-controlled station, which at that time couldn't even be seen in the UK.

If you voted for Brexit and like open-ended UK property funds, we have some bad news -- From Standard Life Investments as it suspends trading in its £2.9bn UK real estate fund (one of the UK’s largest) because of post-referendum redemption requests: Updating with actual press release: Due to exceptional market circumstances, Standard Life Investments has taken the decision to suspend all trading in the Standard Life Investments UK Real Estate Fund (and its associated Feeder Funds) from 12:00 noon on 4July 2016. The decision was taken following an increase in redemption requests as a result of uncertainty for the UK commercial real estate market following the EU referendum result. The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns from the range, mix and quality of assets within the portfolio. “The Standard Life Investments UK Real Estate Fund invests in a diverse mix of prime commercial real estate assets from across the office, retail, industrial and other sectors. Its lower risk positioning should be beneficial for performance in times of market stress and uncertainty. The fund continues to offer a stable and secure income return with a distribution yield of c3.86% (SLI UK Real Estate Fund, Institutional Income Share – class on 15 June 2016). However, unlike investing in equities, the selling process for real estate can be lengthy as the fund manager needs to offer assets for sale, find prospective buyers, secure the best price and complete the legal transaction. Unless this selling process is controlled, there is a risk that the fund manager will not achieve the best deal for investors in the fund, including those who intend to remain invested over the medium to long-term.

Exclusive: Banks saw unprecedented step up in market supervision around UK vote | Reuters: Central banks raised oversight of currency markets to an unprecedented degree around Britain's shock vote to leave the European Union, demanding detailed updates from major trading desks every six hours throughout last week, industry sources said on Monday. One senior banker with a major global bank said the calls, never before conducted as often or consistently, had been seen as a sign that officials were worried an "Out" vote could trigger the sort of financial sector problems not seen since the collapse of Lehman Brothers in 2008. The U.S. Federal Reserve, the Bank of England and the European Central Bank all declined to comment on the calls, their conduct, content and aims. But some officials pointed to a general promise by the Bank of England and others to increase supervision of markets around the vote and said the calls were chiefly evidence of greater - and so far successful - coordination of regulatory efforts by the world's big central banks. The BoE said ahead of the vote it could ask banks for daily checks on their funding levels if need be. It has also become the norm for the ECB to check more regularly in times of stress with banks about short-term liquidity or the situation in currency or derivatives markets. "These calls have been going on. They are reflective, I think, of a more systematic and modern approach from the regulators," said one industry source. "If they make these things regular and keep to a proforma then it is easier to compare notes with other central banks on what is happening. You can infer also that there is an awful lot more conference calling going on between the central banks."

Globalization’s Political Fault Lines - Nouriel Roubini – The United Kingdom’s narrow vote to leave the European Union had specific British causes. And yet it is also the proverbial canary in the coalmine, signaling a broad populist/nationalist backlash – at least in advanced economies – against globalization, free trade, offshoring, labor migration, market-oriented policies, supranational authorities, and even technological change. All of these trends reduce wages and employment for low-skill workers in labor-scarce and capital-rich advanced economies, and raise them in labor-abundant emerging economies. Consumers in advanced economies benefit from the reduction in prices of traded goods; but low and even some medium-skill workers lose income as their equilibrium wages fall and their jobs are threatened. In the “Brexit” vote, the fault lines were clear: rich versus poor, gainers versus losers from trade/globalization, skilled versus unskilled, educated versus less educated, young versus old, urban versus rural, and diverse versus more homogenous communities. The same fault lines are appearing in other advanced economies, including the United States and continental Europe. With their more flexible economies and labor markets, the US and the UK have recovered more strongly than continental Europe in terms of GDP and employment since the 2008 global financial crisis. Job creation has been robust, with the unemployment rate falling below 5%, even if real wages are not growing much. Yet in the US, Donald Trump has become the hero of angry workers threatened by trade, migration, and technological change. In the UK, the Brexit vote was heavily influenced by fear that immigrants from low-wage EU countries (the proverbial “Polish plumber”) were taking citizens’ jobs and public services. In continental Europe and the eurozone, however, economic conditions are much worse. The average unemployment rate hovers above 10% (and much higher in the eurozone periphery – more than 20% in Greece and Spain) with youth unemployment over 30%. In most of these countries, job creation is anemic, real wages are falling, and dual labor markets mean that formal-sector, unionized workers have good wages and benefits, while younger workers have precarious jobs that pay lower wages, provide no employment security, and offer low or no benefits.

Britain is plunging towards an economic nightmare, and it isn’t just because of Brexit. On Monday morning, Markit released its latest set of data on the state of the UK’s construction sector, and to say things didn't look good would be an understatement.  The sector slipped into contraction for the first time since April 2013, hitting just 46.o, a shock fall from an already poor base last month, and the biggest single month fall since 2009. All this helped confirm fears about a coming crash in the UK's construction industry. Generally speaking, Markit doesn’t make grand proclamations and or use strong language about its data, but on Monday representatives from both Markit and CIPS, which jointly produced the survey, variously said that "the rate of decline was not as sharp as that experienced during the last recession" and called the data "a clear warning flag for the wider post-Brexit economic outlook." When the best you can pull from a dataset is that it is not quite as bad as during the worst recession since the 1930s, you know things are not looking good. Here's the chart showing just how sharply construction fell last month:

S&P scoffs at 'Armageddon' warnings for Britain --  Britain will scrape by without a full-blown recession over the next two years as a weaker pound cushions the Brexit shock and panic subsides, Standard & Poor’s has predicted. “We’re not in the Armageddon camp,” said Jean-Michel Six, the rating agency’s chief economist for Europe. “Devaluation acts a shock absorber. It stimulates exports and makes the London Stock Exchange more attractive to foreign investors,” he said. The UK economy should muddle through with growth of 1.5pc this year, 0.9pc in 2017, and 1pc in 2018, shielded from the storm by fiscal largesse and monetary stimulus a l’outrance. The benign outcome assumes that the Bank of England will cut interest rates to zero and relaunch quantitative easing, buying £100bn of bonds in each of the next two years. It also assumes that Britain joins the European Economic Area – the "Norway model" – or a close equivalent that safeguards full access to the single market and preserves the City’s passporting rights for financial services. “If that does not happen, it could be extremely negative,” said Mr Six. A hostile EU divorce could push the housing market into a downward spiral as an exodus of migrants compounds the damage from an economic slump. The agency warned that devaluation has its drawbacks but the net effect in these specific circumstances is positive. “Down the road, by the end of the year or early next year, the inflation effect will hit real incomes and weigh on consumption,” it said

FX focus: Pound plunges to 31-year low against the dollar as BoE admits Brexit effect: The pound plunged to a new 31-year low against the dollar and to the lowest level in over two years against the euro on Tuesday (5 July), amid disappointing economic data and post-Brexit uncertainty.The sterling slid 1.29% to $1.3116, hitting its lowest level against the greenback since 1985 and hit a two-and-a-half year low of 84.73p against the euro, before edging back to 84.98p per €1.  The decline came on the back of a fresh bout of post-Brexit pessimism among UK businesses. A survey released overnight by YouGov and the Centre for Economics and Business Research (CEBR) showed the number of businesses feeling pessimistic about the economic outlook over the next 12 months jumped from 25% before the vote to 49% in the week following the referendum.  Meanwhile, the Bank of England said it would postpone demands for £5.7bn in extra financing to be held by commercial banks' balance sheets – known as the 'countercyclical capital buffer' – in light of the economic uncertainty triggered by the Brexit vote last month. Furthermore, the UK central bank said would reduce the level of the buffer – pencilled in for 2017 – from the planned 0.5% of a banks' lending exposure to 0%. "Carney reiterated that the Bank has a wide range of tools if further easing is needed, but declined to offer any indication as to when the Bank might act,"

After Brexit: Reckoning With Britain's Racism and Xenophobia --The EU's "empire of free trade" has been the target of the ire of both the right and the left; the right is incensed over the regulations seen to hamper businesses (especially environmental and health-and-safety regulations as well as the human rights charter) and the left is incensed over the unaccountability of the EU officials and its rigid neoliberal stance. This undemocratic power exercised by distant Eurocrats is the plausible basis of a progressive criticism of the institution.But what has distinguished the EU free-trade pact from other free-trade pacts -- notably the North American Free Trade Agreement -- is the relatively unrestricted movement of people across internal European borders to seek jobs or residency elsewhere in the Union. And it is this free movement of people that has triggered a long festering xenophobia at the heart of British society. Britain's insularity has been punctured throughout its history in moments where the need for migrant labor has trumped the Little Englander aversion toward foreigners. One such moment was the post-Second World War reconstruction era when the devastated country needed people to aid in the reconstruction of the national economy (much like the rest of Europe). The importation of guest workers from the colonies, followed by decolonization and the migration of former colonized subjects to the metropole have triggered virulent xenophobic and racist responses in Britain. That the British political classes have refused to reckon with the country's colonial legacy and their steadfast refusal to acknowledge the racism interwoven in its institutions have only exacerbated this xenophobia and racism. This xenophobia takes different shapes according to the historical moment, but neoliberal policies have only ever intensified these sentiments. Migrants are today blamed for taking up places in housing and schools, burdening the country's publicly-funded universal health system and weakening the working class. Scant attention is paid to how, beginning with Margaret Thatcher's scorched-earth neoliberalism, policies of privatization and austerity -- during both feast and famine -- have led to a degradation of national life, a diminishing of social mobility and a growth in inequality in the UK.

Brexit voters are not thick, not racist: just poor: The most striking thing about Britain’s break with the EU is this: it’s the poor wot done it. Council-estate dwellers, Sun readers, people who didn’t get good GCSE results (which is primarily an indicator of class, not stupidity): they rose up, they tramped to the polling station, and they said no to the EU. It was like a second peasants’ revolt, though no pitchforks this time. The statistics are extraordinary. The well-to-do voted Remain, the down-at-heel demanded to Leave. The Brexiteer/Remainer divide splits almost perfectly, and beautifully, along class lines. Of local authorities that have a high number of manufacturing jobs, a whopping 86 per cent voted Leave. Of those bits of Britain with low manufacturing, only 42 per cent did so. Of local authorities with average house prices of less than £282,000, 79 per cent voted Leave; where house prices are above that figure, just 28 per cent did so. Of the 240 local authorities that have low education levels — i.e. more than a quarter of adults do not have five A to Cs at GCSE — 83 per cent voted Leave. Then there’s pay, the basic gauge of one’s place in the pecking order: 77 per cent of local authorities in which lots of people earn a low wage (of less than £23,000) voted Leave, compared with only 35 per cent of areas with decent pay packets. It’s this stark: if you do physical labour, live in a modest home and have never darkened the door of a university, you’re far more likely to have said ‘screw you’ to the EU than the bloke in the leafier neighbouring borough who has a nicer existence. Of course there are discrepancies. The 16 local authorities in Scotland that have high manufacturing levels voted Remain rather than Leave. But for the most part, class was the deciding factor in the vote.

Sterling falls to new low against the dollar in Asia trade - BBC News: The pound has hit a new low in Asian trading as concerns about the UK's vote to leave the European Union continue to weigh on investor confidence. It touched 1.2798 against the dollar on Wednesday, a 31-year low, before recovering slightly to $1.2963. The pound has now fallen about 14% against the dollar since hitting $1.50 ahead of the referendum result. US government bond yields also fell to record lows as investors rushed to put money in perceived havens. The falls follow decisions by fund managers, including Standard Life and Aviva, to stop investors withdrawing money from their UK property funds.  They said the high levels of uncertainty caused by the referendum had led to investors rushing to pull their money out. Investor confidence was further undermined by the Bank of England's warning on Tuesday that there was evidence some of the risks it identified related to Brexit were already emerging. Disappointing data on the UK services sector and a decline in US factory orders also fuelled pessimism.

Brexit Accelerates the British Pound’s 100 Years of Debasement - Bloomberg There have been few better ways to chart Britain’s decline from empire than its currency. Historians, economists and foreign-policy specialists point to the more-than 10 percent plunge since the June 23 referendum as signaling another downward leg in the U.K.’s global role and influence. “The history of the pound against the dollar over the last century is essentially a downward ladder with big permanent steps,” according to Rui Pedro Esteves, an associate professor in economics at Oxford University. Sterling Slide The world’s oldest currency -- sterling is derived from the old German “ster” for strong or stable -- bought almost $5 during World War I. The day of the EU referendum, it traded at $1.50. It touched $1.30 for the first time since 1985 on Tuesday. HSBC Holdings Plc analysts are among those forecasting $1.20 as a likely destination. Billionaire investor George Soros suggests $1.15, the equivalent of about a euro -- about 60 cents below its average since 1971. “A country’s economic size measured in other currencies -- for the U.K., measured say in dollars -- is an indicator of its capacity to project power and influence internationally,” said Barry Eichengreen, a professor of economics at the University of California Berkeley. While some economists, including former Bank of England Governor Mervyn King, see the weaker currency as leading to more export competitiveness, others see the threat of recession and lower interest rates -- combined with more insular politics and withdrawal from the world’s largest trading bloc -- as undermining appetite for U.K. assets.

U.K. Pension Fund Deficit Likely to Hit Record as Brexit Turmoil Squashes Bond Yields - As the dust settles after the U.K’s vote to exit the European Union, there’s already one clear loser from the market turmoil: pension funds. Some investors have profited from the fallout, but those who rely on returns on long-term government bonds are not among them. Yields on sovereign debt tumbled in the aftermath of the June 23 Brexit referendum, as investors bolted in favor of assets with a reputation for safety. The good news from falling yields is that it’s even less costly for governments to borrow money. But pensions funds, which need to find long-term assets that match liabilities due decades into the future, are on the less advantageous end of that trade. 10-year gilt prices registered their largest five day rally since 2010 after the referendum, rising by more than 4% in price from Thursday, June 23, the day of the vote, to the following Thursday. The latest official data from the Pension Protection Fund showed a deficit of £295 billion ($392 billion) for the PPF 7800 — an index of thousands of defined benefit pension schemes — at the end of May. That deficit likely widened to around £388 billion by the end of June, according to analysts at Morgan Stanley, based on the changes in yields and share prices. That’s the largest shortfall since at least 2003, when the PPF data begins. The deficit is expected to grow because although the value of the bonds the fund already owns has risen, the shrinking returns mean they need to hold ever more to cover their liabilities.

Three UK property funds halt trade in first sign of post-Brexit seize-up | Reuters: Three British commercial property funds worth about 10 billion pounds suspended trading within 24 hours, in the first sign of markets seizing up since Britain's vote to exit the European Union sent asset prices into a tailspin. Policymakers rushed on Tuesday to emphasise that the seize-up was confined to the sector of "open-ended" funds in real estate that normally allow investors to exit at will, and did not signal a liquidity problem in wider financial markets. However other shares and funds in the commercial property sector also faced a sharp sell-off on Tuesday as the implications set in that assets could be due for a fall. Commercial real estate has wider implications for the financial system because it is often used as collateral by companies that borrow from banks. The three suspended funds collectively account for nearly a third of the 35 billion pounds ($46 billion) in open-ended British commercial property funds, which the Bank of England had flagged as a major risk ahead of the June 23 vote. The 4.4 billion pound Property Portfolio run by M&G Investments, the fund arm of insurer Prudential, was the latest to go on Tuesday afternoon after a run on the fund from investors seeking to take their money out. Insurer Aviva's fund arm had earlier stopped trading in its 1.8 billion pound UK Property Trust, following in the steps of rival Standard Life Investments, which suspended a 2.9 billion pound fund late on Monday. The M&G fund owns 182 properties including the New Square Bedfont Lakes office park near Heathrow Airport, while Aviva's owns the Omni Leisure Centre in Edinburgh, among others. The Standard Life fund, meanwhile, owned 124 properties at the end of May including Monument Mall in Newcastle.

Brexit Vote Rattles Companies Across Europe - WSJ: There is no Plan B. That is what many companies across Europe have been telling investors since Britain voted to leave the European Union. The exit and its timing are so uncertain, executives say, that few companies had any meaningful contingency plans to either defend against the fallout or take advantage of the opportunity. “I can’t even assess the impacts this could have on us in operational terms,” says Maurizio Focchi, chief executive of Focchi, a family-controlled Italian construction company with about 90% of its revenue in the U.K. Almost 70% of German firms surveyed by the Federation of German Industries, or BDI, ahead of the vote said they didn’t know how they would react to a Brexit vote. Vodafone Group says the vote means it might have to move its headquarters from Newbury, England, to somewhere else in Europe. It also might not. It is “not yet possible to draw any firm conclusions,” the company said last week. “My message to my investors,” says Michael O’Leary, chief executive of Ryanair Holdings, Europe’s biggest airline by passengers flown, “is don’t ask me for what this means, because we don’t know.”   Any big election brings uncertainty for businesses. None in recent years has raised so many questions for corporations, over such a broad swath of industries and geography, as last month’s vote by Britain to leave the EU. In the short term at least, that has paralyzed planning and investment in boardrooms across the continent.

Nigel Farage and Boris Johnson are unpatriotic quitters, says Juncker - Jean-Claude Juncker, the president of the European commission, has accused Nigel Farage and Boris Johnson of being unpatriotic quitters, after the pair stood back from leadership positions after the UK’s historic vote to leave the European Union. “The glorious Brexit heroes of yesterday are the sad heroes of today,” Juncker told MEPs at the European parliament in Strasbourg. “Those who have contributed to the situation in the UK have resigned – Johnson, Farage and others. They are as it were retro-nationalists, they are not patriots. Patriots don’t resign when things get difficult; they stay.” The head of the commission was informing MEPs about last week’s EU summit, when David Cameron reported to his fellow leaders on the UK’s vote to leave the EU. Cameron created a vacancy for the job of prime minister by resigning on the morning after the vote, despite a previous promise not to stand down. Johnson was widely tipped to succeed him, but pulled out of the Tory leadership race after his old friend and fellow leave campaigner Michael Gove announced he would stand against him.  In an act of high political drama, Gove declared that the former mayor of London was unable to provide “the leadership or build the team for the task ahead”. Farage then announced on Monday he was standing down as Ukip leader, because he “wanted his life back”. The maverick politician will however keep his seat in the European parliament and remain co-chair of its Eurosceptic faction, the Europe of Freedom and Direct Democracy group.

Brexit Empty Threats: The UK’s Fantasy of Becoming a Big Tax Haven - Yves Smith - One of the noteworthy features of the preliminary Brexit jockeying is British commentators and even worse, officials, reassuring themselves and their audiences that the EU’s firm insistence that the UK will not be able to cherry-pick will melt when the understand that the UK has real bargaining leverage.  Based on the arguments I have seen so far, the Eurocrats aren’t at any risk of these supposed trump cards working out as envisaged. For instance, over the weekend the Telegraph published, George Osborne is threatening the EU with a giant tax haven right on its doorstep. From the story: Either way, Mr Osborne had a helpful suggestion today. Britain needs to act fast to signal to international investors that it is going to be a hospitable and profitable place to do business. His statement that Britain should aim for corporation tax rate of 15 per cent is not a bad start. That would be a cut of 5 percentage points and give us the lowest rate in the G7 by some margin…. But there’s also another, cannier reason why Britain should do everything in its power to appeal to large corporations that employ people across the EU: it improves our negotiating position. As I’ve written, I believe getting a good deal from the EU is going to be extremely tough, because there are powerful forces on the continent determined not to grant us full single market access if we want any concessions on free movement. One strategy we should use to loosen their resolve is to give the EU an idea of what an excluded Britain on the edge of the market might look like. And one potential answer to that is obviously: a giant tax haven.. First, the UK’s 20% tax rate is already an inducement…and how many companies are set up there just for the purpose of the tax rate? There are a lot of other factors, like access to raw materials, markets, and quality of workforce that factor into these decisions. Second, for the UK to be a tax haven, there would need to be no withholding at EU borders. That in turn depends on EU directives and EU/EEA membership. That’s Ireland can be a corporate tax haven. It’s in the EU!

Finance insiders: The UK won’t really go -- Finance industry insiders still don’t think a full Brexit will actually happen.  Only 37 percent of participants in POLITICO’s Economic Caucus, which surveyed an elite group of 63 business and economic leaders, said that Britain will exit the European Union following the June 23 referendum. An overwhelming majority said the U.K. won’t cut its ties altogether — a finding that reflects the finance community’s optimism, delusion or a little of both.  Britain will suffer much more than the rest of the Continent and will fall into recession following the referendum, said the caucus, which includes EU ambassadors, European Commission Vice President Kristalina Georgieva, former Italian Prime Minister Mario Monti, and OECD and European Central Bank economists. More than three-quarters of those surveyed said the U.K. should brace itself for a major economic slowdown as uncertainty hits “confidence, consumer spending and investment,” whereas they predicted the wider European economy will fare much better.  Britain scored “an astonishingly avoidable own goal,” said one member of the caucus, all of whom spoke on condition their remarks not be individually attributed.  “The uncertainty [while exit negotiations take place] will particularly hit the British services market, which is the strong point of the U.K. economy at the moment,” said one caucus member, adding that “anti-foreigner sentiment, if not kept in check, might persuade many skilled workers to leave the U.K.” Reports of hate crime in London are up by more than 50 percent since Britons voted by a margin of 52-48 percent to leave the EU, police figures show.

IMF cuts growth predictions for eurozone over post-Brexit confusion -- The International Monetary Fund has cut its growth outlook for the eurozone on the back of the Brexit vote, warning that a new climate of uncertainty across the single currency bloc will dent confidence, fan financial market volatility and spill over into other economies. The Fund used a regular healthcheck on the eurozone to warn it would suffer an economic slowdown and more political uncertainty as a result of last month’s referendum result. It is the latest body to warn that fresh cracks could emerge in the region as it grapples with the fallout of the UK’s decision to depart the EU. GDP in the eurozone is now expected to grow 1.6% this year and just 1.4% in 2017, a slowdown from a 1.7% expansion last year, “mainly due to the negative impact of the UK referendum”, the IMF said. That compares with IMF forecasts before the June vote of 1.7% growth for the eurozone this year and next. The IMF had repeatedly warned before the referendum of dire economic consequences from Brexit, much to the anger of leave campaigners. In its latest comments, the Washington-based fund highlighted the UK’s importance as a trading partner for the eurozone as the destination for 13% of euro area exports. “The markdowns for the euro area reflect likely weaker investor confidence on account of heightened uncertainty, greater financial market volatility, and lower import demand from the UK. “Given the euro area’s substantial weight in world trade, this slowdown would have spillovers to many other economies, including emerging markets but the impact is expected to be limited.

Orban calls “quota referendum” in Hungary for October 2nd - The Hungarian government has announced the date for the so-called “quota referendum” for October 2. Hungarians will be invited to approve or reject taking a quota of migrants and refugees which the EU is trying to get all member states to approve in order to share the burden which is mainly being carried by Germany, Greece and Italy. Prime Minister Viktor Orban is against taking any, and wants a popular mandate to defy Brussels. “Right after the Brexit referendum one of the most important conclusions that the Hungarian government made was that the people’s voice should be heard, so they were already referring to their referendum campaign here in Hungary, with what they would like to achieve, increasing their bargaining power with the EU saying that this is what most of the Hungarian people want,” says political analyst Edit Zgut. Hungary rapidly threw up fences on its border with Serbia last summer as refugees from Syria, Afghanistan and Iraq started arriving in waves, but one problem for Orban is that any Hungarian referendum struggles to reach a 50% turnout. Below that the result is invalid. The campaign, which the government has already started, will now go into overdrive. “In the campaign which officially starts now the governing parties and probably the far-right Jobbik will tell the voters to say NO to Brussels. The left wing parties on the other hand will campaign for YES to win,” reports euronews’ Andrea Hajagos in Budapest.

Renzi ready to defy Brussels and bail out Italy's troubled banks  Italy is prepared to defy the EU and unilaterally pump billions of euros into itstroubled banking system if it comes under severe systemic distress, a last-resort move that would smash through the bloc's nascent regime for handling ailing banks. Matteo Renzi, the Italian prime minister, is determined to intervene with public funds if necessary despite warnings from Brussels and Berlin over the need to respect rules that make creditors rather than taxpayers fund bank rescues, according to several officials and bankers familiar with their plans.  The threat has raised alarm among Europe's regulators, who fear such a brazen intervention would devastate the credibility of the union's newly implemented banking rule book during its first real test. In the race to find workable solutions, Margrethe Vestager, the EU's competition chief, has laid out options for Rome to address its banking problems without breaking the bail-in principles of Europe's banking union. Italy is the eurozone's biggest vulnerability following the shock outcome of the UK vote to leave the EU, with bank stocks plunging by a third. Concerns are building before the outcome of bank stress test results due this month and a constitutional referendum in Italy in early October, on which Mr Renzi has wagered his job. Citi has described the referendum as "probably the single biggest risk on the European political landscape this year outside the UK". After several of its ideas on intervention were rebuffed, Rome is considering whether to act alone. "We are willing to do whatever is necessary [to defend the banks], and do not rule out acting unilaterally, although that would only be as a last resort," said one person familiar with the government's thinking. European officials fear any Italian intervention would carry high risks, opening a battle over illegal state support that would put off private investors.

Italian banks under pressure as political crisis looms - Banca Monte dei Paschi di Siena SpA shares were slammed to an all-time low, highlighting the suffering among Italian bank stocks this year as the sector grapples with bad loans on its books and ultralow interest rates. In Milan, BMPS shares were yanked down 14% to close at 0.329 euros (37 U.S. cents), the lowest close on record, FactSet data show. On Tuesday, they fell another 8.4% to 0.301 euros. Italy’s third-largest lender and the world’s oldest bank on Monday said the European Central Bank wants it to cut the amount of bad loans on its portfolio to €32.6 billion ($36.3 billion) by 2018, from €46.9 billion currently. BMPS has until Friday to respond to the ECB’s correspondence. BMPS shares are veering toward a 76% slide for 2016, on course for their worst yearly loss on record. But BMPS is hardly alone in facing sharp share-price declines so far this year. UniCredit, Italy’s largest bank by assets, has slid 63%, Banca Popolare di Milano is down about 64%, and Intesa Sanpaolo has given up 46%. Banks in Italy are weighed by about €360 billion in nonperforming loans, or unpaid debts, according to Italy’s central bank. That represents 18.1% of total loans to consumers. Roughly €210 billion of those loans have been taken out by borrowers now considered to be insolvent. “Meanwhile, average return on equity has been less than 2% per year during the last five years, neither enough to clear out the NPLs at a decent pace, nor to attract more capital. So something has to give,” said Erik Nielsen, group chief economist, at UniCredit Research, in a July 3 note. At the same time, concerns about bank margins have mounted as interest rates have been pushed sharply lower. Such moves have come after the ECB last year began buying sovereign debt throughout the eurozone and yanked the deposit rate deeper into negative territory as part of its stimulus efforts to boost economic growth and inflation.

Bad Debt Piled in Italian Banks Looms as Next Crisis - WSJ: —Britain’s vote to leave the EU has produced dire predictions for the U.K. economy. The damage to the rest of Europe could be more immediate and potentially more serious. Nowhere is the risk concentrated more heavily than in the Italian banking sector. In Italy, 17% of banks’ loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5%. Among publicly traded banks in the eurozone, Italian lenders account for nearly half of total bad loans. Years of lax lending standards left Italian banks ill-prepared when an economic slump sent bankruptcies soaring a few years ago. At one major bank, Banca Monte dei Paschi di Siena BMPS 6.07 % SpA, bad loans were so thick it assigned a team of 700 to deal with them and created a new unit to house them. Several weeks ago, the bank put the bad-credit unit up for sale, hoping a foreign partner would speed the liquidation process. The U.K. vote to exit the European Union has compounded the strains on Europe’s banks in general and Italy’s in particular. It imperils the Monte dei Paschi sale, some bankers say, and creates fresh uncertainty at a time when lenders are struggling with ultralow and even negative interest rates and sluggish economic growth. Brexit has many executives concerned that central banks will keep interest rates lower for longer than they might otherwise, in an attempt to counteract the slower growth—in the eurozone as well as Britain. European banks’ stocks slid after the vote, with those in Italy especially hurt.

Political and Financial Contagion from the Italian Banking Crisis: Italy’s Exit? - Yves Smith -- Just because a crisis is “slow moving” does not mean it can be successfully arrested.  The political and financial stakes in the ongoing Italian banking crisis rose today as the chairman of Societe General, Lorenzo Bini Smaghi, talked up the risk of a “pan European banking crisis” if the European officialdom didn’t relent and permit Italy to use government funds to shore up its bank most at risk of keeling over: number three Monte dei Paschi.  The spectacle of Bini Smagi warning that an Italian banking implosion could kick off a broader European meltdown, while accurate, comes uncomfortably close to the famous scene in Blazing Saddles, where the sheriff threatens to shoot himself to ward off an angry mob.  So why is a major bank leader stoking fears about the health of Continental banks? And why did Italy’s prime minister Matteo Renzi throw mud back, saying that the troubles facing Italian banks were minuscule compared to those those of players with big derivatives books, meaning Deutsche and the big French banks? Mind you, Mr. Market took notice of the spat: European bank stocks fell, including SocGen’s the fabulously undercapitalized Deustche Bank’s share price dropped to its lowest level since 1989.  Italian banks have been in serious trouble for quite a while. Unlike the systemically important players in London, Paris, and Frankfurt, they weren’t exposed in a big way to the tightly coupled credit default swaps business, nor had they loaded up on US subprime exposures. As a result, their crisis-related bailouts were modest: a mere €22.0 billion, versus €114.6 each for the UK and Germany €174.3 for Spain, €39.8 for the Netherlands, and €23.3 for Belgium. Italian banks got sick the old-fashioned way: on lending to businesses in their markets. The problem with the Italian banks thus isn’t the complexity of the problem; it’s the scale, and the fact that Italy sits in the Eurozone, which has a Rube Goldberg bank resolution scheme that the authorities are unwilling to admit won’t work in practice.

Italy Bans Short-Selling In Monte Paschi For Three Months, Forgets To Ban Buying Of CDS -- Yesterday we got the first sure sign that Italy's banking system is near collapse when in a flashback to the Greek financial crisis days of 2010-2011, Italy's bank regulator banned short selling in Monte Paschi shares for the day. Today, we can conclude that the Italian bank crisis is set to get far worse, because moments ago, Italy's banking regulator just announced that what was supposed to be just a temporary measure has been extended for the next three months and shorting in BMPS shares is now prohibited until October 5. Consob bans for three months net short positions on Banca MPS shares - The prohibition shall apply from tomorrow 7 July 2016 until 5 October 2016 - It affects derivatives and market makers as well. Consob, with Resolution 19655 of 6 July 2016, decided to temporary prohibit net short positions on Banca Monte dei Paschi di Sienashares - BMPS (ISIN code IT0005092165). The ban will be enforce for the next three months, from tomorrow 7 July 2016 (start of day) until 5 October 2016 (end of day). The prohibition on net short positions strengthens and extends the ban to short selling adopted yesterday, as the new prohibition bans both short selling on BMPS shares and short positions taken though single stock derivatives on BMPS shares. The ban applies to all transactions, irrespective of where they have been carried out (on an Italian or foreign trading venue or over-the-counter) and it affects market makers as well.  While at it, Italy should probably also ban buying of CDS... just a thought.

Renzi Rocked as Five Star Surges in Polls - The populist Five Star Movement has emerged as Italy’s leading political party, overtaking Matteo Renzi’s ruling Democratic party (PD) in four separate opinion polls that have exposed the growing vulnerability of the country’s centre-left prime minister. The primacy of the Five Star Movement, which is led by the sardonic comedian Beppe Grillo and has called for a referendum on ditching the euro, reflects a shift in public opinion against Mr Renzi that will heighten fears of a return to political instability and uncertainty in the single currency’s third largest economy. “A government collapse is more than just a possibility, it is a scenario that we are looking at very closely,” said Federico Santi, an analyst at the Eurasia Group consultancy. “The trend has been clearly bad for the ruling party and favourable to the Five Star Movement, driven by issues — like migration, the banking troubles and corruption scandals — that are not going to go away. It’s hard to see what it could take for Renzi and the PD to make a comeback at this point.” According to polls released on Wednesday by Ipsos, the Five Star Movement is supported by 30.6 per cent of Italians, compared with 29.8 per cent for the PD. Similar polls in January had Mr Renzi’s party leading the Five Star Movement by nearly six percentage points. In the 2014 European elections, shortly after Mr Renzi took office, the PD defeated the Five Star Movement by nearly 20 percentage points. Three other surveys taken after the Brexit vote also showed the Five Star Movement ahead, with the next national elections due in early 2018.  One by Demos released on July 1 showed the party ahead by a margin of 32.3 per cent to 30.2 per cent over Mr Renzi’s PD. Others by Euromedia and EMG showed the Five Star Movement with narrower leads of 0.5 and 0.4 percentage points. Another poll showed the Democratic party hanging on to a narrow lead. The polls look even darker for Mr Renzi if the likelihood of a run-off between the two largest parties — which is called for under Italy’s new electoral law if no party exceeds 40 per cent — is taken into account. In those scenarios, the Five Star Movement would defeat the PD by as much as ten percentage points, as right-wing voters would coalesce around the protest party.

Bank of Italy says public money needed to help banks | Reuters: Bank of Italy Governor Ignazio Visco said on Friday that public money should be used to help Italy's troubled banks in a financial system which is "full of risks" following Britain's decision to leave the European Union. Italy's banks are saddled with some 360 billion euros ($400 billion) of bad loans and their shares have been hit by heavy selling this year, which has intensified in the wake of last month's referendum in Britain. Visco said the current market situation was "full of risks for financial stability," and a public backstop to support the banks was necessary and was not prohibited by European rules. Italy has been in talks with the European Commission to devise a plan to recapitalise its lenders with public money, limiting the losses for bank investors which are required by EU rules. "We are confident of the possibility of success for a common commitment to overcome the current difficulties," Visco told a conference of Italian bankers. Economy Minister Pier Carlo Padoan, speaking at the same conference, said EU rules allowed for flexibility on state aid for banks and this must be used to the full in the current circumstances. The government is in "continuous dialogue" with Brussels "to explore all means of public intervention allowed by EU regulations," Padoan said.

ECB gives Italy helping hand as banking woes escalate | Reuters: - Italy stands to be the biggest beneficiary of rumoured changes to the European Central Bank's quantitative easing programme, potentially throwing a lifeline to the country as it grapples with a brewing banking crisis. More and more bonds are falling outside the ECB's buying remit because they yield less than the deposit rate. Almost 60% of German Bunds, the biggest QE constituent, are now out of reach and with a mere 122.5bn still eligible the monetary authority could be forced to change its strategy. A few options have been floated in the market but perhaps the most radical could be a move by the ECB from a capital key to a weighting system based on the amount of debt outstanding. The ECB's capital comes from national central banks (NCB) with the NCB's shares in this capital calculated using a key which reflects the respective country's share in the total population and gross domestic product of the EU. For Italy, this would be the biggest lifeline as the country faces up to its banking problems and tries to address 200bn of bad loans. According to the Ministry of Finance, the country had just over 1.9trn of government debt outstanding at the end of June and would therefore benefit from a shift to a weighting system. The ECB's purchases of its debt would jump to 17.4bn from 10.6bn a month, according to Deutsche Bank analysts. Germany, on the other hand, would see monthly purchases drop to 8.9bn from 15.9bn. Many believe that dropping the capital key would be the option of last resort but some investors have jumped in regardless.

OECD: EU sanctions on Portugal, Spain is 'last thing we need' | Reuters: OECD chief Angel Gurria on Friday urged the European Commission not to apply sanctions on Portugal and Spain for overshooting their budget deficit goals, saying it was the "the last thing we need" as Europe grapples with Brexit and other challenges. The European Commission launched formal disciplinary procedures on Thursday against Spain and Portugal for their excessive deficits in 2014 and 2015. "I have gone on the record to say that the last thing we need now is for the Commission to talk about sanctions for countries which may have deviated by 0.2 percent from a path of deficit reduction," Gurria, who heads the OECD which advises developed nations on policy, told a conference in Lisbon. "We face new challenges, of migrants and refugees, terrorism and Brexit." He said it would "create divides among us by applying sanctions which are not even sanctions because they have to do with the past and not with the future".

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