week ending Aug 13

Global monetary taps still open wide, Fed minutes in focus | Reuters: The glue binding a still-aggressive global monetary policy response to a struggling world economy and almost daily record highs for world stock markets along with record low bond yields is set to remain intact in the coming week. The one thing that could unstick it, apart from divine intervention, would be a change in tune from the U.S. Federal Reserve, which is still toying with when to deliver a follow-up interest rate hike to last December's baby step-up from zero. Minutes to the Fed's July policy meeting due on Wednesday may come under more scrutiny than normal given the central bank really only has one opportunity left, at its meeting next month, to raise rates before the November presidential election. Fed officials have given differing and often conflicting signals throughout much of this year on when the next move will come, leaving few with any clear sense of how much of a risk there is of a September rate rise. Interest rate futures contracts in financial markets, as well as the median probability given by economists in a recent Reuters poll, suggest the chances are low and that if they go this year at all, December is more likely. [ECILT/US] "Our guess is that the market-implied odds of a 2016 rate hike will trend up over the remainder of the month, with both the FOMC minutes on August 17 and Chair (Janet) Yellen's Jackson Hole speech on August 26 likely to suggest that September is very much a live meeting,"

Ben Bernanke explains why Fed’s not going to be raising rates for a while -- Ben Bernanke thinks his former colleagues at the Federal Reserve will be reluctant to raise interest rates anytime soon. One of Wall Street's favorite pastimes is trying to discern hidden meaning in language tweaks from Fed officials. But Bernanke, the central bank's former chairman, thinks doing so under current conditions will only lead investors astray. In part, that's because most Fed officials have been wrong on their economic forecasts over the past several years. They anticipated that economic growth would be stronger, while both the unemployment rate and the natural level of interest rates would be higher.  Chastened over their forecasting errors, Fed officials will be less likely to tip their hands on how they see the future, both in terms of growth and whether they will hike rates.  "It has not been lost on Fed policymakers that the world looks significantly different in some ways than they thought just a few years ago, and that the degree of uncertainty about how the economy and policy will evolve may now be unusually high," Bernanke wrote this week in his most recent blog post for the Brookings Institution, a think tank he joined after leaving the Fed in 2014. "In general, with policymakers sounding more agnostic and increasingly disinclined to provide clear guidance, Fed-watchers will see less benefit in parsing statements and speeches and more from paying close attention to the incoming data," he added.

The Most Cynical Take On Friday's Jobs Number: "The Fed Will Not Hike In September With Trump In The Race": Citi -- If traders have a feeling that there is a prevailing sense of blase disenchantment involving not only US macro data but the overall market, you are not alone. Here is arguably the best, and thus most cynical take, of Friday's impressive seasonal adjustment factor payrolls report, from Citi's Brent Donnelly: Summer apathy and generally high frustration levels related to poor returns, extreme bearishness and existential questions around the death of price discovery due to central bank meddling. Fed credibility is near zero so a strong number doesn’t matter much. This Fed is not going to hike two months before an election where the Republican candidate is seen by many as unfit to lead. So NFP doesn’t matter much. This drop in Fed credibility is borne out in the price action as you have probably noticed that the market doesn’t react at all to Fed commentary anymore (see Lockhart and Evans recently). This is in bright contrast to sharp market moves on Fedspeak pre-2016 (when Fed words were thought to be correlated to future Fed actions). Well, the market may not react to Fed commentary, but it most certainly still reacts to central bank liquidity injections. If and when that changes, try not to be the last to sell.

The Fed’s shifting perspective on the economy and its implications for monetary policy - Ben Bernanke - The headline on a recent piece by Ylan Mui of the Washington Post—“Why the Fed is rethinking everything”—captured the current moment well. The Federal Reserve has indeed been revising its views on some key aspects of the economy, and that’s been affecting its outlook both for the economy and for monetary policy. In this post I document and explain the ongoing shift in the Fed’s economic views. I then turn to some implications, suggesting among other things that, for now at least, Fed-watchers should probably focus on incoming data and count a bit less on Fed policymakers for guidance. Talking about the “Fed’s thinking” is of course very loose. There are few official communications from the Federal Open Market Committee (FOMC) as a whole, and those that exist (such as the statements issued after each FOMC meeting) have the prose style that might be expected of a document prepared by a large committee. The usual practice therefore is to try to infer the FOMC’s policy inclinations from the views expressed by individual FOMC participants in various forums. To quantify changes in the thinking of FOMC participants, I use in this post the Fed’s Summary of Economic Projections, a summary of participants’ forecasts that the Committee releases four times a year.

Mysterious “Computer Glitch” Conveniently Cancels Hotel Rooms For Fed Protesters At Jackson Hole Event -- Over the last two years, the Fed Up Campaign has routinely brought a coalition of low-wage workers to Jackson Hole, Wyoming to protest Federal Reserve hike rates amidst the unequal “economic recovery.” The Jackson Hole event is invite only, closed to the public and costs $1,000 per person to attend. It appears that this year, Janet Yellen and company went out of their way to ensure there would be no such protests diverting the attention of the nation's most esteemed economists. According to a formal complaint filed by Ady Barkan, the Campaign Director for the Fed Up Campaign, to the DOJ and the Department of the Interior, “In early May, members of our coalition made three separate reservations for a total of 13 rooms at the Lodge for the nights of August 24, 25, and 26. We paid for the rooms. We requested and paid for rollaway beds that would allow us to sleep three guests to a room, for a total of 39 guest accommodations. On July 26, my colleague Ruben Lucio received a phone call and then a follow-up email from Zachary Meyers, the Director of Hotel Operations at the Company, informing us that the Company would not honor our paid-for reservations and we could no longer stay at the Lodge. Meyers informed Lucio of a “reservations system glitch that caused the overbooking of Jackson Lake Lodge affecting your reservations” and explained that “the system issue caused us to take reservations for rooms that we don’t actually have inventory to honor. I’m very sorry for the unfortunate mishap with our systems at GTLC that led to this regrettable situation.”The complaint also states that of the 18 rooms that were affected by the supposed “glitch,” all 13 rooms that were allocated to the Fed Up Coalition were coincidentally all cancelled. Of course, the hotel denied any knowledge that these rooms were protesting the oligarchs at the Fed.  “There is no legitimate explanation for the Company’s decision. As Klein explained to me, the Company books out its conference and sleeping rooms on a first-come first-serve basis.However, faced with an alleged computer glitch that affected only the three nights we were present, the Company decided to honor reservations made after ours and cancel our reservations. Our reservations constituted only 3 percent of the rooms at Jackson Lake Lodge (13 out of 385), yet the Company decided that our group would bear 72 percent of the total burden for its mistake (13 rooms out of 18 overbooked reservations). This is egregious disparate treatment.

 Recession Watch, August 2016 - The implications of the tradables sector, the dollar, and Fed policy. The employment numbers released on Friday were re-assuring, especially in light of the previous week’s GDP figures. But can we rule out an ongoing or incipient recession?Figure 1 depicts the series that the NBER Business Cycle Dating Committee (BCDC) has in the past focused on.All series have risen, save industrial production, since the IP peak in 2014M11. That decline is fairly marked, a 2.5% decline (in log terms). The initial read on June manufacturing and trade sales was also down.Now, industrial production is less representative of overall output than it has been in the past. Nonetheless, it’s still a very important component. Value added in mining, utilities and manufacturing accounted for 19.2% of GDP in 1997, and still accounted for 15.4% in 2015. Hence, this drop is worrisome.Why the decline? While manufacturing has not subtracted from industrial production, it has not added. Figure 2 shows the manufacturing production index (red line). The June 2016 value is the essentially the same as at the prior peak value in November 2014. (Manufacturing accounts for 12.1% of value added.)The stagnation in employment and aggregate hours can be attributed, at least in part, to the 15% appreciation in the real value of the dollar since 2014M07. While the dollar is down since its recent peak, that decline is only 3%.  This is where Fed policy is of particular relevance. Fed funds futures indicate an 82% likelihood of a 25-50 bps increase by September 21 [CME, accessed 8/8]. (18% is for a 50-75 bps.) To the extent that one of the few things we know moves the dollar is the interest rate (and expectations of future interest rates), further tightening seems ill-advised.

Four ‘Upside Risks’ That Could Make the Economy Look Better Than Expected - - WSJ: Every month, The Wall Street Journal asks a group of about 70 business, financial and academic economists to provide their forecasts for the year ahead. Among the questions we ask is how their forecasts might go wrong. What might cause the economy to grow more slowly, or even knock it into recession? Earlier this summer, we recapped the four biggest risks that economists thought could push the U.S. economy into recession. Those same risks are still out there. But for the sake of completeness, here’s the other half of that story. Surprises are not always negative, and anyone who has been forecasting for decades like the economists in the WSJ survey has learned that it’s possible to be wrong in both directions. With that in mind, here are four factors that survey respondents think could cause the economy to do better than expected in the coming years.

• Consumer Surprise --The U.S. economy is driven by consumer spending, and the consumer might end up doing better than is commonly appreciated. About 30% of economists cited the possibility that consumers could surprise.
• Business Investment Revival  -- Business investment has slumped in the U.S. for three consecutive quarters. About 20% of economists said the biggest upside surprise could be a better-than-expected turnaround in the levels of business investment.
• Low Rates Boost Housing -About 15% of economists cited the possibility that another spell of ultralow rates could provide an upside surprise in home construction, in particular.
• Political Outcomes Aren’t Horrible It’s impossible to miss the doom and gloom emanating from this election.  But it’s often proved hard to separate campaign rhetoric from the policies that are actually enacted. About 15% of economists mentioned the possibility that policy could end up more favorable for growth than is generally anticipated.

 We’re in a Low-Growth World. How Did We Get Here? - The United States is adding jobs at a healthy clip, as a new report showed Friday, and the unemployment rate is relatively low. But that is happening despite a long-term trend of much lower growth, both in the United States and other advanced nations, than was evident for most of the post-World War II era. This trend helps explain why incomes have risen so slowly since the turn of the century, especially for those who are not top earners. It is behind the cheap gasoline you put in the car and the ultralow interest rates you earn on your savings. It is crucial to understanding the rise of Donald J. Trump, Britain’s vote to leave the European Union, and the rise of populist movements across Europe. This slow growth is not some new phenomenon, but rather the way it has been for 15 years and counting. In the United States, per-person gross domestic product rose by an average of 2.2 percent a year from 1947 through 2000 — but starting in 2001 has averaged only 0.9 percent. The economies of Western Europe and Japan have done worse than that.  Over long periods, that shift implies a radically slower improvement in living standards. In the year 2000, per-person G.D.P. — which generally tracks with the average American’s income — was about $45,000. But if growth in the second half of the 20th century had been as weak as it has been since then, that number would have been only about $20,000. To make matters worse, fewer and fewer people are seeing the spoils of what growth there is. According to a new analysis by the McKinsey Global Institute, 81 percent of the United States population is in an income bracket with flat or declining income over the last decade. That number was 97 percent in Italy, 70 percent in Britain, and 63 percent in France. Like most things in economics, the slowdown boils down to supply and demand: the ability of the global economy to produce goods and services, and the desire of consumers and businesses to buy them. What’s worrisome is that weakness in global supply and demand seems to be pushing each other in a vicious circle.

Big Government Keeps Getting Smaller - Justin Fox - Among the many contributors to what was generally a gangbusters employment report Friday was the government sector, which added 38,000 jobs in July (30,000 of them in local government). That hasnt been the case very often during this recovery. There are almost 15 million more workers on nonfarm payrolls now than there were at the end of 2009, but 300,000 fewer government workers. As a result, government's share of nonfarm employment has dropped to a level (just under 15.4 percent) last seen in 1959. As you can see from the chart, the federal government's share of overall employment is lower than it has been since the Bureau of Labor Statistics started counting in 1939. As noted, it doesn't include military personnel or employees of the federal intelligence agencies. The Defense Department does publish data on the number of active-duty military, though, and that shows a decline from 3.3 million in 1954 to 1.3 million in 2015. A bigger question mark involves employment at government contractors, which seems to have grown in recent decades. The Congressional Budget Office was asked in 2015 to estimate the size of the federal contract workforce and essentially threw up its hands. It did pass on, though, that the Department of Defense, which is responsible for close to 60 percent of federal contract spending, reported paying for 670,000 full-time-equivalent positions among service contractors in 2012 (July's jobs report counted 2.79 million federal employees total). So it may be that government-funded employment isnt really at its lowest level, as a share of nonfarm employment, since 1959. And, of course, there are other ways besides employment (spending, regulatory reach) to measure government bigness. Still, this government-jobs data seems like important information that should be more widely known.

 The Buyer Strike Is Over: 3Y Treasury Sells In Strong Auction As Foreign Central Banks Rush To Buy -Following a disappointing month of Treasury auctions, one which saw last month's 3Y issue see a plunge in Indirect bidders which dropped to 44.7%, August has started off strongly with the sale of $24 billion in 3 Year paper, which moments ago sold at a high yield of 0.85%, 1 bps inside the When Issued 0.86%, and with a Bid to Cover which surged from last month's 2.686 to 2.984, the highest since December. The internals were likewise impressive, with Indirects taking down 56.9%, the highest since May, leaving Dealers holding 33.7%, the lowest in 4 months and Directs left holding 9.5%.  The market was surprised by the strong demand for the short-end, easily the strongest auction in at least 3 motnhs, and moments after the details were announced, the yield on the 10Y dropped to session lows as suddenly concerns about a buyers strike have disappeared.

  America’s Looming Debt Decision - Kenneth Rogoff – Should the US government lock in today’s ultra-low borrowing costs by issuing longer-term debt? It’s a tough call, but with overall debt levels already high (not to mention unfunded pension and medical insurance liabilities, which are both likely to rise), perhaps the time has come.  Until now, the US Treasury and the Federal Reserve Board, acting in combination, have worked to keep down long-term government debt, in order to reduce interest rates for the private sector. Indeed, at this point, the average duration of US debt (integrating the Fed’s balance sheet) is now under three years, well below that of most European countries, even taking into account their own central banks’ massive quantitative-easing (QE) programs.  The tilt toward short-term borrowing as a way to try to stimulate the economy has made sense until now. Given that the interest rate on 30-year US debt is roughly 200 basis points higher than on one-year debt, short-term borrowing has saved the government money as well.  But the government should not operate like a bank or a hedge fund, loading up on short-term debt to fund long-term projects. It is too risky. With net US government debt already running at 82% of national income, the potential fiscal costs of a fast upward shift in interest rates could be massive.  No one is saying that such a shift is likely or imminent, but the odds aren’t as trivial as some might like to believe. For starters, interest rates could spike in the event of a war or some other catastrophic event. Less dramatic but more likely is that the Fed will someday find a way to push up inflation expectations, which, as in most advanced economies, have been drifting inexorably downward. If inflation expectations do start rising, this will push up rates.

The Pentagon Money Pit - What if the inspector general of the Department of Health and Human Services were to report that $6.5 billion in spending by that federal agency was unaccounted for and untraceable? You can imagine the headlines, right? What if it was $65 billion? The headlines would be as big as for the first moon landing or for troops landing on Omaha Beach in World War II.But how about a report by the Pentagon’s Office of Inspector General saying that the US Army had $6.5 trillion in unaccountable expenditures for which there is simply no paper trail? That is 6,500 billion dollars! Have you heard about that? Probably not. That damning report was issued back on July 26 — two whole weeks ago — but as of today it has not even been reported anywhere in the corporate media.It’s not that it’s secret information, or hard to come by. The report is available online at the Department of Defense’s OIG website.  And as it states:The Office of the Assistant Secretary of the Army (Financial Management & Comptroller) (OASA[FM&C]) and the Defense Finance and Accounting Service Indianapolis (DFAS Indianapolis) did not adequately support $2.8 trillion in third quarter journal voucher (JV) adjustments and $6.5 trillion in yearend JV adjustments made to AGF data during FY 2015 financial statement compilation.2 The unsupported JV adjustments occurred because OASA(FM&C) and DFAS Indianapolis did not prioritize correcting the system deficiencies that caused errors resulting in JV adjustments, and did not provide sufficient guidance for supporting system‑generated adjustments.In addition, DFAS Indianapolis did not document or support why the Defense Departmental Reporting System‑Budgetary (DDRS-B), a budgetary reporting system, removed at least 16,513 of 1.3 million records during third quarter FY 2015. This occurred because DFAS Indianapolis did not have detailed documentation describing the DDRS-B import process or have accurate or complete system reports.

Why Do Military Professionals Remain Silent About America’s Disastrous Wars? By William J. Astore --The United States is now engaged in perpetual war with victory nowhere in sight.  Iraq is chaotic and scarred. So, too, is Libya. Syria barely exists. After 15 years, “progress” in Afghanistan has proven eminently reversible as efforts to rollback recent Taliban gains continue to falter. The Islamic State may be fracturing, but its various franchises are finding new and horrifying ways to replicate themselves and lash out. Having spent trillions of dollars on war with such sorry results, it’s a wonder that key figures in the U.S. military or officials in any other part of America’s colossal national security state and the military-industrial complex (“the Complex” for short) haven’t spoken out forcefully and critically about the disasters on their watch. Yet they have remained remarkably mum when it comes to the obvious.  Such a blanket silence can’t simply be attributed to the war-loving nature of the U.S. military.  Sure, its warriors and warfighters always define themselves as battle-ready, but the troops themselves don’t pick the fights.  Nor is it simply attributable to the Complex’s love of power and profit, though its members are hardly eager to push back against government decisions that feed the bottom line. To understand the silence of the military in particular in the face of a visible crisis of war-making, you shouldn’t assume that, from private to general, its members don’t have complicated, often highly critical feelings about what’s going on. The real question is: Why they don’t ever express them publicly?  To understand that silence means grasping all the intertwined personal, emotional, and institutional reasons why few in the military or the rest of the national security state ever speak out critically on policies that may disturb them and with which they may privately disagree. I should know, because like so many others I learned to silence my doubts during my career in the military.

First Evidence Surfaces of Foreign Money Pouring into U.S. Elections After Citizens United | Democracy Now! (interview & transcript) Six years ago, President Obama warned the nation that foreign corporations could soon pour money into the U.S. election system thanks to the Supreme Court Citizens United decision. Now, direct evidence has emerged for the first time showing a foreign company has indeed donated money to a federal campaign. Documentation obtained by The Intercept shows a company owned by Chinese nationals donated $1.3 million to Jeb Bush’s super PAC after receiving advice from a prominent Republican lawyer. To talk more about the exposé, we are joined by The Intercept’s Lee Fong, who co-wrote the multi-part series "Foreign Influence."

The Price of Access - Two billion dollars, the estimated cost of this year’s presidential election, is big money, but it is not huge money. Two billion is one-tenth of NASA’s annual budget, one-twentieth of the Harvard endowment, one-thirtieth of the personal wealth of Warren Buffett. Buffett is number two on the 2015 Forbes list of 106  Americans who hold personal fortunes of $5 billion or more, the Club of 106. These billionaires are rich enough to pay for the campaigns of both Hillary Clinton and Donald Trump and still have $3 billion left over. A lot of the money in Club 106 is family money. The Club includes two Kochs, four Waltons, three Marses, two Newhouses, and three Ziffs. Donald Trump was also born into big money. With a supposed net worth of $4.5 billion, he is brushing up against the velvet rope outside of Club 106. The Clintons, both born to families with ordinary incomes, are now worth around $110 million, which puts them way off from Club 106 and pretty far from you and me as well. .At least four of the members of Club 106 (Buffett, the Kochs, Bloomberg) have openly voiced their thoughts on who should be president. Five members (Soros, Simons, Cohen, Ellison, Bloomberg) are among the top 25 donors to the outside groups that have poured tens of millions of dollars into the campaign. Seven members (Bezos, Zuckerberg, Page, Brin, Murdoch, the Newhouses, Bloomberg) own large media and internet companies — Amazon, the Washington Post, Facebook, Google, Fox News, the New York Post, the Wall Street Journal, Condé Nast, Bloomberg — with the power to shape public opinion.

Stark New Evidence on How Money Shapes America’s Elections -  Lynn Parramore - Outrage over how big money influences American politics has been boiling over this political season, energizing the campaigns of GOP nominee Donald Trump and former Democratic candidate Sen. Bernie Sanders alike. Citizens have long suspected that “We the People” increasingly means “We the Rich” at election time. Yet surprisingly, two generations of social scientists have insisted that wallets don’t matter that much in American politics. Elections are really about giving the people what they want. Money, they claim, has negligible impact on elections. Now the researchers have turned their attention on political money in Congressional elections in a new paper for (INET).They begin with a simple question: What are the facts about total campaign spending and election outcomes? As they write: “We can pool all spending by and on behalf of candidates and then examine whether relative, not absolute, differences in total outlays are related” to the differences in votes received by the major political parties. Their answer is stunning: there is strong, direct link between what the major political parties spend and the percentage of votes they win – far stronger than all the airy dismissals of the role of money in elections would ever lead you to think, and certainly stronger than anything you read in your poli sci class.They show the strength of this relationship through a simple graph. The line going out to the right in the graph shows the Democratic percentage of the total money flowing into the race for the major parties and runs from 0 to 100 percent. The vertical line shows the percentage of the major party vote that the Democrats won. Dots represent individual House races in 2012.As Ferguson, Jorgensen, and Chen sum up: At the bottom left Democrats spend almost no money and get virtually no votes; at the top right, they spend nearly all the money and garner virtually all the ballots, calculated as proportions of totals for the major parties.

Bill And Hillary Clinton Made A Quarter Billion Dollars Since Leaving The White House, Mostly From Speeches -- 2015 was a bad year for the Clintons: with only $10.6 million in taxable income, as Hillary revealed earlier today in order to shame Trump in revealing his tax returns, this was a 60% drop from the record $27.9 million they earned in 2014, it was the lowest income the power couple made since 2010, and was the third lowest income they generated in the past decade. Of the $10.6 million, the dynastic presidential couple earned over 60%, or $6.7 million, from speaking fees: it was their top money-making activity by a wide margin. As reported earlier, the due also donated $1 million to "charity", of which 96% went to the Clinton Foundation. A breakdown of the Clinton's income shows that they have earned nearly a quarter billion dollars, or $237 million to be precise, since leaving the White House in 2001. The full breakdown is shown in the chart below.  Hillary Clinton has famously described herself as “dead broke” when they left the White House, saying they were in debt. "We had no money when we got there, and we struggled to piece together the resources for mortgages for houses, for Chelsea’s education. It was not easy. Bill has worked really hard. And it’s been amazing to me. He’s worked very hard." According to tax filings, the Clintons went from making $357K in 2000 to nearly $16 million in 2001. It is documented that speeches have been the primary source of income for the power couple. As CNN puts it, "The Clintons are millionaires, thanks to big businesses paying them sizable sums to speak at corporate events. It's a great way to make money, but it also comes with questions about whether the Clintons are too tied to corporate cash." Hillary clearly dialed back her paid speaking activity last year. She earned only $1.5 million. That's way down from the $10.5 million she garnered from speaking fees in 2014 and the $9.7 million she made in 2013.

96% Of Clinton Donations Went To The Clinton Foundation -- Moments ago, when we disclosed the Clinton's 2015 tax return, we posted a rhetorical question: "how much of the Clinton charity donations went to the Clinton Foundation? Taking a deduction for contributing to the employer of your daughter and expense payer of your husband is awesome." We now know: as page 29 of the tax return reveals, of the $1,042,000 in charitable cash contributions, exactly $1 million went to, you guessed it, the Clinton Family Foundation, whose expenses pay among others, those Clinton family members and friends employed by the foundation, like Chelsea Clinton is the foundation's Vice Chair. Call it the ultimate Clinton reacharound.

Clinton, Rubio, Cruz Receive Foreign Policy Advice From Same Consulting Firm - Consultants affiliated with a small Washington, D.C., firm called Beacon Global Strategies hold the unique privilege of providing high-profile foreign policy guidance to Hillary Clinton, Marco Rubio, and Ted Cruz, among others.The bipartisan firm was founded in 2013 by former senior officials from the State Department, Department of Defense, and Central Intelligence Agency, and quickly had more than a dozen clients, primarily defense contractors, according to Defense News. Philippe Reines and Andrew Shapiro, both considered part of Clinton’s inner circle of foreign policy advisers, are founders of the firm. Reines served as a longtime spokesperson for Clinton and Shapiro served as her assistant secretary of state for military affairs.Eric Edelman, a former Bush administration Defense Department official, is an advisory board member to Beacon Global Strategies and a leading foreign policy adviser to Marco Rubio’s presidential campaign. “It’s mostly about defense, but I’ve talked to him about the authorization of military force. I’ve talked to him about the campaign against ISIS, about Russia and Ukraine. There’s not a shortage of issues right now,” Edelman told Reuters. The news wire noted that that Edelman “regularly briefs the senator.” The Beacon Global Strategies advisory board, which includes retired Adm. James Stavridis and CNN contributor Fran Townsend, was established to “provide guidance to the BGS team on the full range of the firm’s activities, from particular projects to larger strategic initiatives,” the firm announced in 2013.

Sanders Supporters Stunned by Sudden Death of 38-Year Shawn Lucas Who Served the Lawsuit on the DNC and Wasserman Shultz -- On Friday, July 1, just ahead of the long Fourth of July weekend, a happy, exuberant process server, 38-year old Shawn Lucas of One Source Process, served a lawsuit at the Democratic National Committee headquarters in Washington, D.C. The lawsuit was filed on behalf of Senator Bernie Sanders’ supporters and named the DNC and its then Chair, Debbie Wasserman Schultz, as defendants. It leveled the following serious charges: fraud, negligent misrepresentation, deceptive conduct, unjust enrichment, breach of fiduciary duty, and negligence. The suit seeks class action status and was filed in the Federal District Court in the Southern District of Florida. (Wilding et al v DNC Services Corporation and Deborah ‘Debbie’ Wasserman Schultz; Case Number 16-cv-61511-WJZ). A video of the service of process (see embedded video below) shows Shawn Lucas saying he was “excited” and “thrilled” to be the process server on this lawsuit, later in the video equating it to his “birthday and Christmas” rolled into one. A month later, Lucas was found dead on his bathroom floor. A cause has yet to be announced. As of this writing, we could find no mainstream newspaper or wire service that has reported on the troubling death of Shawn Lucas. The original YouTube video, however, has skyrocketed from 32,000 views to more than 350,000 views as of this morning. The flurry of angry comments below the video are suggesting there is some form of Hillary Clinton hit squad in operation. According to the official report from the Metropolitan Police Department in Washington, D.C., officers Kathryn Fitzgerald and Adam Sotelo responded to a 911 call from the girlfriend of Lucas, Savannah King. The officers arrived “at 1913 hours,” or 7:13 p.m. on the evening of  Tuesday, August  2. The report states that Lucas was “laying unconscious on the bathroom floor” and that “DCFD Engine 9 responded and found no signs consistent with life.” Just hours before Lucas was found dead, there had been a major housecleaning of DNC officials implicated in the DNC emails leaked by Wikileaks, showing that key executives had secretly strategized on how to sabotage the campaign of Senator Bernie Sanders while bolstering the campaign for Hillary Clinton.  DNC Chair Debbie Wasserman Schultz had stepped down earlier as a result of the emails at the outset of the Democratic Convention but Politico reported on the afternoon of August 2 that “CEO Amy Dacey, communications director Luis Miranda and chief financial officer Brad Marshall” were leaving the DNC and that staffers had been told of the changes that very day. All three had been implicated by the leaked emails.

Clinton Body Count or Left-Wing Conspiracy? Three With Ties to DNC Mysteriously Die - -  Since the Democratic National Committee emails were leaked a few weeks ago, three people associated with the DNC have all been found dead under what could be questionable circumstances. Some — including Bernie Sanders supporters  — suspect the Clintons were behind the deaths, just more episodes in the alleged “Clinton body count” dating back to the 1990s. Others dismiss the speculation as left-wing conspiracy nuts. But until the police have completed their investigations and the medical examiners have released autopsy reports, it is premature to make any determinations. DNC staffer Seth Rich was mysteriously murdered in the streets of Washington, D.C., on July 10. Although it is being investigated as a robbery, his wallet, credit cards and watch were not taken. The 27-year old was shot in the back on July 10 at 4:15 a.m. near his affluent neighborhood, while he was reportedly walking home from his girlfriend’s apartment. Police still have no suspects, witnesses or motive. His mother told the local NBC station that there were bruises on his face, knees and hands, apparently from trying to fend off his attackers. Some are speculating that Hillary Clinton is behind the murder, because Rich could have been the DNC staffer responsible for leaking the 20,000 damaging DNC emails to Wikileaks. The allegation is that powerful Sanders allies convinced Rich to leak the data.  Shawn Lucas, along with filmmaker Ricardo Villaba, served the DNC on July 3 with a complaint and summons in a fraud action on behalf of Sanders supporters. In the video, he can be seen grinning, happy to do it. On August 2, he was found lying on the bathroom floor dead by his girlfriend when she came home that evening. His girlfriend said he was in good health.The former President of the United Nations General Assembly, John Ashe, mysteriously passed away on June 22, a few days before he was scheduled to begin pretrial meetings involving shady financial dealings regarding a former Clinton crony. Local police officers said he died from dropping a barbell on his throat while working out, but the UN oddly first claimed he died of a heart attack.

Wikileaks' Assange Hints Murdered DNC Staffer Was Email-Leaker, Offers $20k Reward For Info --The mysterious circumstances surrounding the death of 27-year-old Democratic-staffer Seth Rich (shot multiple times, and not robbed, at 420am near his home in Washington D.C., where no homicides have been reported within 1500 feet) have stirred Wikileaks founder Julian Assange to offer a $20,000 reward for information leading to a conviction. But it is Assange's comments during a Dutch TV interview that are most disturbing as he hinted that Rich - who was in charge of DNC voter expansion data - was the email-leaker and his death was a politically-motivated assassination. As The Hill notes, Police in Washington have been tight-lipped about the Rich investigation but have suggested they believed the crime was a robbery. Just last week, D.C. Police Chief Cathy Lanier said it was possible that Rich was killed in an attempted robbery. She spoke at an event with Rich’s mother, and both made a plea for tips that might help solve the case.

Democratic Strategist Calls For The Assassination Of Julian Assange -- Amid the media-hyped furor over Donald Trump's 2nd Amendment comments and Wikileaks' suggestions about the untimely death of DNC-staffer Seth Rich, we thought it perhaps of note that Democratic strategist, and CNN host, has publicly called for the "illegal assassination of that son-of-a-bitch" Julian Assange... Met Bob Beckel - Democratic strategist, CNN host (former Fox host), and clear "treasonous, traitor" Assange-hater...  Hillary Clinton strategist Bob Beckel called for WikiLeaks editor Julian Assange to be assassinated. #DNCLeak pic.twitter.com/9L2ixl24Er — This strikes us as very dangerous talk... We wonder if he is being questioned or investigated for such a public and unquestionable demand for someone to be murdered? Forget due process... "just kill the son of a bitch."

Newly Released Emails Highlight Clinton Foundation’s Ties to State Department -- WSJ —A conservative watchdog group on Tuesday released 296 pages of emails from former Secretary of State Hillary Clinton’s personal server, including many exchanges that weren’t handed over to the government as part of the Democratic nominee’s archive. The new emails, released by the group Judicial Watch, offer fresh examples of how top Clinton Foundation officials sought access to the State Department during Mrs. Clinton’s tenure. The documents were obtained through a Freedom of Information Act lawsuit filed by Judicial Watch against the State Department. A spokesman for the Clinton Foundation, a nonprofit organization established by former President Bill Clinton, didn’t immediately return requests for comment. Mrs. Clinton had attached her name to the foundation after she left the U.S. government and subsequently removed it when she started her presidential campaign. In an exchange from April 2009, a longtime aide to Mr. Clinton told three of Mrs. Clinton’s top advisers that it was “important to take care of” a particular person, whose name has been redacted from the document. That person had written the aide, Doug Band, under the subject line “A favor…” to thank him for the “opportunity to go on the Haiti trip,” which the person called “eye-opening.” Mr. Band was a chief adviser in helping Mr. Clinton launch the Clinton Foundation after leaving the White House.

FBI Mutiny? Feds Said To Launch Clinton Foundation Corruption Probe Despite DoJ Objections -- Having detailed Clinton-appointee Loretta Lynch's DoJ push-back against the FBI's Clinton Foundation probe, it seems Director Comey has decided to flex his own muscles and save face as DailyCaller reports, multiple FBI investigations are underway involving potential corruption charges against the Clinton Foundation, according to a former senior law enforcement official.  The Department of Justice had looked into allegations surrounding the foundation a year earlier after the release of the controversial book "Clinton Cash," but found them to be unsubstantiated and there was insufficient evidence to open a case.  As so as a result...DOJ officials pushed back against opening a case during the meeting earlier this year. Some also expressed concern the request seemed more political than substantive, especially given the timing of it coinciding with the investigation into the private email server and Clinton's presidential campaign. However, as DailyCaller reports, The FBI is undertaking multiple investigations involving potential corruption changes against The Clinton Foundation... The investigation centers on New York City where the Clinton Foundation has its main offices, according to the former official who has direct knowledge of the activities. Prosecutorial support will come from various U.S. Attorneys Offices — a major departure from other centralized FBI investigations. The New York-based probe is being led by Preet Bharara, the U.S. attorney for the Southern District of New York.   The official said involvement of the U.S. Attorney’s Office in the Southern District of New York “would be seen by agents as a positive development as prosecutors there are generally thought to be more aggressive than the career lawyers within the DOJ.”

Guccifer 2.0 hacked DCCC - Guccifer 2.0. - Hi all! It’s time for new revelations now. All of you may have heard about the DCCC hack. As you see I wasn’t wasting my time! It was even easier than in the case of the DNC breach. As you see the U.S. presidential elections are becoming a farce, a big political performance where the voters are far from playing the leading role. Everything is being settled behind the scenes as it was with Bernie Sanders.  I wonder what happened to the true democracy, to the equal opportunities, the things we love the United States for. The big money bags are fighting for power today. They are lying constantly and don’t keep their word. The MSM are producing tons of propaganda  hiding the real stuff behind it. But I do believe that people have right to know what’s going on inside the election process in fact. To make a long story short, here are some DCCC docs from their server. Make use of them.

• Publication Passwords
• 2016 Cycle Passwords
• Coordinated Shared Passwords

By the way, the complexity of the passwords leaves much to be desired. Here are more docs from the DCCC server.

Exclusive: Congressional leaders were briefed a year ago on hacking of Democrats - sources | Reuters: U.S. intelligence officials told top congressional leaders a year ago that Russian hackers were attacking the Democratic Party, three sources familiar with the matter said on Thursday, but the lawmakers were unable to tell the targets about the hacking because the information was so secret. The disclosure of the Top Secret information would have revealed that U.S. intelligence agencies were continuing to monitor the hacking, as well as the sensitive intelligence sources and the methods they were using to do it. The material was marked with additional restrictions and assigned a unique codeword, limiting access to a small number of officials who needed to know that U.S. spy agencies had concluded that two Russian intelligence agencies or their proxies were targeting the Democratic National Committee, the central organizing body of the Democratic Party. The National Security Agency and other intelligence agencies sometimes delay informing targets of foreign intelligence activities under similar circumstances, officials have said. The alleged hacking of the Democrats and the Russian connection did not become public until late last month when the FBI said it was investigating a cyber attack at the DNC. The DNC did not respond to a request for comment for this story. The congressional briefing was given last summer in a secure room called a Sensitive Compartmented Information Facility, or SCIF, to a group of congressional leaders informally known as the "Gang of Eight," the sources said.

More on Trump's Tax Returns - Linda Beale - Today's New York Times Op-Ed by Mitchel Zuckoff (a journalism prof at Boston University), titled "Why We Ask to See Tax Returns" (Aug. 6, 2016), at A19, goes beyond my list of reasons taxpaying voters may learn items of interest from reviewing presidential candidates' tax returns.  Looking at the history of the tax return disclosure precedent and the way it adds value "as a measure of character", Zuckoff says outright what I merely hinted at in talking about tax scams--a presidential candidate could be a crook and taxpayers deserve to know!  It started with Richard M. Nixon, and Congress's July 1969 decision to eliminate what seemed like a gigantic tax-avoidance loophole that allowed sitting presidents to take large tax deductions for donating presidential papers to an archive. Congress observed, notes Zuckoff, that "a president's papers already belong[] to the public."  As for Nixon, his 1969 tax return claimed a half million dollar deduction (quite a huge sum 47 years ago) for donating presidential documents 4 months before the law change. Eventually, the IRS did audit Nixon's returns. Eventually, too, Nixon gave in to the pressure from the press and released 5 years of returns in December 1973 and asked a congressional committee to review his gift of presidential papers.  Eventually, Nixon resigned from office under threat of impeachment because of the Watergate coverup, and had to pay a considerable amount to the IRS.

Trump admits some benefits to trade : Donald Trump on Monday softened his harsh criticism of free trade when he declared that isolationism is “not an option” and acknowledged some positives of free-trade agreements — but he still wants to get rid of TPP and renegotiate NAFTA. "Trade has big benefits, and I am in favor — totally in favor — of trade," Trump said during a nearly hourlong economic policy speech at the Detroit Economic Club. "But I want trade deals for our country that create more jobs and higher wages for American workers. Isolation is not an option. Only great and well-crafted trade deals, where we as a country for once benefit instead of being taken advantage of." The real estate mogul offered few new trade policy specifics in his speech, which also focused on tax, regulatory and energy reform. He criticized Hillary Clinton for her past support of free-trade deals, highlighted the trade in goods deficit without mentioning the services surplus, and promised to make trade enforcement against China “the center” of his trade policy plan. And despite fewer than 100 days remaining until Election Day, Trump promised more details in the coming weeks.

Will Hillary Clinton Flip-Flop Again on TPP After Election Day? We Ask Her Adviser Joseph Stiglitz | Democracy Now! (video & transcript) As President Obama addressed the Democratic National Convention last night, delegates held up signs denouncing the sweeping trade deal called the Trans-Pacific Partnership. Obama has been pushing through the TPP, which encompasses 12 Pacific Rim nations, including the United States, and 40 percent of the world’s economy. Both Hillary Clinton and Donald Trump have come out opposing the deal amid a wave of public protest by those who say it benefits corporations at the expense of health and environmental regulations. This week, Virginia Governor Terry McAuliffe told Politico that he believes Hillary Clinton would support the TPP if she were elected president. The trade agreement will be one of the main economic issues the incoming president will have to address. Others include unprecedented levels of inequality, mounting student debt and financial sector reforms. We speak with Joseph Stiglitz, Nobel Prize-winning economist, Columbia University professor and chief economist for the Roosevelt Institute.

On Trade, Our Choices Aren’t Only Xenophobic Nationalism Or Neoliberal Globalization -  Few issues are receiving a more insipid—and thus more harmful—treatment in our public discourse than world trade. Along with immigration, “free trade” is now the foremost symbol of a supposed either/or choice between globalism and nationalism. “Globalists” generally hail the liberal marketplace as the engine of economic prosperity and assail its critics as uneducated and irrational isolationists, while “nationalists” instinctively identify trade with economic decline (or at least the loss of good working-class jobs), rising inequality and a general loss of control over the future. As CNN host Fareed Zakaria put it after Britain voted to leave the EU, “the new politics of our age will be not be left versus right, but open versus closed.” This framework risks closing off our best possibilities for building a progressive economic future. We need a new paradigm. Some historical perspective is first in order. That is the only way to account for the fact that those forces—call them white working class— today most deeply resentful of the open market were among its loudest champions during the first three decades after World War II.

The Warren Buffett Economy: How Central-Bank-Enabled Financialization Divided America - David Stockman - During the 29 years after Alan Greenspan became Fed chairman in August 1987, the balance sheet of the Fed exploded from $200 billion to $4.5 trillion. Call that a 23X gain.That’s a pretty massive increase—so let’s see what else happened over that three-decade span. Well, according to Forbes, Warren Buffett’s net worth was $2.1 billion back in 1987 and it is now about $73 billion. Call that 35X. During those same years, the value of non-financial US corporate equities rose from $2.6 trillion to $36.6 trillion. That’s on the hefty side, too. Call it 14X and take the hint about the idea of financialization. The value of corporate equities rose from 44% to 205% of GDP during that 29-year interval. Needless to say, when we move to the underlying economy which purportedly gave rise to these fabulous financial gains, the X-factor is not so generous. As shown above, nominal GDP rose from $5 trillion to $18 trillion during the same 29-year period. But that was only 3.6X Next we have wage and salary disbursements, which rose from $2.5 trillion to $7.5 trillion over the period. Make that 3.0X. Then comes the median nominal income of US households. That measurement increased from $26K to $54K over the period. Call it 2.0X. Digging deeper, we have the sum of aggregate labor hours supplied to the nonfarm economy. That fairly precise metric of real work by real people rose from 185 billion hours to 240 billion hours during those same 29 years. Call it 1.27X. Further down the Greenspan era rabbit hole, we have the average weekly wage of full-time workers in inflation adjusted dollars. In constant 1982 dollars that was $330 per week in 1987 and is currently $340. Call that 1.03X Finally, we have real median family income. At about $54,000 then and now, call it a three decade long trip to nowhere if you credit the BLS inflation data. But when you deflate nominal household income by our more accurate Flyover CPI per the last chapter, you end up at the very bottom of the Maestro’s rabbit hole. Median real household income went backwards! It now stands at just 0.8X of its starting level. So 35X for Warren Buffett and 0.8X for working people. That is some kind of divide.

MF Global 5 Years Later: PWC Set To Take The Fall As Corzine Still Untouched -- Jon Corzine, former Governor of New Jersey and CEO of Goldman Sachs, took over the helm of MF Global in March 2010.  When revenue at the bank failed to live up to expectations, Corzine developed a scheme to place a massive $6BN bet on the sovereign debt of the aptly named PIIGS (Portugal, Italy, Ireland, Greece, Spain) through a financial structure known as a "Repo to Maturity".  To summarize the strategy for all you aspiring CEO's, when you find it difficult to generate organic revenue growth sometimes the better option is to just bet your entire firm on a single, massively-levered trade on the sovereign debt of countries on the verge of insolvency.  Well, not so much.  Deterioration of the Eurozone economies in mid-2011 resulted in massive margin calls on Corzine's trade and a liquidity crisis at MF Global.  By the time the dust settled there was $1.6BN of cash "missing" from customer accounts which should have been segregated.  And with that, less than 2 years after Mr. Corzine took the CEO seat, MF Global filed for bankruptcy protection on October 31, 2011 in the Southern District of New York.   Well apparently it's not that big of a deal unless you're the scapegoat accountants. Yesterday, U.S. District Court Judge Victor Marrero of New York denied PwC’s motion for dismissal of a $1 billion professional malpractice suit filed by MF Global against the accounting firm saying that the administrator had "presented sufficient evidence to create a material factual dispute" as to whether advice from PwC ultimately played a role in the bankruptcy filing.  According to the WSJ: MF Global sued PwC in March 2014 for at least $1 billion, alleging that the firm’s accounting advice helped cause MF Global’s 2011 collapse. Officials in charge of MF Global’s liquidation claimed PwC gave “flatly erroneous” advice on how to account for the European sovereign debt that tipped MF Global into bankruptcy. MF Global’s lawsuit against PwC claims the accounting firm’s advice is what allowed Mr. Corzine to make such a big bet in the first place, a charge PwC has denied.

Bill Black: Thomas Friedman’s Big Idea for Hillary – Embrace Wall Street and Deregulation Thomas Friedman’s economic illiteracy and sycophancy for Wall Street “elites” have never been in doubt, but he has (unknowingly) plumbed new depths in his columns advising Hillary Clinton to remake the Democratic Party in Bill’s image – by embracing Wall Street’s dream of deregulation. Friedman has literally learned nothing from the three great epidemics of accounting control fraud (“liar’s” loans, inflated appraisals, and fraudulent resale of these fraudulently originated mortgages) that drove the financial crisis and the Great Recession. Friedman gives no indication that he realizes that (1) his economic dogmas were all falsified by our recurrent financial crises and (2) the policies implemented on the basis of those dogmas proved disastrous.Friedman advises Hillary to embrace Wall Street elites and adopt the deregulatory, desupervisory, and de facto decriminalization (the three “de’s”) policies that Ronald Reagan, Bill Clinton, and George W. Bush implemented. The three de’s have created the “criminogenic environments” that led to the epidemics of accounting control fraud that drove the savings and loan debacle, the Enron-era accounting control fraud scandals, and the most recent crisis. Friedman urges Hillary to use Bill as her model and embrace elite bankers and financial deregulation because, what could go wrong?In his column entitled How Clinton Could Knock Trump Out, Friedman bemoans “the anti-bank sentiment of the Democratic Party.” Friedman’s only implicit recognition that bank CEOs were the problem rather than the solution was a trademark Friedman slogan that he uses as his substitute for analysis and proposing an actual policy. We need to prevent recklessness, not risk-taking.

Trump to Propose Moratorium on New Financial Regulations - Donald Trump will propose a temporary moratorium on new financial regulations in an economic speech Monday in Detroit in an effort to draw a stark contrast with the domestic policies of Hillary Clinton, who he says “punishes” the American economy. The Republican presidential nominee’s speech will focus on providing regulatory relief for small businesses, according to senior campaign aides familiar with its contents. More broadly, Trump will say he will not propose any new financial regulations until the economy shows “significant growth,” the aides said. Trump has previously said he would repeal and replace the 2010 Dodd-Frank Act.  Trump will also propose a repeal of the estate tax, sometimes called the “death tax.” Under current law, the 40 percent tax applies only to estates larger than $5.45 million for individuals and $10.9 million for couples. For U.S. businesses, Trump will propose a tax rate of 15 percent and suggest strengthening intellectual-property protections. He’s expected to call for three income-tax brackets, down from the current seven. He’ll call for the elimination of special tax treatment for carried-interest income at private-equity firms and other investment firms—the latter of which is a proposal his Democratic rival also supports. Carried interest, which is a portion of investment gains paid to certain investment managers, is currently taxed like capital gains—at rates that can be as low as 23.8 percent. Trump proposes to tax them as ordinary income, but for members of partnerships, that could actually mean a rate cut to 15 percent.

Donald Trump Pitches Tax Breaks, Moratorium on New Regulations - WSJ:  Republican presidential nominee Donald Trump hammered sharp contrasts with Democratic nominee Hillary Clinton’s policies, which he said amounted to more wealth redistribution and government regulation. He also called for aggressive sanctions against U.S. trading partners, a rollback of environmental regulations and large tax cuts for individuals and businesses.  He promised to unveil a big infrastructure-spending plan, embracing a signature goal of Democrats, as well as a new proposal to help families facing rising child-care costs by allowing households to deduct those expenses from their income taxes. It wasn’t clear how such a tax break might be structured and whether it would be available to tens of millions of families that don’t pay income taxes because they have lower incomes. Making child-care expenses fully deductible would provide much larger benefits to the wealthiest families that have larger tax bills. Mr. Trump’s economic message has long promised to boost job growth, but it has included fewer appeals to voters on pocketbook issues such as child care and college tuition—a focus of Mrs. Clinton’s. Mr. Trump delivered his hourlong speech at the Detroit Economic Club, a venue that has played host to several presidential candidates, and read from a teleprompter with few of the impromptu riffs that have been a staple on the stump. The address was interrupted numerous times by protesters, with Mr. Trump quietly pausing until each protester was removed. On Monday, Mr. Trump also called for a temporary moratorium on all new regulations from federal agencies and would seek to roll back rules that reduce employment. The campaign said the review could target a series of environmental rules issued by the Environmental Protection Agency to curb carbon-dioxide emissions from power plants and to bring more waterways and wetlands under federal protection. It isn’t clear how such a moratorium would apply to financial regulators, whose agencies enjoy greater independence from the executive branch, and Mr. Trump’s speech made no mention of past calls to repeal or replace parts of the Dodd-Frank financial-regulatory overhaul law.

CRFB Calculates What Donald Trump's Revised Tax Plan Will Do To US Debt  -- Following the release of Donald Trump's "original" economic plan, his opponents had a field day with his tax proposals and economic agenda, which according to the Committee for a Responsible Federal Budget (CRFB) would boost US Federal debt by $9.25 trillion from the tax cuts alone, while his comprehensive agenda would add over $11.5 trillion to the national US debt. Needless to say, the Fed and other central banks who are desperate to find more securities to monetize, were salivating at the option, although it probably would be difficult to explain a decade from now why US debt is yielding 0%, or negative, with a debt/GDP ratio of over 200%. Which is why, Trump had no choice but to revise his economic proposal which he did earlier today, in a speech which as we reported was interrupted at least 14 times. More importantly, moments ago the CRFB scored Trump's adjusted proposal, and found that as a result of the revisions to his tax plan, total US debt would increase by only $2.55 trillion over a decade, nearly five times less than his original proposal, and certainly a far more realistic number to pitch to America's conservatives.Here is the CRFB's assessment: CRFB Responds to Donald Trump’s New Tax Plan. In a speech today at the Detroit Economic Club, presidential candidate Donald Trump announced revisions to his tax reform plan, suggesting that details will be provided in the coming days. “It’s encouraging that Donald Trump appears to be modifying his tax plan, which would push America toward an unprecedented level of debt unless it is significantly changed,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.  In the June report Promises and Price Tags, the Committee for a Responsible Federal Budget estimated that his original tax plan alone would cost roughly $9.25 trillion over the course of a decade, while his entire agenda would add $11.5 trillion to the national debt, including interest, by 2026. Based on today’s speech – which proposes individual tax rates of 12 percent, 25 percent, and 33 percent instead of 10 percent, 20 percent, and 25 percent - Trump’s new tax plan is likely to cost significantly less. However, the plan is still likely to add substantially to the debt, particularly the plan to cut business taxes, which we previously estimated would cost about $2.55 trillion over a decade.

Trump agenda looks like more of the same - Dean Baker  Republican presidential nominee Donald Trump gave his first major economic address on Monday. Most of the speech was devoted to putting forward a more or less standard set of Republican policies -- Trump promised large tax cuts that would primarily benefit higher-income taxpayers, ending the Affordable Care Act and curtailing government regulation. But he also broke with Republican orthodoxy, rejecting the Trans-Pacific Partnership, proposing renegotiating NAFTA, and vowing to take a firmer stance on currency management and other issues with our trading partners. The proposal for tax cuts would put in place a system with three tax brackets of 12%, 25%, and 33%. Trump didn't indicate the cutoffs for the brackets, so it's not possible to determine how much the different groups would save. However, it is certain that the highest-income taxpayers would save under the Trump plan.  Currently, high-income taxpayers pay a 39.6% tax rate on income over $415,000 for a single individual. If a high-level executive or Wall Street trader makes $2.4 million a year (roughly the average for the richest 1%), they would save $120,000 from their tax bill just on the reduction in the top tax bracket. For the richest 0.1%, the savings would average almost $700,000 a year. Trump also called for large cuts in the corporate tax rate. Currently, corporations pay on average a bit more than 25% of their profits in taxes. Trump committed to a tax code in which no corporation would pay more than 15% of its profits in taxes. This implies a reduction in revenue from the corporate income tax of more than 25%, or a loss in revenue of close to $100 billion a year. These tax cuts are virtually certain to lead to large deficits, as occurred with previous tax cuts under President Ronald Reagan and President George W. Bush. Some increase in the deficit would actually be a good thing, because the economy has not yet replaced the demand lost when the housing bubble burst. However, Trump's plan almost certainly goes too far and will lead to high interest rates and/or serious problems with inflation.

Some points you may have missed on Trump’s ill-advised tax plan - Jared Bernstein - As you’ve probably seen, Donald Trump talked mostly tax policy yesterday in a big speech in Detroit. He’s amending his original tax plan, which I guess he no longer thinks is as awesome and amazing as when he first introduced it. Here are a few points which, amidst all the hoopla, you might not have picked up on. Interestingly, the plan is pure, old-fashioned, supply-side, trickle-down orthodoxy. How that squares with Trump’s play for disaffected working class voters hurt by globalization is left as an exercise for the reader (because I don’t get it). Believe me, those voters benefit not one cent from eliminating the estate tax. I assume his motives are a) a sop to the top 1% who fund such campaigns, b) a way to shrink gov’t by starving it of revenues, and c) a signal to the Ryan wing of the party that “despite all the cray-cray, I’m really with you re the parts you care most about (eg, a and b).”  He claims to close one loophole but opens up a much bigger one. This, to me, is a big deal that’s easy to miss. I’m talking about the Trump plan for a 15% tax rate on “pass-through” income. His updated plan sets the top income tax rate at 33% but creates “a much lower rate than 33 percent for a substantial number of very-high-income households by allowing people to pay a new low rate of 15 percent on “pass-through” income (business income claimed on individual tax returns).  More than two-thirds of all pass-through business income flows to the top 1 percent of tax filers (see figure).”  Being of sound fiscal personality, I probably wouldn’t go there, but if you’re in the top income bracket, any putz with a tax lawyer will march into their boss’s office and declare that “I’m no longer Joe Paycheck, I’m Joe Paycheck, LLC. Pay me the same salary but call it consultant’s fee for services provided by my limited partnership.” Joe then passes that income through from the business to the personal side of the tax code and pays 15% on it.

Donald Trump Sells Out To Trickle-Down Economics -- From the beginning of Donald Trump’s campaign, there has been a nagging inconsistency in his approach to economic issues. On trade and immigration, he has broken with Republican dogma, arguing that the influx from abroad of cheap goods and low-wage workers has undermined the job prospects and living standards of ordinary Americans. On tax policy, however, Trump has stuck to the standard G.O.P. script, promising a slew of tax cuts skewed toward businesses and the rich. To be sure, until Monday, Trump hadn’t talked much about his tax plan, but the broad outlines of it were there on his Web site, serving as a reminder of the limits of his populism.Trump rolled out his original tax plan last September, after his Republican-primary opponents accused him of lacking policy specifics. I thought at the time that adopting trickle-down economics represented a strategic error for a candidate who was promoting himself as a new type of Republican. Instead of saying he’d slash business taxes and bring the top rate of income tax down to twenty-five per cent, Trump could have promised tax cuts and tax credits targeted specifically at middle-class Americans, citing the fact that wealthy Americans were doing fine and didn’t need another handout. For instance, he could have suggested raising the upper-income cut-off on Social Security contributions and using the cash this generated to pay for higher benefits for everybody. Or he could have eschewed tax cuts aimed at the wealthy in favor of expanding the Earned Income Tax Credit, which boosts the take-home pay of low-income working families.It’s true that without any offsetting cuts in spending, such a tax plan would have raised the hackles of deficit hawks—but the plan he did introduce raised those hackles anyway. A plan aimed at the middle class, however, could have complemented Trump’s populist line on immigration and trade, wrong-footed the Democrats, and allowed him to claim he had a three-pronged approach to raising wages and living standards. In short, it would have made him a much more formidable candidate.

 How can Trump support deregulation and Glass-Steagall? - Peter J. Wallison -- The Republican platform’s proposal to reinstate Glass-Steagall is hard to understand, even in the confused policy mishmash created by Donald Trump. The best interpretation is that it’s an awkward outreach to the disappointed “progressive” supporters of Elizabeth Warren and Bernie Sanders. The worst is that it calls into question whether Donald Trump really supports financial deregulation. The key problem for those Republicans who are now warily supporting their presidential nominee is that it is not clear where he will lead the party in this election—and the country—if he wins. Is he committed to anything, really, or is he just twisting and turning to win the presidency, only to decide later what he wants to do? In this sense, favoring the reinstatement of Glass-Steagall is a bad omen. Glass-Steagall was modified in 1999—permitting bank holding companies (but not banks themselves) to engage in the securities business—for a simple reason. Since the mid-1980s, the securities markets had been outcompeting banks in the business of financing corporate America.If that trend continued, banks would eventually be forced out of financing all but the smallest businesses. This had been predicted in the Reagan administration, when the idea of modifying Glass-Steagall was first proposed.  Those who advocate the reinstatement of Glass-Steagall should be careful what they wish for. But it is the symbolic importance of reinstating Glass-Steagall, endorsed by the Trump campaign, that should concern us. Trump and some of his “free market” advisers have proposed deregulation of the economy, including a repeal of the Dodd-Frank Act and a temporary suspension of all new regulations. Good. That, plus a sensible tax policy, will restore the economic growth that the Obama policies have suppressed.

Trump's Call to Freeze New Banking Regs Would Be Tough to Deliver | American Banker: — Republican presidential nominee Donald Trump called for a temporary suspension of all new federal regulations during a speech Tuesday, but even if he wins the White House, stalling or rolling back financial rules may prove to be beyond his reach. "Upon taking office, I will issue a temporary moratorium on new agency regulations," Trump said in prepared remarks at the Detroit Economic Club. Trump cited some estimates that claim "overregulation is costing our economy as much as $2 trillion a year" and said his running mate, Mike Pence, "signed a similar order when he became governor of Indiana" that suspended new regulations. He also said he would determine which regulations to do away with by asking "every federal agency to prepare a list of all of the regulations" that are "are not necessary, do not improve public safety, and which needlessly kill jobs."Yet Trump's remarks were met with skepticism from financial industry observers, who suggested it either wasn't possible or wouldn't be helpful if it were. "I don't think a full-on moratorium is even plausible," said Ian Katz, a policy analyst Capital Alpha Partners. "There are independent agencies that don't need to ask the president's permission to pass new regulations." Mark Calabria, director of financial regulation studies at the Cato Institute and a former GOP Senate Banking aide, said it may also be too late to delay or revoke many Dodd-Frank Act regulations, as Trump has said he would do. "Most of Dodd-Frank has been implemented or proposed, so the impact would be minor," Calabria said. Katz said that as a practical matter, Trump was sending a "sweeping message that there has been too much regulation, and he's vehemently opposed to adding to the burden. He got that point across, but an actual moratorium isn't workable."

Thomas Friedman: This Time is Different: Deregulation Makes Banking Safe - Bill Black - In this column I focus on Thomas Friedman’s plea that Hillary Clinton embrace deregulation, desupervision, and de facto decriminalization (the three “de’s”) and the Trans-Pacific Partnership (TPP) as a “knock-out” political strategy against Donald Trump and as a means to produce dramatic economic growth and financial stability.  He claims that embracing the three “de’s” and the TPP creates an “open system.” Friedman presented this advice in two columns he addressed to Hillary to mansplain the economy to her.  His first column was the unintentionally hilarious “Web People vs. Wall People.”  It consists of a surfeit of slogans masquerading for analysis. Web People understand that in times of rapid change, open systems are always more flexible, resilient and propulsive; they offer the chance to feel and respond first to change. As I explained in my last column, “open systems” is systems theory jargon for a system that adapts to change by self-organizing.  I explained why social systems, including economics, are not “open systems.”  I showed that “flexible, resilient, and propulsive” were amoral and euphemistic descriptors for what, in the social sphere, would include genocide, mass rape, slavery, and torture. In this column I apply the “open systems” jargon to Friedman’s endorsement of the three de’s in finance.  In my next column I deal with his support for further eviscerating health and safety regulation through the TPP.  Friedman’s heroes as heads of state were Bill Clinton (he urges Hillary to emulate his economic policies) and Tony Blair.  Blair consciously modeled driving “New Labour’s” economic policies far to the right on the identical strategy that Bill Clinton and his fellow “New Democrats” used to drive the Democratic Party to adopt what had traditionally been (harmful) Republican policies.  The “New Democrats’” structure was the Democratic Leadership Council (DLC), which was funded by Wall Street elites and worked assiduously and slavishly to advance the interests of those elites.

Big Wall Street Firms Make Lame Excuse for Volcker Rule Non-Compliance, Ask for Additional Five Year Extension  - Yves Smith - Because it’s become so routine, it’s hard to get outraged about brazen behavior by the Wall Street heavyweights, but this incident is a noteworthy exception. Major Wall Street firms are asking a clearly-in-the-tank-for-them Fed to delay Volcker Rule implementation an astonishing additional five years. And what’s the excuse? That they have some “illiquid” positions that they need more time to sell. This is after implementation of the Volcker Rule having first been pushed back by four years and the banks having obtained an additional three years of extensions.  Anyone who knows bupkis about finance knows if you can’t sell a financial asset in three years (or more accurately, seven), particularly with public and private market valuations at record levels, the problem is not liquidity. It’s valuation. These banks are carrying these holdings on their books at inflated marks and don’t want to recognize losses. As we discuss below, the Fed has repeatedly behaved in an intransigent manner regarding the Volcker Rule, effectively thumbing its nose at Congress. As we reported in the runup to the crisis, it behaved the same way with the Home Ownership and Equity Protection Act, which was meant to limit abuses with high interest rate mortgage loans, particularly refinances and home equity loans. As we wrote at the time, Fed officials dismissed the notion that homeowners ever could be the victims of bank abuses. Any fraud was borrower fraud. By contrast, even the famously bank cronyistic Office of the Comptroller of the Currency took HOEPA enforcement far more seriously. So the Fed’s defiance of the will of Congress has played a direct role in contributing to systemic risk,. The central bank again seems determined to shelter banks rather than do its job. The idea of a five-year extension seems to be far outside the Fed’s authority under the Volcker Rule. If this does happen, it will rely at best on a strained interpretation, which really boils down to force majeure: who will stop the Fed if it ignores the law and comes up with a shabby pretext?

Private Equity‘s Latest Con: Using Fund-Level Borrowing to Juice Reported Returns While Increasing Investor, and Even Systemic, Risk -- Yves Smith - For the last couple of years, we’ve been monitoring a troubling development in private equity, the use of “subscription line financing”. This innocuous-sounding term is for a credit line, offered by a bank, to allow general partners to borrow at the level of the investment fund. This is in addition to the considerable borrowing that already occurs in private equity, at the portfolio company level, where 70% of the purchase price typically comes from lenders. Troublingly this practice, which even major players like Bain Capital decry as dangerous, appears to have gone mainstream. As we’ll explain, it makes already-exaggerated returns in private equity look more attractive than they are, and not merely through the raw application of leverage but by changing how investment cash flows are reported. And it greatly increases the risk of investing in private during financial shocks. That feature wipes out one of the supposed advantages of private equity, that private equity appears to do well in bear markets, when in fact private equity partners are merely providing rosy portfolio values. The more general partners use these subscription lines of credit, the more private equity will amplify investor risks rather than reduce them.

Here’s Why Americans Are Mad as Hell at Wall Street and Washington - Pam Martens -- Wall Street is an insidiously corrupt financial system that now operates as an institutionalized wealth transfer mechanism that is hallowing out the middle class, leaving one of every five children in our nation living in poverty, while funneling the plunder to the top one-tenth of one percent. Tens of millions of Americans clearly understand that an entrenched system of corruption such as this, perpetuated through a revolving door between Wall Street and Washington, while enshrined by a political campaign finance system that recycles a portion of the plunder to ensure greater plunders, will inevitably leave the nation’s economy in tatters — again. That’s because systemic corruption and legalized bribery within the financial arteries of the nation can only create grossly perverse economic outcomes. The actual role of Wall Street is to fairly and efficiently allocate capital to maximize positive economic outcomes for the nation. Under the current model, Wall Street is focused solely on maximizing profits in any manner possible, including fraud and collusion, to maximize personal enrichment. When Senator Bernie Sanders said during his campaign stops and a presidential debate that “the business model of Wall Street is fraud,” there was a long, substantive archive of facts to back up that assertion.

BofA: "45% Of The Global Bond Market Is Now Compromised By Central Bank Buying" -- The market’s attention this week was focused on the Bank of England’s decision to purchase £10 billion in corporate bonds over the next 18 months. By doing so Mark Carney, like Draghi, has opened up a Pandora's box, since ultimately corporate debt is nothing more than post-petition equity, and all it would take to make the BOE (or ECB) an activist stakeholder in an legal process is for the obligor to go bankrupt.Central banks are taking us to a place with no precedent, which is becoming more dangerous by the day: not a single "expert" dares to refute any more that the only reason the S&P500 is at record high is because global central bank QE has hit a record $180 billion per month. Worst of all, they are doubling and redoubling down at every occasion, with the naive excuse that they are reducing corporate funding costs in hopes of stimulating growth.    As this charade continues, it is the average citizen who is paying the price. With virtually earning 0% at every bank (if not negative rates), and their tax money being risked by unaccountable bureaucrats, it is time we stop this madness. Perhaps instead of endlessly wondering why 2% growth is not attainable, it is worth realizing that overburdening the world with debt significantly burdens any other economic activity, and the main culprits will be the Central Banks. Then again, maybe we won't have long to wait. As Bank of America's Barnaby Martin calculates, following the BOE relaunch of QE, "around 45% of the global fixed income market is now “compromised” by central bank buying." According to BofA, the winners of the BOE's latest scramble, will not be consumers or the economy, but debt markets that are untouched by central banks. For now. As for the loser of QE, it is a well known one: volatility, also "for now." With 2 corporate QEs now ongoing in Europe, the loser is market volatility. Note how unresponsive credit spreads has been to the drop in the oil price since June. True, seasonals may be behind the latest oil price decline, rather than something more menacing. But as chart 8 shows, the credit market was highly positively correlated with the oil price in the first quarter of this year (correlation between the iTraxx Crossover index and oil was 90%). Now the credit market is ignoring oil and the correlation has declined significantly and is now negative (-50%). In fact, the correlation between oil and US high-yield energy spreads has conspicuously broken down (chart 9).

How the Fed Promoted “Financial Dominance” and Shadow Banking by Promoting Repo -- Since the 1980s, central banks have been increasingly freed from fiscal dominance, the obligation to monetize government debt. The new regime of monetary dominance celebrated the (price) stability benefits of insulating scientific monetary policy from poorly theorized, highly politicized fiscal policy. Yet the growing dominance of the ‘monetary science, fiscal alchemy’ view in both academia and policy circles played a critical role in the rapid rise of shadow banking. The untold story of shadow banking is the story of (failed) attempts to separate monetary from fiscal policy, and of the bordeland that connects them, mapped onto the repo market. While the state withdrew from economic life, privatizing state-owned enterprises or state banks, and putting macroeconomic governance in the hands of independent central banks, its role in financial life grew bigger. Sovereign debt evolved into the cornerstone of modern financial systems, used as benchmark for pricing private assets, for hedging and as base asset for credit creation via shadow banking. The state’s role as debt issuer, passive and systemic at once, has been reliant, beyond the arithmetic of budget deficits, on the intricate workings of the repo trinity. The quiet revolution in crisis central banking that involves direct support for core markets may appear like, but does not entail a return to, fiscal dominance. Rather, it creates financial dominance, defined as asymmetric support for falling asset prices. While financial dominance should be addressed by direct regulatory interventions, the quest for biting repo rules has so far proved illusive. The precise impact of Basel III liquidity and leverage rules is yet to be determined, whereas the failed attempts to include repos in the European Financial Transactions Tax and the FSB’s watered-down repo proposals suggest that (countercyclical) collateral rules are only possible once states design alternative models of organizing their sovereign debt markets. Paradoxically, new initiatives in Europe suggest that a return to the repo trinity is rather more likely: the Capital Market Union plans to create Simple, Transparent and Standardized (STS) securitisation again illustrate the catalyst role that central banks choose to play in market-driven solutions to safe asset shortages.

As Libor Blows Out To Fresh 6 Year Highs, A $28 Trillion Debt Question Emerges - Two weeks ago, when looking at the recent surge in short-term funding rates in general, and Libor in particular, we said that this is the result of a scramble by various funds to change their asset ahead of an October 14 deadline for money market reform. Recall that "On October 14, 2a-7 money fund reforms will require some prime money market mutual funds (those that invest in non-government issued assets) to float their net asset value (NAV) or, under certain circumstances, to impose redemption gates and liquidity fees on redemptions. Rather than face these regulatory constraints, many investors have started pulling assets from prime funds, and a number of prime funds have converted to government-only funds (which are exempt from these regulations). Since late-2015 alone, prime fund assets have declined by nearly $450 billion, reducing the supply of dollars that funded private sector short-term liabilities." Adding to the impact of the decline in prime fund assets, the behavior of the remaining prime funds has also pressured shorter-tenor funding rates. As part of the 2a-7 reforms, prime funds are required to hold at least 30% of their assets in securities that are convertible to cash within 5 business days, or otherwise face either liquidity fees and/or redemption gates. In anticipation of these changes, many prime funds have lowered the weighted average maturities (WAM) of their assets in recent months, reducing the supply of dollars available at longer tenors. The result has been a spike in various market indicators that at least historically have been an indicator of broader market funding stress and liquidity shortfalls.

Investors stockpile cash to offset economic despair -- August has so far been notable for yet another set of bizarre market signals. Last week the Bank of England cut rates from 0.5 per cent to a record low of 0.25 per cent and pledged to introduce a £70bn quantitative easing programme. In the wake of that, yields on sovereign debt in the UK, Ireland and Spain have tumbled to record lows: the rate on benchmark 10-year gilts is now a mere 0.56 per cent while short-term notes have turned negative. More startling still, the total global volume of sovereign and corporate bonds with negative nominal yields last week rose above $12.6tn, according to data assembled for the Financial Times by Tradeweb, the financial services group. That represents almost half of all western sovereign debt. By historical standards this is extraordinary — not least because investors continue to gobble up those notes, even though they will lose money on redemption. If you want a further sign of how distorted the system is, take a look at another indicator that does not usually attract much attention because it is much harder to track: the attitude to cash of investors and treasurers. In recent years it has often been assumed that one reason central banks cut rates is to force investors and companies to move funds from low-yielding assets, such as bonds or cash, into more productive investments that could produce better returns and growth. But that economic theory is not playing out. A couple of weeks ago, for example, the US Association for Financial Professionals published a survey of corporate treasurers. This suggests that, far from becoming cash-averse, they are planning to increase rather than decrease their holdings of cash this summer. Indeed, they are more enthusiastic about cash than at any point since 2011.

Big Oil Increasingly Funding Dividends With Borrowing -- How do you ride out low oil prices and still pay dividends and CEO salaries? You double down on debt, apparently. All oil majors posted plunging profits or accumulated losses in the second quarter, blaming low crude prices and weak refining margins for these results that missed estimates—in some cases by wide margins. All saw cash flows shrinking, and yet, all kept dividends intact and vowed to continue investing in their respective major projects. Quite naturally, all these factors have led to supermajors amassing more and more debt since crude oil prices started slumping in 2014. Estimates by Bloomberg have shown that oil majors have doubled their combined debts to US$138 billion since 2014. That’s also a staggering tenfold jump from the 2008 total oil major debts. Looking at the Q2 balance sheets of some oil majors, we see debts rising, cash flows dropping, capex diminishing, but dividends firmly held, and in Exxon’s case, even raised by 2.7 percent compared with the second quarter of 2015—the same quarter in which Exxon’s earnings plunged 59 percent annually. Another U.S. oil major, Chevron—which swung to a US$1.47-billion net loss in the second quarter—reported a total debt of US$ 45.085 billion as of June 30, 2016, up from US$38.549 billion at the end of December 2015, while cash and cash equivalents dropped to US$8.764 billion from US$11.022 billion. Cash flow from operations shrank to US$3.7 from US$9.5 billion. Capex declined to US$12 billion from US$17.3 billion. But interim dividends were diligently kept unchanged, lest shareholders be disappointed by their returns. Dividends were also held steady at BP, whose second-quarter profit plunged to US$720 million from US$1.3 billion for the second quarter of 2015. In the group’s own words, “refining margins were the weakest for a second quarter since 2010.”

For Oil Companies $110 Billion Debt Wall Looms Over Next 5 Years - The worst may be yet to come for some strained oil services companies as $110 billion in debt, most of it junk rated, creeps closer to maturity. More than $21 billion of debt from oilfield services and drilling companies is estimated to be maturing in 2018, almost three times the total burden in 2017, according to a report from Moody’s Investors Service on Aug. 9. More than 70 percent of those high-yield bonds and term loans are rated Caa1 or lower, and more than 90 percent are rated below B1. Speculative-grade debt is becoming increasingly risky, as the default rate is expected to reach 5.1 percent in November, according to a separate Moody’s report. The 12-month global default rate rose to 4.7 percent in July, up from its long-term average of 4.2 percent, Moody’s wrote. Of the 102 defaults this year, 49 have come from the oil and gas sector, Moody’s noted. “While some companies will be able to delay refinancing until business conditions improve, for the lowest-rated entities, onerous interest payments and required capital expenditure will consume cash balances and challenge their ability to wait it out,” Morris Borenstein, an assistant vice president at Moody’s, said in the report. The pressure on oilfield services companies will only increase through 2021, when nearly $29 billion of bonds and loans are expected to come due. Much of the maturing debt was issued between 2011 and 2015, when U.S. drilling was at a record high fueled by strong energy prices and new technologies. Moody’s expects that more than one-third of the analyzed companies will be carrying debt loads that are more than 10 times higher than earnings this year.

 20 Months, 90 Bankruptcies In North-American Oil & Gas -- A report published earlier this month by Haynes and Boone found that ninety gas and oil producers in the United States (US) and Canada have filed for bankruptcy from 3 January, 2015 to 1 August, 2016. Approximately US$66.5 billion in aggregate debt has been declared in dozens of bankruptcy cases including Chapter 7, Chapter 11 and Chapter 15, based on the analysis from the international corporate law firm.Texas leads the number of bankruptcy filings with 44 during the time period measured by Haynes and Boone, and also has the largest number of debt declared in courts with around US$29.5 billion.Forty-two energy companies filed bankruptcy in 2015 and declared approximately US$17.85 billion in defaulted debt. The costliest bankruptcy filing last year occurred in September when Samson Resources filed for Chapter 11 protection with an accumulated debt of roughly US$4.2 billion. The study noted an acceleration in bankruptcy filings in 2016 with forty-eight filings in the first seven months alone including at least twelve cases with defaulted debts of at least US$1.2 billion. Oklahoma-based SandRidge Energy reported a US$8.2 billion deficit for during a one-week span in May where seven firms declared bankruptcy on debts of at least US$26.7 billion.In June and July, nine companies filed for bankruptcy with roughly US$6.7 billion worth of debt, as the Haynes and Boone study shows. The main factors behind the rise in bankruptcies is the fall in the price of oil, hurting companies that over expanded with cheap debt. Haynes and Boone researchers expect the number to bankruptcies to keep increasing in the months ahead due to the low price of oil. The bankruptcy bug isn’t only affecting North American energy firms. A Deloitte study published in February concluded that a “third of the world’s publicly-traded oil companies are at high risk of going bankrupt this year.”

EFH bankruptcy fees approaching those of Enron — Energy Future Holdings, the largest power utility in Texas, has paid its lawyers and financial advisers $600,000 a day for each and every one of the 831 days – including weekends and holidays – since it filed for bankruptcy in April 2014. As a result, the Dallas power company’s attempt to shed massive debt through Chapter 11 of the U.S. Bankruptcy Code has become one of the most expensive corporate restructurings in U.S. history. Data obtained by The Texas Lawbook shows that the legal and financial adviser fees and expenses in the EFH corporate restructuring will pass $500 million this month. Bankruptcy experts say the price tag will likely reach $700 million – the final cost in the Enron Corp. bankruptcy – before it is over. Federal court records show that more than 380 business lawyers and more than 240 financial advisers and business consultants have billed EFH thousands upon thousands of hours for work they’ve done on the bankruptcy – some of them charging as much as $1,400 an hour. While very few of the advisers are from Texas, a handful of Houston lawyers – including corporate M&A expert Andrew Calder of Kirkland & Ellis – have been working EFH’s bankruptcy for two years. Kirkland & Ellis and Calder referred requests for comment to EFH. EFH officials declined to comment for this article, but EFH General Counsel Stacey Doré previously told The Texas Lawbook that she is dismayed and frustrated by the high fees. “When you actually see the numbers, it’s astonishing,”

 Bonds and debt: Negative yields are doing the opposite of what they were intended -- Paying someone to borrow your money sounds like a questionable idea on paper, and seems not to be working out so well in practice. Yet that's exactly what people who buy negative-yielding bonds do: Instead of collecting payments in the form of yields, investors have to pay someone to take their cash. Investors ostensibly hope they can sell the debt elsewhere and make a profit, as prices go up when yields fall. It's a strange arrangement that nonetheless has become policy in Japan and parts of Europe. The goal that sovereign debt issuers and central banks hope to achieve is a world where money is pushed toward risk and all that no-yielding debt causes inflation that leads to growth. However, as the arrangement spreads around the world to the point where more than $11 trillion of global debt holds negative yields, questions are growing quickly about its efficacy. "It's the definition of insanity: Keep doing the same thing over and again and expect a different result. That's my assessment of central banks in a nutshell," said Kim Rupert, managing director of global fixed income analysis at Action Economics. "I never thought I'd say that. I had a lot of respect for central bankers. But they're getting way overindulgent with very little success as far as I can tell." Central bankers are pivotal players in the negative-yield machine, as they are buying up much of that debt.  Yields are negative in France, Germany, Italy, Japan and multiple other countries around the globe. Though the Fed in the U.S. has avoided negative yields, it has kept rates at historic lows, with its target overnight funds rate held near zero for more than seven years.  Negative yields are being felt in two critical and unfavorable ways: They're feeding people's fears about how bad conditions must be in order to drive such policies in the first place, and they're leading to an increase in savings rates as individuals struggle to meet their cash goals with such low returns on their individual accounts.

Bitfinex and a 36 per cent charge from the school of life --  Izabella Kaminska - Publicly, the Hong Kong-based bitcoin exchange Bitfinex has lumped its users with a 36 per cent haircut on all balances to cover the $70m hack which it experienced last week. The haircut applies to all customers irrespective of whether they were holding bitcoin balances or dollar balances or other altcoin balances. But customers don’t come away with nothing! No. Not in the world of virtual money creation. That would be crazy. They get a BFX token (an IOU) as compensation. Privately and anecdotally, however, customers are reporting some variance with regard to the way the haircut is being imposed. Some US customers, for example, who only had dollar balances are reporting they’ve been able to get all their money back. And then there’s this dialogue between Zane Tackett, Bitfinex’s PR man, and concerned bitcoiners the other day, which exposes a lot of confusion with regards to how bail-ins and loss absorbing capital is supposed to work:  [...] The participants go on to note that Bitfinex is not a publicly traded company hence information about the group’s financials is scarce. When asked about some basic Bitfinex financial figures such as estimated valuation or revenue, Zane dodges the questions completely leading to a crash course in the delights of doing business in a mostly unregulated sector and inadvertently investing (or god forbid trusting) in the word of companies with zero track record or transparency. Bitfinex has since issued this statement, which users will once again have to take blindly on trust:

The First "Bitcoin Bail-In": All Bitfinex Users To Lose 36% In "Shared Loss" After Historic Hack -- Last week's sharp, 30% plunge in the price of bitcoin (and its latest competitor, ether), after news hit that 119,756 bitcoins, or about $70 million, had been stolen from the Hong Kong-based bitcoin exchange Bitfinex, demonstrated once again the biggest risk with digital currencies: despite claims to the contrary, outside hacks remain a key threat and risk to anyone holding  (obviously, we use the term loosely) digital currencies. Now, adding insult to injury for those who "held" their BTC at the hacked exchange, Bitfinex announced it would pull a page right out of Europe's bank resolution mechanism, saying thatall of its users will lose 36% of their deposits after it concluded its review the massive hack, in what is set to be the first ever "bitcoin bail-in." And, in pulling another page out of Europe, Bloomberg adds that to compensate its customers, Bitfinex users would receive (largely worthless) tokens that may later be redeemed or exchanged for shares in its parent company. Following the announcement, bitcoin climbed to $599 in early trading on Sunday. The virtual currency had dropped 12% to $577.23 in the week through Friday, its largest weekly decline since June, however has now recovered all of its sharp drop which had seen its price tumble as low as $470 on August 2. “After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets,” the exchange wrote in a blog post on Saturday. “In place of the loss in each wallet, we are crediting a token labeled BFX to record each customer’s discrete losses.” Good luck monetizing said "token."

Bitcoin’s Latest Economic Problem – Market Ouvert Or Squatters’ Rights - An interesting little observation by Izzy Kaminska over in the FT about a problem that Bitcoin faces. It’s a legal problem that leads to an economic one. And the problem Bitcoin faces is one that is based upon the very existence of the blockchain itself. There’s a good reason that all functioning economic systems have something akin to a market ouvert rule, or something like squatters’ rights. Note that I say something like, not exactly either of those rules. For example, if you find money in the street then you can’t and shouldn’t just keep it. But if you hand it in to the police, no one then claims if for some period of time, then it does become yours. No, you can’t just move into someone elses’ house and insist that it belongs to you. But move in for long enough (the time period varies) and no one complains or does anything and it becomes yours. You don’t get title when you buy stolen goods. But something you bought in good faith, in an open marketplace, does become yours eventually. Even if it had been stolen some point further down the ownership chain. The reason for these rules, and yes they vary across places and concerning different specific items, is that at some point we’ve got to give up on historic unfairnesses and or illegalities and just get on with the current allocation of scarce resources. We just don’t want to wall off something that may or may not have been stolen in, say, 1820, from being put to use today. We almost certainly would want to make sure that something stolen yesterday was returned to its rightful owner. But at some point between those two dates we’ve got to have a cut off point.

A Surprising Use for Blockchain: Shared National Credit Exams --To date, the predominant focus of applying distributed ledger and blockchain technologies to real-world uses has been on securities and payment systems. But what if distributed ledger and blockchain technologies could be used by regulators in offsite collection and analysis of bank loan data to reduce the time needed for onsite examinations? As theoretical as that endeavor sounds, there exists a discrete — though highly complex — category of loans for which bank examiners could test blockchain-enabled analysis sooner rather than later: the Shared National Credit Program. Each year, the federal bank regulators announce results of their examination of SNC loans — syndicated business loans of $20 million or more that are shared by three or more financial institutions. In late July, the federal bank regulators announced their 2016 SNC exam results. The release came significantly earlier in the calendar than in past years. The reason is that the Federal Deposit Insurance Corp., Federal Reserve Board and Office of the Comptroller of the Currency now conduct SNC exams twice a year, with results combined in an annual report. But what if the regulators could collect and evaluate SNC data basically in real time? A key reason distributed ledger technology might be useful in the SNC context is to simplify the collection of data across multiple institutions that share a single loan. Currently, SNC bank examiners gather historical SNC information from the bank that has taken on the responsibility of handling all administrative matters for the banks participating in the SNC loan. After collecting the information from the lead bank, examiners then review the SNC loan records of the participating banks as maintained separately by each bank. Examiners then compare and analyze these records across the banks that participate in a SNC loan. Instead, imagine that there was only one database of record containing near real-time information that examiners and all banks participating in a specific loan could view, add to and agree upon? That is the essence of distributed ledger and blockchain technologies — they effectively act as a database that is maintained not by a single actor, but rather, maintained collaboratively by multiple participants. The technology and algorithms forming the ledger's plumbing mean less room for human error and less wasted time and effort.

How I learned to stop blockchain obsessing and love the Barry Manilow - Izabella Kaminska - Financial hype cycles are predictable mostly because they mimic fashion fads and music fads. For example, there was a time in this reporter’s life when she aspired to be cutting edge and cool. Joyfully, no longer.  Financial technology fads are seemingly undergoing a similar pattern. Blur (bitcoin) evolved into a love of Radiohead (Blockchain). But Radiohead (blockchain) was adopted too quickly by those who then compromised the likeability of the entire Indy genre (cryptocurrency). It was time consequently to turn to drum and bass (private blockchains). But drum and bass was being cross-polluted by Indy rock enthusiasts (cryptocurrency enthusiasts) so it became time to embrace something totally radical and segregated, ie go backwards to an ironic appreciation of Barry Manilow abandoning all refs to modern musical phenomena (Distributed Ledger Technology). Which puts us roughly at the point where cheesy revivalism should be turning into a general love of the all time provable greats (old school centralised ledger technology, but you know, digitally remastered). Suffice to say, there is some commentary emerging to suggest we are indeed in a phase transition and what’s cool isn’t the blockchain anymore but rather the defiant acknowledgement that the old operating system — for all its flaws — is built on the right regulatory, legal and trusted foundations after all and just needs some basic tweaking. And in that regard the following appear to be early trend setters. Credit Suisse’s team this month on blockchain limitations: The buzz surrounding blockchain is comparable to that surrounding the internet in the late 1980s – some go as far as to suggest that blockchain has the potential to reimagine and reinvent key institutions – for example, the corporation. We are less sanguine, and note eight key challenges that have the potential to limit the utility, and therefore reduce adoption, of blockchain systems.

• 1. Security vs Cost trade off: The security of the bitcoin blockchain is ensured by syntactic rules and computational barriers to mining. Permissioned architectures are cheaper to run, but as we increase our trust in permissioned authors, we lose the distribution which is a guarantee of ledger integrity
• 2. Do you actually need blockchain? ‘If it ain’t broke, don’t fix it,’ for a blockchain to be relevant you must: (1) require a database, (2) need shared write access, (3) have unknown writers whose interests are not unified, and (4) not trust a third party to maintain the integrity of the data.
• 3. Critical mass is essential: Blockchain-based solutions intrinsically rely upon multiple users, particularly at the authoring level. We see clear threats to achieving critical mass (1) fragmentation of platforms, and (2) institutional and social inertia to transition to and/or agree on a platform.
• 4. What you get out is only as good as what you put in… In reality the ‘truth level’ of on-chain information is only as good as barriers employed to (1) ensure the quality of data being added is high, and (2) ensure the quality of node permissioned to add to the chain is high.
• 5. More entry points make a blockchain system more hackable… The hackable ‘surface area’ of a distributed network increases with each node added.
• 6. You have to see it to believe it… Although identity can be encrypted relatively easily on a blockchain, transaction data are not for the simple reason that nodes have to see it to verify it. This may be an issue for those concerned about data privacy.
• 7. Identity problems? On-chain asset ownership by virtue of private key knowledge essentially makes all on-chain assets bearer instruments. The issue with bearer instruments is you can lose them; cash being the most salient example. A better solution to reconciling on and off-chain identity appears necessary.
• 8. A forked road, the lesson of the DAO attack… The DAO attack exposed flaws in smart contracts on Ethereum which should act as a reminder that nascent code is susceptible to bugs before it is truly tire-kicked, and even then, complete surety is never guaranteed. The ‘hard fork’ undertaken by the Ethereum community also shows that blockchains are only immutable when consensus wants them to be.

Call Blockchain Developers What They Are: Fiduciaries --The recent hack of the DAO (short for Decentralized Autonomous Organization) and the subsequent reversal of funds on Ethereum's blockchain should finally put an end to a decentralization charade. People are, in fact, governing public blockchains, and we need to be able to trust them. In the techno-utopian world of blockchain technology, it has become fashionable to proclaim that software code and its operation can replace the need for human governance. Hence, the push toward "decentralized autonomous organizations," which are essentially corporations run through code rather than by people. The DAO is just software, coded by an ambitious group at the company Slock.It. It was embarrassingly compromised through a computer hack for $60 million within a month of its inception. Since the DAO was built on the Ethereum blockchain, everyone involved with the technology was affected: DAO investors, owners of ether (the cryptocurrency of Ethereum) and anyone building anything on Ethereum, which has sought to be a platform for so-called smart contracts. This raised serious questions like: Should folks try to get the stolen ether back? Ultimately, the core developers of Ethereum decided to attempt a hard fork, which involved writing a new version of the Ethereum software that would recover the stolen funds and make them available to the DAO's investors. Long story short: the hard fork initially appeared successful, but part of the Ethereum community thwarted the developers' best-laid plans, these mavericks kept the old Ethereum blockchain running and dubbed it "Ethereum Classic." Worse, there is now competition between the all-new Ethereum (which took the name with it when it forked) and Ethereum Classic. And unsurprisingly, a group just announced on bitflikz.com that it is suing both the coders of the DAO and the Ethereum core developers. Wow. Aside from the fact that there should definitely be a movie made of these escapades (The Anti-Social Network?), the DAO debacle spotlights something very important. It is past time to acknowledge that governance of public blockchains is happening, by actual identifiable people, and that these people's actions impact consumers. Treating the core developers and big miners of public blockchains as fiduciaries would set a clear standard for performance, make them accountable for actions that significantly impact other people, and ensure that they take their creation and operation of these public systems seriously.

Call Public Blockchain Developers What They Are: Open Source Coders Not Fiduciaries -- Angela Walch, Associate Professor at St. Mary’s University School of Law, has written a thought-provoking editorial where she argues that developers are in a position of trust, therefore, they must be burdened with responsibilities – including, perhaps, outright licensing requirements to ensure a certain standard.  Although the professor has many good points, the open source system is designed in such a way as to adequately minimize any negligence or oversight to a point where one can say that users do not need to trust any one developer, but all developers which can include anyone who can code. According to Google’s definition, a fiduciary is in a position of trust “especially with regard to the relationship between a trustee and a beneficiary.” A simple example is a trustee in bankruptcy or a trustee of a recipient fund or company directors. All three cases involve control and direct power over assets that are not owned by the trustee. Since this relationship is beneficial to society, the law recognizes this agreement and enforces it in a court of law with the most relevant aspect being that of negligence. Negligence is a common law concept created by judges to provide restitution in cases where individuals cause loss or injury to others through carelessness. It does not, however, apply in all cases, but only where there is a duty of care. The concept of duty of care, according to a common law case, requires that: “Harm must be (1) reasonably foreseeable (2) there must be a relationship of proximity between the plaintiff and defendant and (3) it must be ‘fair, just and reasonable’ to impose liability.” In other words, it can be established by asking whether a reasonable man would say that there should be a duty of care. The absence of a duty of care does not mean that there is no recourse or that participants can do whatever they wish. Journalists, for example, make their living from the trust of their readers who will very much judge them and/or stop providing their readership if they conclude there has been improper behavior.  Likewise, open source developers would either be quickly corrected if they made a careless mistake during the review stage, long before users apply the code, or would enjoy a lengthy discussion where the question is not very clear cut. The open source system, therefore, is in many ways a combination of a non-governing body, peer-reviewed journal, public gathering/discussion, and a workplace.

Fintech Has Forced Banks' Hand on Blockchain, AI Adoption | Bank Think --Millennials have a clear preference for accomplishing tasks through digital applications and services — something fintech companies are better at providing than banks in terms of speed and personalization. Already, 62% of millennials in North America use products from fintech companies, according to the 2016 World Retail Banking Report. More disturbing, Gen Y customers are far less loyal to their banks: only 45% of North American millennials said they plan to stick with their current bank, compared to 85% of North American respondents from all other age groups.While banks have steadily built up their online and mobile channels — in part to appeal to millennials — the products and services they offer in those channels are built on top of legacy systems and fail to provide the level of speed and personalization millennials expect. A customer might be able to deposit a check from anywhere with their mobile device, but it can take several days for that deposit to post to the user's account.  To cater to this increasingly important customer demographic, banks should embrace blockchain technology and artificial intelligence now or risk losing millennials to fintech companies that aren't bogged down with old technology. The distributed ledger technology that underpins blockchain systems, after all, is designed for near real-time transfer of data. It can deliver instant resolution to customers' transactions and interactions with their banks. Beyond real-time payments, the blockchain can be used to transfer data quickly across a large number of use cases, including real-time account opening and flexible loyalty programs. For example, blockchain startup Ascribe is working with Capgemini to offer a distributed ledger-based application that will let customers combine loyalty points across different loyalty programs and spend them instantly with a range of different merchants.Beyond the blockchain, machine learning — a facet of artificial intelligence — can also help speed up transactions for customers. Several banks are already using machine learning to spot suspicious transactions more quickly and accurately. More recently, banks are starting to investigate using chatbots, which are driven by machine learning algorithms to quickly answer customer inquiries and resolve their problems.

Here’s Why We Need Fintech Disruption Now More Than Ever | Dealbreaker: Despite decades of advances in communications technology, data analysis – and pharmacological stimulants – bankers aren’t any cheaper than they were a hundred years ago. Thus the need for fintech disruption, more now than ever. That’s the conclusion of New York University professor of finance Thomas Philippon, who compiled U.S. financial data dating back to 1880 in order to determine how prices have (or haven’t) changed. As it turns out, Americans have paid a premium of about 2 cents on every dollar intermediated through the banking system for most of the last century. In an updated version of the study, Philippon finds prices have relaxed since the financial crisis, but not a ton. “Finance has benefited more than other industries from improvements in information technologies,” Philippon writes. “But, unlike in retail trade for instance, these improvements have not been passed on as lower costs to the end users of financial services.” “If the goal of financial regulation is to foster stability and access to services,” Philippon writes, “then regulators should consider policies that promote low-leverage technologies and the entry of new firms.”If only it were so simple. Fintech is definitely having a moment, but probably not the kind Philippon wants.. Lending Club, the leading peer-to-peer loan company, had to dump CEO Renaud Laplanche in May after it was found that the company had sold $22 million in bonds on faulty premises. Moreover, Laplanche had failed to disclose his financial ties with a firm Lending Club was thinking of investing in. The entire peer-to-peer sector sank on the news.Then there’s bitcoin, the most rabidly hyped of fintech saviors. Last week the cryptocurrency suffered what was, according to one count, its 37th attack, and the second-largest in its history. Hackers compromised the digital wallets at Bitfinex, a leading storage center and bitcoin trading hub, making off with $65 million in digital lucre. And bitcoin’s more cerebral little brother Ethereum had its own brush with doom in June, when resourceful hackers exploited a glitch in the code to pilfer $60 million of the currency from a digital investment trust that had been advertised as “a new breed of human organization never before attempted.”

The FTC Will Not Leave Companies to Their Own Devices - What was once a fantasy played out in television shows like The Jetsons is now a rapidly growing industry of internet-connected devices, dubbed the Internet of Things. Consumers can now speak to electronic assistants to handle everyday tasks. Electronic assistants can, in turn, order pizza, play music through speakers and TVs, and command home security to lock doors as an owner leaves her house to enter an Uber car—also ordered on command. Growing just as rapidly as the market for interconnected devices are the databases of individual user information collected by and transferred between these devices, creating a cache of so-called big data and raising renewed concerns about the misuse of personal data. Social media data, streaming data, and publicly available sources of data can all now be incorporated together with device-collected information to create highly detailed profiles of users. These caches of user information, however, can pose a threat if used improperly.  Earlier this year, the Federal Trade Commission (FTC) issued a report that provides recommendations to companies that rely on big data. The report notes that improper use of big data might lead to consumer sorting that reinforces preexisting social disparities and perhaps promote illegal discrimination of protected classes. By connecting otherwise unrelated user data, companies can make predictive inferences about a person’s daily routine, financial circumstances, and even health. Such inferences, while potentially helpful, might also enable companies to deny some people certain opportunities based on information from big data libraries

Why TIAA's Big Acquisition Should Make Bankers Nervous - TIAA's pending purchase of EverBank Financial in Jacksonville, Fla., portends the rise of a powerful new competitor for banks. The insurance and retirement savings behemoth had spent six years quietly building its own bank, TIAA Direct, before agreeing to plunk down $2.5 billion in cash for the $27 billion-asset EverBank. The deal, officially unveiled Monday, would give the New York company access to billions of dollars in low-cost deposits. EverBank would also provide TIAA with greater expertise in areas such as mortgages and commercial lending, along with an entrée into currency CDs and equipment leasing. In short, a TIAA spokesman said, the acquisition "leapfrogs our growth plans for the bank by about a decade." The deal should "meaningfully steepen the growth trajectory" of TIAA's banking operations, said Matthew Forgotson, an analyst at Sandler O'Neill. "Bolting EverBank's online deposit platform into TIAA Direct materially strengthens their ability to source funds from across the country." TIAA said in documents filed in conjunction with the deal's announcement that it intends to make EverBank "an integral part of its retail financial services business" with plans of offering banking and lending services to the 5 million individuals and 16,000 institutional clients it serves. Many, if not most of those clients, do their banking elsewhere, industry observers said.

U.S. Said to Prepare Case Against Former Goldman MBS Trader - U.S. securities regulators are investigating and preparing to bring a civil case against Edwin K. Chin, a mortgage bond trader who was fired from Goldman Sachs Group Inc. in 2012, according to people with knowledge of the matter. The U.S. Securities and Exchange Commission and the U.S. Justice Department have been cooperating on a probe of Chin’s activities at Goldman Sachs, said the people, asking not to be identified because they’re not authorized to speak publicly. The SEC is preparing the case, and the two sides may try to reach a settlement, the people said. Investigators found Chin may have inflated prices on mortgage bonds acquired by the bank, allowing him to trade the securities for a greater profit, the people said. The trades occurred after the 2008 financial crisis, the people said. Chin didn’t respond to requests for comment. Representatives of Goldman Sachs, the SEC and the Justice Department declined to comment. The U.S. has been investigating possible wrongdoings in the trading of mortgage-backed securities and other securitized debt for a number of years. Pursuing Chin’s case as a civil suit may represent a change in the government’s approach after a federal appeals court last year overturned former Jefferies & Co. trader Jesse Litvak’s criminal conviction for lying to buyers about how much the bank paid for bonds he was selling. Traders at banks including JPMorgan Chase & Co., Royal Bank of Scotland Group Plc, Nomura Holdings Inc., Deutsche Bank AG and Barclays Plc have been put on leave or dismissed over the past three years amid investigations into the market, according to people with knowledge of those moves and Financial Industry Regulatory Authority records. More than 20 traders across Wall Street have lost their jobs amid the investigations, according to people with knowledge and employment records obtained by Bloomberg.

Dodd-Frank Killing Community Institutions? No, Says White House Report —The Dodd-Frank overhaul financial law isn’t to blame for the decline in the number of community banks, according to a new report from the White House Council of Economic Advisers. The Wall Street Journal noted that a “common complaint” of community bankers since passage of the Dodd-Frank Act has been that new regulations are squeezing their profits and hampering their ability to provide credit to Main Street, while also raising compliance costs. Credit unions and their trade associations have voiced the same complaints. The White House report, however, argues that is not the case. “There’s no evidence at all that Dodd-Frank has had a negative impact on this sector,” Jason Furman, chairman of the council, told The Wall Street Journal in an interview. As evidence, the White House report said it found that nearly every county has a bank office, and many Americans have the ability to use a community bank. It also said lending by the smallest banks has increased since 2010, the Journal reported. “In all those respects, this sector has been really successful in the last six years, and so it’s hard to say Dodd-Frank caused a problem,” Furman was quoted as saying. According to FDIC data reported by the Wall Street Journal, community banks have expanded their lending faster than larger financial firms. Lending by community banks was up 8.9%, year over year, at the end of the first quarter, outpacing the loan growth of larger banks. The economic report points to longer-term trends in banking, including changes in branching patterns, that were playing out long before President Obama signed the law, according to the Wall Street Journal. The Wall Street Journal, however, also noted that other studies, including a 2015 study by the GAO and a 2014 study by the Mercatus Center’s Small Bank Survey “found post-crisis regulations resulted in increased compliance costs and forced smaller-size institutions to reconsider what products and services they offered to bank customers.”

Forecasting Loan Losses for Stress Tests -- Atlanta Fed's macroblog - Bank capital requirements are back in the news with the recent announcements of the results of U.S. stress tests by the Federal Reserve and the European Union (E.U.) stress tests by the European Banking Authority (EBA). The Federal Reserve found that all 33 of the bank holding companies participating in its test would have continued to meet the applicable capital requirements. The Federal Reserve's Policy Statement on the Scenario Design Framework for Stress Testing indicates that the severely adverse scenario will have an unemployment increase of between 3 and 5 percentage points or a level of 10 percent overall. That statement observes that during the last half century, the United States has seen four severe recessions with that large of an increase in the unemployment rate, with the rate peaking at more than 10 percent in last three severe recessions. To forecast the losses from such a severe recession, the banks need to estimate loss models for each of their portfolios. In these models, the bank estimates the expected loss associated with a portfolio of loans as a function of the variables in the scenario. In estimating these models, banks often have a very large number of loans with which to estimate losses in their various portfolios, especially the consumer and small business portfolios. However, they have very few opportunities to observe how the loans perform in a downturn. Indeed, in almost all cases, banks started keeping detailed loan loss data only in the late 1990s and, in many cases, later than that. Thus, for many types of loans, banks might have at best data for only the relatively mild recession of 2001–02 and the severe recession of 2007–09.

CFPB Makes 'Choke Point-Esque' Move Against Payment Processors | American Banker: A single paragraph in a lawsuit filed by the Consumer Financial Protection Bureau is sparking fears by third-party payment processors that the agency is quietly and significantly expanding its authority over the industry.

Most CFPB Small Business Panelists Disagree with Agency Rules: GAO -- The Consumer Financial Protection Bureau has met the requirements for convening small business review panels though most panelists said they disagreed with the agency's final rules, the Government Accountability Office said Wednesday.  The GAO conducted a performance audit of the CFPB's small business review panels at the request of Sen. David Vitter, R-La., chairman of the Senate committee on small business and entrepreneurship, and Sen. James E. Risch, R-Idaho, a committee member.  The report found that only 12% of small entity representatives who responded to the GAO said they were satisfied with the CFPB's final rules. The GAO's 43-page report examined the Small Business Regulatory Enforcement Fairness Act panels, which seek direct input from small entities before a proposed rulemaking is released. Under the law, the agency must preview proposals before formally releasing them for comment. In some cases, this can result in substantial delays as the agency makes changes. For example, the CFPB waited more than a year to formally issue a proposal reining in payday lending after first showing it to its small business review panel.The GAO interviewed 57 of the 69 small entity representatives who participated in the four small business review panels that the CFPB has held so far. Of those who responded, a majority said the CFPB either reported their views accurately or appeared to take their views into consideration during the rulemaking process.

 Payday Lenders' Move to Installment Loans Increases Risks, Report Finds --Payday lenders are increasingly shifting to installment lending to get ahead of federal regulation, creating new risks for borrowers, according to a new report.  The Consumer Financial Protection Bureau released a proposed rule in June meant to rein in abusive practices in the payday industry. But if the rule is enacted in its current form, it “would expedite the transition toward installment loan[s],” according to a report Thursday from the Pew Charitable Trusts, a public policy research group. The loans often have high interest rates and result in borrowers taking out new loans to repay old ones—the same onerous features that have accompanied payday loans. The report is notable because Pew is generally an advocate of the CFPB’s efforts. But the research group was critical of the regulator on a call discussing its report with reporters. If enacted in its current version, “the net effect is moving from 400% APR for two-week loans to 400% APR for installment loans,” said Nick Bourke, a project director at Pew. “The CFPB should be doing more to ensure that installment loans are safer and more affordable.”A CFPB spokesman said the proposed rule would require lenders to make “a reasonable determination whether a consumer will have the ability to repay.” The CFPB is soliciting comments until Oct. 7. There is no official estimate as to when a final rule will be announced. Installment loan volume has surged The Wall Street Journal reported this week. This is believed in part to be due to efforts by payday lenders to anticipate the new rules. Lenders extended nearly $24.2 billion in installment loans to borrowers with credit scores of 660 or less in 2015. That was up 78% from the prior year and nearly triple the amount in 2012, based on loan data submitted by mostly nonbank lenders to credit-reporting firm Experian. The CFPB’s proposed rule requires that payday lenders and many installment lenders make sure applicants have the ability to repay their loans after covering major obligations, such as housing costs. That requirement is a lot harder for payday loans because they typically require one lump sum payment. Payday lenders are issuing installment loans or lines of credit in 26 of the 39 states they operate in with APRs often ranging from 200% to 600%, according to the Pew report.  Pew’s report says many installment lenders charge large upfront fees to give out the loans and encourage borrowers to refinance to charge more of those fees. Fees can equal around 10% of the loan amount.

‘Commercial’ bank is misnomer. ‘Real estate’ bank is more apt: Comparing banking in the 1950s to today, we find giant changes that surely would have astonished the bankers of that earlier time. What’s the biggest and most important one? You might nominate the shrinkage in the total number of U.S. banks from over 13,200 in 1955 to only about 5,300 now — a 60 percent reduction. Or you might say the rise of interstate banking, or digital technology going from zero to ubiquitous, or the growth of financial derivatives into hundreds of trillions of dollars, or even air conditioning making banking facilities a lot more pleasant. You might point out that the whole banking industry’s total assets were only $209 billion in 1955, less than one-tenth the assets of today’s JPMorgan Chase, compared with $15 trillion now. Or that total banking system equity was $15 billion, less than 1 percent of the $1.7 trillion it is now. Of course, there have been six decades of inflation and economic growth. The nominal gross domestic product of the United States was $426 billion in 1955, compared with $17.9 trillion in 2015. So banking assets were 49 percent of GDP in 1955, compared with 83 percent of GDP now. But I propose that the biggest banking change during the last 60 years is none of these. It is instead the dramatic shift to real estate finance and thus real estate risk, as the dominant factor in the balance sheet of the entire banking system. It is the evolution of the banking system from being principally business banks to being principally real estate banks. In 1955, commercial and industrial loans were 40 percent of total banking loans and real estate loans only 25 percent. The great banking transition set in after 1984. The share of C&I loans kept falling, down to about 20 percent of total loans, while real estate loans rose to about 50 percent, with a bubble-induced peak of 60 percent in 2009. In this remarkable long-term shift, the share of real estate loans doubled, while the share of commercial and industrial loans dropped in half. The lines crossed in 1987, three decades ago and never met again, despite the real estate lending busts of the early 1990s and of 2007-9.

Could Bank-Friendly Bayh Seize Chair of Banking Committee? | American Banker: The Indiana Senate race could prove to be the most important congressional race for bank policymaking if handshake deals propel former Sen. Evan Bayh to the top of the banking committee. Sen. Sherrod Brown, D-Ohio, is currently the top Democrat on the panel and widely considered the next in line for the chair if his party succeeds in retaking the chamber. But a Bayh victory in Indiana could upset that plan. The former two-term Democratic senator, who sat on the Banking Committee from 2000 to 2010, may have more seniority than Brown, allowing Bayh to leapfrog his colleague. The scenario has been quietly discussed among financial services lobbyists, most of whom prefer the more moderate and bank-friendly Bayh to the progressive Brown.Bayh "has seen upfront a lot of the problems with Dodd-Frank and we are hoping he would be somebody who could stand up to the extremists who don't think there should be any changes to Dodd-Frank," said Howard Headlee, head of the Utah Bankers Association and treasurer of the Friends of Traditional Banking, a financial services super political action committee. A financial services lobbyist who declined to speak on the record said financial lobbyists are all "talking about this and nobody knows" whether Bayh could get his seniority back and the chairmanship. Brown's office declined to comment for the story and efforts to reach the Bayh campaign were unsuccessful.

Is CMBS The Next "Shoe To Drop"? GGP Sales Suggest Commercial Real Estate Crashing --  Apparently people are growing less and less "eager" to shop in America's dilapidated malls of the 80's.  Stunning Soviet-era architecture just doesn't draw the crowds it used to.  The mall, once a hot spot for American youth, has aged (and not so gracefully we might add) due to the consequences of a decade of extreme under-investment as REIT investors sacrificed long-term success for current yields.  Add to that the fact that Amazon is eager to sell almost everything you could possibly want at a loss and ship it to your door within 27 minutes, it's not surprising that mall traffic is suffering.   The problem, of course, is that none of this curbed investor appetite for CMBS securities or commercial real estate REITs as investors have spent the past 7 years reaching for yield in a low-interest rate environment.  What better place to park capital than a "safe," commercial real estate REIT with high income visibility from long-term lease agreements?  Sounds like a great idea as long as you can ignore the pesky little fact that REIT dividends have predominantly been funded with cash saved from under-investment in repairs and remodels making those distributions effectively a return "of" capital rather than a return "on" capital...details...as long as you can sell to someone else before then music ends then you'll be just fine. Unfortunately for those investors, recent signs seem to indicate that the music is, in fact, ending.  Our most recent example of deterioration comes from data disclosed by GGP in its 2Q earnings call.  According to a research note published by Richard Hill at Morgan Stanley, GGP announced the sale of the Newgate Mall in Ogden, UT and the Rogue Valley Mall in in Medford, OR for 16% and 25% less than their appraised value in 2012.  They look like beautiful establishments, no Soviet-era architecture here folks.

Can Big Data Help Bankers Avoid Another CRE Debacle? -- If examiners were to raise a stink about his commercial real estate loan concentrations, Bob Mahoney at Belmont Savings Bank in Massachusetts is ready to get down and dirty. Using big data, the head of the $2 billion-asset bank is trying to keep tabs on all 380 tenants in properties where it is the commercial mortgage lender. If an accounting firm in an office building is named in a lawsuit, Mahoney is alerted. If a dental practice has its credit score downgraded, he knows about it. "This lets us create a list of tenants — here are the high risks and here are the low risks," said Mahoney, who is using software from Dun & Bradstreet to flag risks early. Many banks are girding themselves for probing questions about CRE-related risk management. Commercial real estate, as a percentage of the industry's total loans, remains stubbornly high, and examiners are said to be peppering bankers with questions about how they plan to avoid the kind of meltdown that took place in such portfolios nearly a decade ago. Regulators want banks "to have both a high-level view and a detailed view of the risks and potential losses" associated with CRE lending, said Matthew Anderson, a managing director at Trepp, a D&B rival that sells software to banks for monitoring and stress-testing CRE loans.

Captive Insurer Ban Takes Toll on Some Home Loan Banks: A Federal Housing Finance Agency rule that will force some members of the Federal Home Loan Bank System out next year is likely to have a material effect on several of the cooperative institutions. In second-quarter filings, the Chicago, Cincinnati, Des Moines and Indianapolis Home Loan banks predicted a drop in the level of advances as captive insurance companies prepare to terminate their relationships with the banks. The Des Moines bank only has 13 captive insurance company members, but their $15.2 billion in advances equal 13% of the bank's total advances outstanding. Three out of the bank's top five borrowers as of yearend 2015 were captive insurance company members. The Indianapolis bank, meanwhile, reported a 2% decline in advances in the first half of the year, "due primarily to repayments by, and restrictions upon new or renewed advances to captive insurance companies as a result of the final membership rule," according to the bank's press release. The FHFA finalized the rule in February, arguing that captive insurance companies were not meant to be part of the Home Loan Bank system. The rule requires them to exit, but gives more time to firms that have been members for longer. Captive insurance companies which were admitted as members prior to Sept. 12, 2014 must leave by Feb. 19, 2021. But any firms which joined after that cutoff date must exit prior to Feb. 19, 2017.

Farmer Mac's Q2 Income Sinks on Hedging Losses: Farmer Mac posted lower net income than during the second quarter of 2015 on a loss on financial derivatives and hedging activities. Farmer Mac reported a 45% drop in net income year over year to $12 million. Earnings per share came in at $1.15. Farmer Mac also swung to a $234,000 noninterest loss, from noninterest income of $18.2 million last year. That decreased stemmed entirely from a $4.7 million loss on financial derivatives and hedging activities versus a $14.4 million gain a year ago. But it did see improvement in other sources of noninterest income, such as guarantee and commitment fees and gains on trading securities. Net interest income rose 7% year over year to $34 million on higher profits from loans and Farmer Mac Guaranteed and USDA securities. Noninterest expense held steady at $10.1 million. Credit quality was stable during the quarter across Farmer Mac's four business lines in spite of headwinds facing the agricultural industry. Overall, the government-sponsored enterprise recorded $1.3 billion in new business during the quarter. "As the agricultural economy continues to adjust to lower commodity prices and the persistence of drought conditions in some portions of the West, we continue to believe that Farmer Mac is well positioned to deliver upon its mission as credit becomes somewhat tighter in agriculture," Farmer Mac president and chief executive Tim Buzby said in a news release Tuesday.

 Fannie and Freddie could need $126 billion taxpayer bailout in next crisis, stress test finds --The Federal Housing Finance Agency released the results of a stress test required by the post-financial-crisis Dodd Frank Act that examined how the mortgage giants would perform in what FHFA calls a “severely adverse scenario.” The test found Fannie and Freddie would require a Treasury draw of at least $49.2 billion, and as much as $125.8 billion, in a scenario devised by the Federal Reserve. Fannie and Freddie have operated under federal conservatorship since the subprime mortgage bubble burst, precipitating the 2008 financial crisis. In 2012, the government amended the 2008 agreement to require that the enterprises send all their profits to Treasury and whittle their capital buffers to zero by 2018.  The dwindling capital buffers raise the likelihood that any quarterly earnings loss could lead to a bailout. Massive interest-rate swings hit Freddie in the first quarter of this year, making the company unable to remit any profits to Treasury but stopping short of requiring a draw. The results of the stress test also show that the enterprises would still be authorized to tap between $132.2 billion and $208.9 billion in Treasury funds under the severely adverse scenario. That scenario assumes GDP declines 6.25%, unemployment soars to 10%, and inflation jumps to 1.9%.  While many housing industry experts, and FHFA’s director, Mel Watt, have warned about risks associated with keeping Fannie and Freddie in limbo, there’s little chance that Congress will take action until at least after the election in November.

Are Nonprofit Loan Buyers Really Good for the Mortgage Market?: The marketplace for nonperforming loans is full of heavyweight buyers like Bayview Asset Management and Lone Star Funds, private equity behemoths that can buy thousands of delinquent mortgages at a time. So New Jersey Community Capital, a nonprofit community development financial institution managing only roughly $300 million in total capital, doesn't seem like a threat to the significant players in the nonperforming loan arena. But New Jersey Community Capital and fellow nonprofit Hogar Hispano have become trailblazers as they have purchased more than 2,000 nonperforming loans from the Federal Housing Administration, government-sponsored enterprises and banks. In doing so, they've raised questions regarding nonprofits' capacity to buy these loans and how this could alter markets. Over the past year, the Department of Housing and Urban Development and the government-sponsored enterprises have come to embrace nonprofits, working to make nonprofits an increasingly important part of the market for nonperforming loans. In June, HUD rolled out new requirements and guidelines for loans sold through the Distressed Asset Stabilization Program. Among them was a pledge that the FHA would make it a goal to sell 10% of its nonperforming loans to be sold to nonprofits and local governments. Fannie Mae went on to select New Jersey Community Capital, a nonprofit community development institution, as the winner in its first three auctions of these pools.

 Hensarling Backs Watchdog s Concerns on Down Payment Assistance Programs: The Inspector General of the Department of Housing and Urban Development has found a new ally in his fight to reform the down payment assistance programs run by HUD and state and local housing finance agencies. House Financial Services Committee Chairman Jeb Hensarling said Monday that HUD is "breaking the law and trapping borrowers in higher interest rate loans and trying to cover it up by secretly rewriting the rules — this is the sad, sorry state of today's" Federal Housing Administration. HUD IG David Montoya has criticized the down payment programs, arguing that lenders charge high interest rates to reimburse housing finance agencies for the assistance. "The illegal financing arrangement 'places the borrower and the FHA at undue risk of loan failure,'" Hensarling said. HUD estimates that 60,000 FHA-insured loans are originated each year with down payment assistance. "HUD has failed to recognize the disturbing parallels to the seller-funded down payment assistance arrangement practices in the late 1990s to 2008 which caused wide-scale problems to the program and whose reverberations are still felt today," Montoya said in a July 26 letter to Hensarling. "It is exactly these types of risks, to the borrowers and to the health of the overall FHA's Fund, which taxpayers rely on, that compel me to now raise these concerns."

June Foreclosures in Florida Drop by 41% -- Florida still leads the nation in completed foreclosures. Lenders closed on 59,749 foreclosures in Florida during the 12-month period ended in June, accounting for 13% of all the seized homes nationwide, data provider CoreLogic reported Tuesday. But that was down by more than 41,600 foreclosures in the prior year, a 41% decline. The state's foreclosure inventory — the percentage of mortgaged homes in some stage of the process — stood at 1.8% at midyear, the sixth-highest level in the U.S. While Florida's foreclosure inventory is down from 2.7% one year ago, it remains nearly double the U.S. rate of 1%. The national rate is the lowest since August 2007. Nationwide, completed foreclosures are down by 16.5 percent, and the foreclosure inventory has shrunk by 26%, CoreLogic said. "Mortgage loan performance depends on the economic health of local markets, with varied differences even within a state," said Frank Nothaft, chief economist for CoreLogic The foreclosure rate in the Sarasota-Manatee region was 1.42% in May, the most recent month measured. That was down from a high of 12.23% in June 2011 and from the 2.25 percent recorded in May 2015, according to CoreLogic. Since the financial crisis began in September 2008, about 6.3 million homes have been lost to foreclosure nationally.

 Foreclosure Inventory Is at Lowest Level Since 2007: CoreLogic: The foreclosure inventory at the end of June was at its lowest level since August 2007, according to data released Tuesday by CoreLogic. The national foreclosure inventory dropped to 375,000, or 1%, of all homes with a mortgage, a decrease of 25.9% from June 2015, CoreLogic reported. Additionally, the number of completed foreclosures dropped to 38,000 from 40,000 last year. Similarly, the serious delinquency rate, which includes all properties with loans that are 90 or more days past due, dropped 21.3% year over year to 1.1 million mortgages, representing its lowest value since September 2007.

 Delinquency Rate Drops to Lowest Level in 10 Years: MBA: The delinquency rate for mortgages on residential properties during the second quarter dropped to the lowest level since the second quarter of 2006, the Mortgage Bankers Association reported. The rate fell 11 basis points from the first quarter and 64 basis points year-over-year to a seasonally adjusted rate of 4.66% of outstanding loans, the MBA said Thursday. The delinquency rate for FHA loans dropped 55 basis points from last year to 8.46%, its lowest level since 2000. The delinquency rate for conventional loans was 3.86% in the second quarter, while the rate for VA loans was 4.31%. Similarly, just 0.32% of loans had foreclosure actions started during the quarter, down 8 basis points from last year for the lowest level since the second quarter of 2000. The MBA also found that 1.64% of loans were in the foreclosure process, a decrease of 10 basis points from the previous quarter and 45 basis points from a year ago. The seriously delinquent rate, which measures the share of loans that are 90 or more days past due, dropped 84 basis points year-over-year to 3.11%. "Mortgage performance improved again in the second quarter primarily because of the combination of lower unemployment, strong job growth, and a continued nationwide housing market recovery," said Marina Walsh, MBA vice president of industry analysis, in a news release.

MBA: "Delinquencies and Foreclosures Continue to Drop" in Q2 - From the MBA: Second Quarter Delinquency Rate Lowest in Ten Years The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased 11 basis points to a seasonally adjusted rate of 4.66 percent of all loans outstanding at the end of the second quarter of 2016. This was the lowest level since the second quarter of 2006. The delinquency rate was 64 basis points lower than one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The percentage of loans on which foreclosure actions were started during the second quarter was 0.32 percent, a decrease of three basis points from the previous quarter, and down eight basis points from one year ago. This foreclosure starts rate was at its lowest level since the second quarter of 2000. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 1.64 percent, down 10 basis points from the previous quarter and 45 basis points lower than one year ago. The foreclosure inventory rate was at its lowest level since the second quarter of 2007. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.11 percent, a decrease of 18 basis points from previous quarter, and a decrease of 84 basis points from last year. The serious delinquency rate was at its lowest level since the third quarter of 2007. This graph shows the percent of loans delinquent by days past due. Note that the total percent delinquencies and foreclosures is below the 2002 level. The percent of loans 30 and 60 days delinquent ticked down in Q2, and is below the normal historical level. The 90 day bucket declined further in Q2, but remains a little elevated. The percent of loans in the foreclosure process continues to decline, and is still above the historical average. The 90 day bucket and foreclosure inventory are still elevated, but should be close to normal in 2017. Most other mortgage measures are already back.

Mortgage Delinquencies and the Unemployment Rate -- In the press release for the MBA quarterly National Delinquency Survey for Q2, Marina Walsh, MBA's Vice President of Industry Analysis, wrote:  "The mortgage delinquency rate tracks closely with the nation's improving unemployment rate. In the second quarter of 2016, the mortgage delinquency rate was 4.66 percent, while the unemployment rate was 4.87 percent. By comparison, at its peak in the first quarter of 2010, the delinquency rate was 10.06 percent and the unemployment rate stood at 9.83 percent." Here is a graph comparing the mortgage delinquency rate and the unemployment rate. The unemployment rate is in Red, the mortgage delinquency rate (excluding in foreclosure) is in Blue, and the combined delinquency and in foreclosure is in Purple.As Ms. Walsh noted, the delinquency rate has pretty much tracked the unemployment rate since the great recession. In 2002, the mortgage delinquency rate was below the unemployment rate, probably because house prices were rising even as the unemployment rate was still recovering from the 2001 recession. A huge difference between the great recession and prior periods was the large number of homes in the foreclosure process (Purple is a combination of the mortgage delinquency rate and the percent of homes in foreclosure).  The combined rate of delinquencies and in foreclosure is now below the combined rate in 2002.  The mix is different (more in the foreclosure process now).   These rates are getting close to normal (foreclosures are still elevated).

Lopsided Housing Rebound Leaves Millions of People Out in the Cold -- The housing recovery that began in 2012 has lifted the overall market but left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans. Home prices rose in 83% of the nation’s 178 major real-estate markets in the second quarter, according to figures released Wednesday by the National Association of Realtors. Overall prices are now just 2% below the peak reached in July 2006, according to S&P CoreLogic Case-Shiller Indices. But most of the price gains, economists said, stem from a lack of fresh supply rather than a surge of buyers. The pace of new home construction remains at levels typically associated with recessions, while the homeownership rate in the second quarter was at its lowest point since the Census Bureau began tracking quarterly data in 1965 and the share of first-time home purchases remains mired near three-decade lows. The lopsided recovery has shut out millions of aspiring homeowners who have been forced to rent because of damaged credit, swelling student loans, tough credit standards and a dearth of affordable homes, economists said. In all, some 200,000 to 300,000 fewer U.S. households are purchasing a new home each year than would during normal market conditions,

MBA: "Mortgage Applications Increase in Latest Weekly Survey" -- From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 7.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 5, 2016.... The Refinance Index increased 10 percent from the previous week. ... The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 13 percent higher than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.65 percent from 3.67 percent, with points increasing to 0.34 from 0.30 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. Refinance activity has increased this year since rates have declined. However it would take another significant move down in mortgage rates to see a large increase in refinance activity.The second graph shows the MBA mortgage purchase index. The purchase index is "13 percent higher than the same week one year ago."

Pace of Growth Slows for New Home Purchase Apps: MBA: The number of mortgage applications for new home purchases increased from a year ago in July, according to the Mortgage Bankers Association's Builder Applications Survey. Application volume rose 2.4% from July 2015, which was the slowest year-over-year pace thus far in 2016, according to Lynn Fisher, the MBA's vice president of research and economics. When compared with June 2016 though, applications dropped 8% with adjustments for seasonality. The MBA estimated that new single-family home sales were occurring at a seasonally adjusted rate of 540,000 units in July based on Builder Applications Survey data, which is an increase of 1.9% from June's seasonally adjusted figure. The product mix in June featured a 68.5% share of conventional loans as part of total loan applications. FHA loans made up 17.2% of applications, and VA and USDA loans composed 13.6% and 0.7% of applications, respectively. The average loan size fell by just over $300 from June to $325,843 in July.

The Typical Home in San Jose Now Costs More Than $1 Million - Rising home prices and growing affordability concerns showed no signs of abating in the second quarter, as San Jose, Calif. became the first city where the price of a typical home eclipses $1 million. Home prices rose in 83% of metropolitan areas across the U.S. in the second quarter compared with a year earlier, according to data released Wednesday by the National Association of Realtors. That is a slight decline from the first quarter, when price increases were reported in 87% of metro areas. Still, there were some signs the market is starting to cool, bringing welcome relief for home buyers. Twenty-five out of the 178 metropolitan areas included in the report experienced double-digit price gains, down significantly from the same period last year, when 34 metro areas saw double-digit gains.Twenty-nine metros also experienced price declines this quarter, according to NAR.Nonetheless, home prices hit r ecord highs during the quarter, driven by rapidly rising prices in California and northwestern cities, such as Portland and Seattle. The national median home price was $240,700, according to NAR, up nearly 5% from the previous peak in the second quarter of 2015.

"Mortgage Rates Drop Back to 1-Month Lows" --From Matthew Graham at Mortgage News Daily: Mortgage Rates Drop Back to 1-Month Lows Just a day after bouncing firmly higher from the lowest levels in a month, mortgage rates are right back down to the bottom of the recent range. For some lenders, there have been one or two days with lower rates over the past, but for most, today is the best in exactly one month. Incidentally, that also puts rates fairly close to the lowest levels in 3 years seen in the immediate wake of the UK vote to leave the European Union (Brexit). For flawless scenarios, 3.375% is now a more prevalent quote than 3.5% on conventional 30yr fixed loans. At current levels, the most aggressive fringe of the marketplace is beginning to offer 3.25% again--a rate that enjoyed a brief spat of popularity in early July. It should also be noted that government rates (FHA/VA/USDA) have been shining of late, with several lenders offering 30yr rates near or under 3.0%, and the vast majority able to do at least 3.25%. But again, don't expect to see these rates without a perfect scenario (in terms of credit score, property type, loan purpose, Loan-to-value, etc).Here is a table from Mortgage News Daily: Home Loan Rates  View More Refinance Rates

 The California Paradox: Highest Per Capita Debt, Lowest Default Rate -- In the months immediately following the financial crisis, the press was filled with sad stories of countless California defaulters who had gotten burned by having too much debt (most of it invested in housing) and who promptly defaulted after the value of their primary asset, their house, plunged when the housing bubble burst. And then, these stories of financial failure gradually stopped. One reason for this is that overall per capital debt did decline... modestly. After hitting $90,000, it has since dropped to just shy of $70,000, even though it is once again rising.  Nonetheless, the average per capita debt in California remains the highest in the US by a margin of about $10,000 as the latest household credit report released today by the NY Fed showed.  Why does the average Californian carry so much debt? The answer is simple: housing. At over $50,000, or 75% of the total, the biggest component of the total debt pile is mortgage debt. Other states where residents are comparably crippled by mortgage debt include New Jersey, Arizona and so on.

14% Of Americans Have Negative Wealth - According to the New York Federal Reserve, 14% of the U.S. population lives in households that have “negative” wealth. In other words, these are households that have more debts piled up than assets, which puts their net worth in minus territory. But what does a negative wealth household look like? In the following chart, VisualCapitalist's Jeff Desjardins compares the data on negative wealth households with the data on their positive counterparts. There are some obvious and stark contrasts... Households that are deep in the red have the majority of their wealth in the family car – automobiles make up 45% of the value of their total assets. Housing makes up 20% of their assets by value. For positive wealth households, it is the reverse: 40% of wealth is in the home, and 15% in vehicles.  The composition of debt is also very telling. Negative wealth households have a whopping 47% of debt in student loans, while positive houses have just 6%.

NY Fed: Household Debt Increased Slightly in Q2 2016, Delinquency Rates Declined -- The Q2 report was released today: 2nd Quarter Household Debt and Credit Report. From the NY Fed: Household Debt Balances Increase Slightly, Boosted By Growth In Auto Loan And Credit Card Balances The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which reported that household debt increased by $35 billion (a 0.3 percent increase) to $12.29 trillion during the second quarter of 2016. This moderate growth was driven by increases in auto loan and credit card debt, which increased by $32 billion and $17 billion respectively. Mortgage debt declined by $7 billion in the second quarter, after a $120 billion increase in the first quarter, and student loan balances were roughly flat. Meanwhile, this quarter saw improvements in overall delinquency rates and another historical low (over the 18 years of the data sample) in new foreclosures. ...Overall delinquency rates improved, continuing the trend in place since 2010. In the second quarter, 4.8 percent of outstanding debt was in some stage of delinquency down from 5 percent previous quarter, and 5.6 percent in the second quarter of 2015. There were 82,000 consumers with new foreclosure notations on their credit reports – another low in the 18-year history of this data set...."Today's report highlights a positive ongoing trend in household debt," said Donghoon Lee, Research Officer at the New York Fed. "Delinquency rates continue to improve, even as credit has become more widely available."

Just Released: Recent Developments in Consumer Credit Card Borrowing -- The Federal Reserve Bank of New York’s Center for Microeconomic Data today released its Quarterly Report on Household Debt and Credit for the second quarter of 2016. It showed that overall household debt increased modestly over the period, with subdued mortgage originations and moderate but continued increases in non-housing related credit—particularly auto loans and credit cards. The total outstanding credit card balance now stands at $729 billion, up $17 billion from the first quarter, but still well below the peak of $866 billion reached in the fourth quarter of 2008. Credit card delinquency rates have continued to improve since peaking in 2008. We have previously “looked under the hood” of auto loans, and in this post, we present analysis that provides new insight into credit card debt by examining trends in credit card issuance and usage. The Quarterly Report and the following analyses are based on data from the New York Fed’s Consumer Credit Panel, which is a nationally representative sample drawn from Equifax credit reports.  The overall use of credit cards has fluctuated with the business cycle. Measured by the share of individuals with at least one card, participation peaked in the second quarter of 2008 at 68 percent of borrowers and then declined sharply to 59 percent during the Great Recession. Over that time period, banks reactively and proactively closed accounts, the Card Act of 2009 resulted in reduced lending to younger borrowers and changed certain practices (such as limiting solicitations, requiring clearer disclosures of terms, and restricting fees), and consumers deleveraged.

New York Fed: Credit-Card Use Increasing Among People with Low Credit Scores - The credit card is coming back, even among people with the lowest credit scores. In the second quarter, total household debt increased by $35 billion to $12.3 trillion, according to the New York Fed’s latest quarterly report on household debt. That increase was driven by two categories: auto loans and credit cards. While auto loans have been rising at a steady clip for the past six years, rising credit-card balances are a new development. After the recession, households cut back on credit-card use until 2014. Since then, card balances have risen by about $70 billion.  The report underscores how the nation’s credit cycle has evolved, from broadly deleveraging in the aftermath of the financial crisis to a renewed—but still tentative—embrace of credit.  From 2008 to 2013, total household debts dropped by more than $1.5 trillion. But first student-loan and auto-loan balances began to rise, and then mortgages and finally credit cards. Total household debt balances are now $400 billion below their 2008 peak. Credit-card debt had declined as households cut back on their use and as financial institutions cut off credit. These effects were particularly pronounced among people with low credit scores, where the number with a credit card declined by more than 10%, according to a special New York Fed supplemental report on credit cards. mNow, credit cards are returning among individuals with low credit or subprime credit scores below 660. Among people with credit scores between 620 and 660, the share that had a credit card rose to 58.8% in 2015 from a low of 54.3% in 2013. Among those with scores below 620, the number of people with a credit card increased to 50% from a low of 45.6% two years ago. Both figures for 2015 are the highest since 2008. By contrast, about 88% of people with high credit scores have credit cards, a figure that has changed little over the past decade.

Did US Consumers Finally Tap Out? BofA Internal Card Data Shows Significant July Spending Slowdown -- Ahead of this Friday's retail sales report, which bulls are hoping will show a continuation of the strong spending trends revealed in last month's data, Bank of America is once again the bearer of bad news. As BofA reports in a note released this morning, according to the bank's internal aggregated credit and debit card data, consumer spending slowed in July, with retail sales ex-autos down 0.3% mom on a seasonally adjusted basis. This follows the flat pace in June for retail sales ex-autos. As chief economist Michelle Meyer points out, "we think the recent  weakening in consumer spending is largely a cooling down after the exceptionally strong gains from March through May (Chart 1). Looking at the full year, BofA finds that retail sales ex-autos are only up 0.7% yoy, and points out that Census Bureau data have closely followed the trend in the BAC data, suggesting that the market should prepare for either a downward revision to the June data and/or disappointing July figures: "In our view, this sets up for a softer Census Bureau retail sales report on  Friday – we would not be surprised to see either disappointing July sales and/or a downward revision to June."

Retail Sales August 12, 2016: Consumers spent their money on vehicles in July but not on much else as retail sales came in unchanged. When excluding autos, retail sales slipped 0.3 percent for the first decline in this reading since March. When excluding both autos and gasoline, the latter falling on lower prices, retail sales improve slightly but are still down 0.1 percent for the first decline since January. This core reading is telling and will likely define total consumer spending (which includes services) for the month of July. The big plus that saves the report is the 1.1 percent monthly surge in motor vehicle sales, one that follows a 0.5 percent gain in June. Spending elsewhere may be weak, but spending on vehicles is a signal of consumer confidence and strength. Elsewhere, positives are hard to find. Supermarket sales fell in the month as did building materials. Sporting goods were especially weak as were restaurant sales, the latter a discretionary category that speaks to the month's lack of non-vehicle punch. On the plus side once again are sales at nonstore retailers which, driven by ecommerce, jumped a sizable 1.3 percent for a second straight month and follows even larger gains in prior months. Sales at gasoline stations, reflecting lower prices, swung 2.7 percent lower following a 2.2 percent gain in the prior month. The consumer is the driver of the economy and July's weakness for retail sales makes for a slow start to the third quarter and will ease talk for now of a September FOMC rate hike. Upward revisions are footnotes in the report with June now at plus 0.8 percent, up 2 tenths from the initial reading which will pull GDP revision estimates for the second quarter higher.

US Retail Spending Remains Unchanged In July -- Consumer spending in the US was flat in July, the Commerce Department reports. The surprisingly weak month may be payback for the strong gain in June, which surged 0.8% in today’s revised data. Meanwhile, the year-over-year trend in headline retail ticked lower. Putting it all together suggests that the appetite for consumption is still positive, but the growth rate is easing. Is that a concern? Maybe, although the recent revival in the pace of job creation implies that retail sales will continue to post steady if unspectacular growth. Monthly data is noisy, of course, and so there’s a strong case for focusing on the annual comparison. By that standard it’s clear that sales growth is relatively modest compared with recent history. Note, however, that the 2.3% year-over-year increase, although historically low, is above the recent trough of 1.7% in March. It’s unclear if the mild revival has staying power, although the improvement in job growth in the last two months certainly lifts the odds in favor of optimism.  As usual, retail spending looks firmer after stripping out gasoline sales. Consumption ex-gas advanced 3.5% for the year through July. That’s not especially impressive either, although for the moment it’s not obvious that it’s a sign of trouble—largely due to the renewed strength in the labor market—and the low probability that a recession is near, based on data through June (and in subsequent updates via The US Business Cycle Risk Report). But as long as payrolls continue to grow at a healthy rate, which was clearly the case for June and July, it’s reasonable to expect that retail spending will hold steady and perhaps perk up in the months ahead.

Retail Sales unchanged in July -- On a monthly basis, retail sales were unchanged from June to July (seasonally adjusted), and sales were up 2.3% from July 2015. From the Census Bureau report:  The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $457.7 billion, virtually unchanged from the previous month, and 2.3 percent above July 2015. ... The May 2016 to June 2016 percent change was revised from up 0.6 percent to up 0.8 percent.  This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 0.2% in July. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 3.4% on a YoY basis. The increase in July was below expectations for the month, however retail sales for June were revised up.

Retail Sales Show No Growth for July 2016 -- Robert Oak - July 2016 retail sales were a real Wall Street let down as there was no change from June.  Gasoline sales plunged by -2.7%, yet most retailers had declining sales.  Auto sales and Amazon prime day were not enough to salvage overall retail sales.  Without autos & parts sales, retail sales would have dropped by -0.3% for the month.  Retail sales without gasoline station sales considered would have been a 0.2% monthly increase.  Retail sales overall have increased 2.3% from a year ago.  Nonstore (online) retailers have shot up by 14.1% and while gasoline has dropped by -11.0% for the year.  Overall retail sales are not a good sign for consumer spending growth.  Total July retail sales were $457.7 billion.  Below are the retail sales categories monthly percentage changes.   General Merchandise includes Walmart, super centers, Costco and so on.  Department stores by themselves declined by -0.5% for the month.  Grocery stores by themselves plunged with a -0.9% monthly decrease.  Sporting goods, hobby, book and music stores had a really bad month, -2.2% change in sales.  Health and personal care had a 0.1% increase for the month but has soared up by 7.8% for the year.  Online shopping continues to increase with a whopping 1.3% monthly gain and an annual one of 14.1%.  One has to wonder if the increase in online shopping story is correlated with less demand in gasoline.  These figures are seasonally adjusted.  Below is a graph of just auto sales. For the year, motor vehicle sales have increased just 2.9%, even though the month showed a 1.3% increase Autos & parts together increased 1.1% for the month and 2.4% from a year ago. Below are the retail sales categories by dollar amounts. As we can see, autos are by far the largest amount of retail sales. By volume, auto dealers by themselves were $86 billion of sales. Grocery stores by themselves are $52.1 billion. Compare that to online sales, which were $47.7 billion and gas at $33.3 billion. We're sorry but Amazon prime day did not ruin retail sales as some in the press claim. Even though online sales are growing, it is clear by volume autos then groceries rule retail and the increase in online does not equate to a decrease in other retailers.

Headline Retail Sales Unchanged In July 2016 - But Our Analysis Says Otherwise.: Retail sales were unchanged according to US Census headline data. Our analysis paints a fairly ugly picture of retail sales - and the sales were significantly under expectations. Backward data revisions were slightly up. Econintersect Analysis:

• unadjusted sales rate of growth decelerated 2.8 % month-over-month, and up 0.7 % year-over-year.
• unadjusted sales 3 month rolling year-over-year average growth decelerated 0.7 % month-over-month, 1.9 % year-over-year.
• unadjusted sales (but inflation adjusted) up 0.9 % year-over-year
• this is an advance report. Please see caveats below showing variations between the advance report and the "final".
• in the seasonally adjusted data - there was only strength in non-store retailers and automotive.
• seasonally adjusted sales unchanged month-over-month, up 2.3 % year-over-year (last month was originally reported at 2.7 % year-over-year).

Core Retail Sales Tumble Most Since January- Despite this week's Macy's-driven retail sales exuberance - following BofA's suggestion that all was not well - the official retail sales print shows July was ugly... Retail Sales (ex Autos/Gas) fell 0.1% MoM (missing expectations of +0.3%) to the weakest since January. The headline data was flat MoM (dramatically missing the +0.4% expectations). The drop was driven by weakness in gas station and sporting goods sales (along with department stores... apart from Macy's?). Perhaps most worrying hjowever is the mere 2.3% YoY growth in headline retail sales - a level that has signaled recessionary conditions in the past. Core Retail Sales monthly changes are volatile to say the least... YoY growth in retail sales slowed to just 2.3% - indicative of recessionary levels...  BofA was right after all... Looking at the full year, BofA finds that retail sales ex-autos are only up 0.7% yoy, and points out that Census Bureau data have closely followed the trend in the BAC data, suggesting that the market should prepare for either a downward revision to the June data and/or disappointing July figures: "In our view, this sets up for a softer Census Bureau retail sales report on  Friday – we would not be surprised to see either disappointing July sales and/or a downward revision to June." Given that BofA's internal credit card data appears indicative of overall spending trends, judging by a very disappointing retail spending report. It's difficult to square such disappointment with the recent GDP data which shows that only the "strong" consumer is keeping the US economy out of recession...

 Preliminary August Consumer Sentiment at 90.4 --The preliminary University of Michigan consumer sentiment index for August was at 90.4, up from 90.0 in July. Confidence inched upward in early August due to more favorable prospects for the overall economy offsetting a small pullback in personal finances. Most of the weakness in personal finances was among younger households who cited higher expenses than anticipated as well as somewhat smaller expected income gains. Concerns about Brexit have faded amid rising references to the outcome of the presidential election as a source of uncertainty about future economic prospects. Home buying has become particularly dependent on low interest rates, with net references to low interest rates spontaneously mentioned by 48%-this figure has been exceeded in only two months in the past ten years. In contrast, low housing prices were cited by just 25%, the lowest figure in ten years. Overall, the data remains consistent with real personal consumption expenditures improving at an annual rate of 2.6% through mid 2017, with new and existing home sales also benefitting from low mortgage rates. (graph)

Preliminary August 2016 Michigan Consumer Sentiment Inches Up from July Final: The University of Michigan Preliminary Consumer Sentiment for August came in at 90.4, a 0.4 point increase from the 90.0 July Final reading. Investing.com had forecast 91.5. Surveys of Consumers chief economist, Richard Curtin makes the following comments: Confidence inched upward in early August due to more favorable prospects for the overall economy offsetting a small pullback in personal finances. Most of the weakness in personal finances was among younger households who cited higher expenses than anticipated as well as somewhat smaller expected income gains. Concerns about Brexit have faded amid rising references to the outcome of the presidential election as a source of uncertainty about future economic prospects. Home buying has become particularly dependent on low interest rates, with net references to low interest rates spontaneously mentioned by 48%-this figure has been exceeded in only two months in the past ten years. In contrast, low housing prices were cited by just 25%, the lowest figure in ten years. Overall, the data remains consistent with real personal consumption expenditures improving at an annual rate of 2.6% through mid 2017, with new and existing home sales also benefitting from low mortgage rates. See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

  Update: U.S. Heavy Truck Sales -- The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the July 2016 seasonally adjusted annual sales rate (SAAR). Heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April 2009, on a seasonally adjusted annual rate basis (SAAR). Since then sales increased more than 2 1/2 times, and hit 486 thousand SAAR in November 2015. Heavy truck sales have since declined - due to the weakness in the oil sector - and were at 399 thousand SAAR in July. Even with the recent oil related decline, heavy truck sales are still above the average (and median) of the last 20 years.

Car finance – is the industry speeding? - The car industry’s fortunes play an important part in the stability of the broader economy. The automotive industry (including manufacturers, their suppliers, dealers, servicing, leasing and refuelling) accounts for over 4% of GDP. Demand for new cars is particularly sensitive to the economic cycle, typically falling sharply in recessions but growing strongly in recoveries (Chart 1). So it was not surprising that the Government introduced a car scrappage scheme between April 2009 and March 2010 to stimulate private new car demand following the recession. This article examines a fairly recent development in the industry, namely that new car purchases nowadays are mostly financed by manufacturers’ own finance houses. This has a risk of exacerbating the cyclicality of new car sales shown in the chart. Moreover, manufacturers increasingly bear the risk of future falls in car prices, potentially making the industry even more vulnerable to macroeconomic shocks.

EIA: "Gasoline prices at 16-week low, expected to average less than $2 a gallon by December" -- The EIA released the Short-Term Energy Outlook today. From the STEO:

• • EIA expects the retail price of regular gasoline to average $2.19/gal during the 2016 summer driving season (April through September), 6 cents/gal lower than projected in last month's STEO and 44 cents/gal lower than the price in summer 2015. EIA expects that the U.S. average retail price of regular gasoline reached a peak of $2.37/gal in June and will fall to an average of $2.05/gal in September and to an average of $1.92/gal in December.
• • The monthly average spot price of Brent crude oil decreased by $3/b in July to $45/b, which was the first monthly decrease since January 2016. Significant outages of global oil supply contributed to rising oil prices during the second quarter of 2016. However, concerns about future economic growth related to the United Kingdom's June 23 vote to exit the European Union and the easing of supply disruptions in Canada contributed to falling oil prices in late June. Prices continued to fall in July because of concerns about high levels of U.S. and global petroleum product inventories, despite relatively strong demand, and because of growing U.S. oil rig counts. The Baker Hughes U.S. active oil rig count increased for six consecutive weeks in July and early August, the longest stretch of weekly increases in almost a year.
• • EIA expects consistent global oil inventory draws to begin in mid-2017. The expectation of inventory draws contributes to accelerating price increases in the second quarter of 2017, with price increases continuing later in 2017. Brent prices are forecast to average $52/b in 2017, unchanged from last month's STEO. Forecast Brent prices average $58/b in the fourth quarter of 2017, reflecting the potential for more significant inventory draws beyond the forecast period.

U.S. lags in road safety --In 2013, 32,894 people in the United States died in motor vehicle crashes. Although down since 2000, the overall death rate — 10.3 per 100,000 people — tops 19 other high-income countries, the U.S. Centers for Disease Control and Prevention reported July 8. Belgium is a distant second with 6.5 deaths per 100,000. Researchers reviewed World Health Organization and other data on vehicle crash deaths, seat belt use and alcohol-impaired driving in 2000 and 2013. Canada had the highest percentage of fatal crashes caused by drunk drivers: 33.6 percent. New Zealand and the United States tied for second at 31 percent. But Canada and 16 other countries outperformed the United States on seat belt use — even though, in 2013, 87 percent of people in the United States reported wearing safety belts while riding in the front seat. Spain saw the biggest drop — 75 percent — in its crash death rate. That country improved nearly all aspects of road safety, including decreasing alcohol-impaired driving and increasing seat belt use, the researchers say.

Rail Week Ending 06 August 2016: Still In Contraction But Short Term Trends Continue To Improve | Talkmarkets: Week 31 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The four and 13 week rolling averages' contraction continues to moderate - but the 52 week rolling average continue to degrade. The contraction began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause some acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 531,595 carloads and intermodal units, down 5.5 percent compared with the same week last year. Total carloads for the week ending August 6 were 268,006 carloads, down 7 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 263,589 containers and trailers, down 3.9 percent compared to 2015. Two of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 15.7 percent to 10,555 carloads; and grain, up 12.1 percent to 24,120 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 24 percent to 10,508 carloads; coal, down 15.7 percent to 89,310 carloads; and forest products, down 7.2 percent to 10,008 carloads. For the first 31 weeks of 2016, U.S. railroads reported cumulative volume of 7,588,589 carloads, down 11.7 percent from the same point last year; and 7,978,993 intermodal units, down 2.8 percent from last year. Total combined U.S. traffic for the first 31 weeks of 2016 was 15,567,582 carloads and intermodal units, a decrease of 7.4 percent compared to last year.

Buffett’s BNSF Dividend Is Lowest Since 2010 as Railroad Slumps - BNSF is hauling less cash to Omaha these days. The railroad, owned by Warren Buffett’s Berkshire Hathaway Inc., made a $500 million distribution to its parent in the three months ended June 30, according to regulatory filings. That’s half the total from the same period a year earlier and the lowest amount for a quarter since 2010. The business has been a major contributor to Berkshire’s profit since Buffett bought it in 2010. BNSF has sent more than $20 billion to its parent since. Times have gotten tougher. A stronger dollar and sluggish consumer demand have become a drag on U.S. railroads and contributed to a decline in freight volumes. BNSF and its competitors have been shedding workers and parking locomotives to cut costs. But it hasn’t been enough. Profit at BNSF dropped 20 percent to $772 million in the second quarter, according to a regulatory filing Friday.

Analysis: Grain trade in Atlantic falls short of Supramax owners' hopes - Grain demand in the Atlantic Supramax market has been unusually lackluster this summer so far, which, allied with a persistent tonnage overhang, has created a soft freight environment ship-owners are finding hard to shake off. This has been especially felt in East Coast South America, which normally reaches the peak of its grain export season in the first half of August. This third quarter, port congestion and lower Chinese demand for soybeans and sugar, have led to a pile-up of vessels in the South Atlantic, while major grain exporters in the region have been less present in the market than usual. "The South Atlantic has definitely been moving downwards and, in July, lots of cargoes got pushed into August due to congestion in the River Plate," said a broker. "All the big boys -- Bunge, Cargill for example -- have been very quiet, and Dreyfus has not been very busy." Chinese demand for ex-ECSA commodities, such as soybeans and sugar, has seen a sharp decline in recent months, which shipping sources attributed to high commodity prices, growing stockpiles in China and restrictions on import permits.According to Chinese customs data, Chinese sugar imports in the first six months of 2016 were down 42% from the same period in 2015, amounting to 1.3 million mt. East Coast South America's lack of sparkle in the past few months has been reflected in weaker freight rates, with Supramax owners currently unable to hit the psychological $10,000/day plus $100,000 ballast bonus mark for trips with grain from ECSA to the Far East, which normally indicates that the market is on the up. Last Friday an Ultramax vessel was heard fixed at $9,500/day plus $95,000 ballast bonus for a trip with grains from Santos, Brazil, to Bangladesh, while Supramax trips from ECSA to the Far East were rating between $8,500/day plus $85,000 ballast bonus and $9,000/day plus $90,000 ballast bonus.

Wholesale Trade August 9, 2016: June wholesale inventories rose 0.3 percent in a build that for a second straight month is too low as sales surged 1.9 percent. The mix pulls down the stock-to-sales ratio two notches from 1.35 in May to 1.33 which appears to be too lean given the strength in sales. And sales strength is impressive and is centered at the heart of business investment, that is machinery where wholesale sales surged 2.8 percent to add onto solid gains over the prior two months. Hardware sales, also key to business investment, surged 7.7 percent in the month. These sales gains hint at rising business expectations which are needed given general weakness in productivity (as seen in this morning's earlier report for the second quarter). Judging by stock-to-sales ratios, both machinery and hardware need to be restocked along with metals and electrical goods which are two other business investment categories. Other areas posting big sales gains include farm products and petroleum, two non-durable categories subject, however, to monthly price swings. Inventory is unwanted when sales are slow but when sales are picking up, inventories need to pick up too. Today's report falls in line with a building run of upbeat economic news.

Wholesale sales and inventories point to renewed growth --  While we'll get a more complete picture on Friday, this morning's release of wholesale sales and inventories supplies yet more evidence that the shallow industrial recession bottomed in March.   Without doubt, the inventory to sales ratio has been the most Doomish statistic of this past year. All of the usual suspects pointed to this as surefire proof that the economy was falling into a full-fledged recession.  But as I've pointed out for months, the inventory to sales ratio tends to make a peak in about mid-slowdown or recession, and declines as the economy is exiting the downturn.  So here is what the wholesale inventory to sales ratio looks like through June:  It has failed to make a new high in months, and today's data showed an unambiguous decline. Of import, note that this ratio also increased going into slowdowns such as the 1998 Asian currency crisis, not just during full-fledged recessions. As I have also continually pointed out, the sequence is that sales turn up before inventories do. That's what is shown by decomposing the ratio into sales (red, left scale) and inventories (blue, right scale): In a recession, the ratio primarily decreases via a sharp decline in inventories, whereas in slowdowns like 1998 the ratio primarily decreases via a renewed increase in sales -- which is what we have seen this year. I'll have more to say Friday when we get retail and whole business sales and inventories.

Wholesale Inventories Rise, Sales Surge Most In 4 Years -- While hope springs eternal for Q3 GDP, the revised jump in Q2 inventories data (+0.3% in June vs 0.0% exp and +0.2% in May revised up from initial) suggests perhaps Q3 will be a let-down. But all eyes will be focused on Wholesale Sales which surged 1.9% MoM - the most since Sept 2012, though we note sales remain lower (-0.45%) YoY and inventories higher (+0.24%) YoY. This move notched the wholesale inventories-to-sales ratio down to 1.33 - which remains deep in recession territory despite its improvement. Sadly - for the recovery-optimists - auto inventory-to-sales ratio rose to 1.82x.But sales gains reduced the ratio... And perhaps most importantly, wholesale auto inventories rose relative to sales... Still, it;s probably nothing some more free 10year term credit from the government can't solve?!

Headline June 2016 Wholesale Sales Improves - Our Analysis Says the Opposite.: The headlines say wholesale sales were up month-over-month with inventory levels remaining at levels associated with recessions. Our analysis shows an degradation of the 3 month averages AND we see a decline looking at the single month's data. Note that Econintersect analysis is based on the change from one year ago. Econintersect Analysis:

• unadjusted sales rate of growth decelerated 0.9 % month-over-month.
• unadjusted sales year-over-year growth is down 0.6 % year-over-year
• unadjusted sales (but inflation adjusted) down 1.2 % year-over-year
• the 3 month rolling average of unadjusted sales decelerated 0.4 % month-over-month, and down 1,9 % year-over-year.
• unadjusted inventories up 0.2 % year-over-year (down 0.3 % month-over-month), inventory-to-sales ratio is 1.31 which historically is at recessionary levels.

US Census Headlines based on seasonally adjusted data:

• sales up 1.9 % month-over-month, down 0.4 % (last month was reported down 2.6 %) year-over-year
• inventories up 0.3 % month-over-month, inventory-to-sales ratios were 1.32 one year ago - and are now 1.33.
• the market (from Bloomberg / Econoday) expected inventory month-over-month change between -0.2 % to 0.3 % (consensus +0.3 %) versus the +1.9 % reported.

PPI-FD August 12, 2016: The burst higher for producer prices proved brief. The PPI-FD for July fell 0.4 percent to pull the year-on-year rate into the negative column at minus 0.2 percent. When excluding food & energy, prices fell 0.3 percent with the year-on-year rate sinking below 1 percent to only 0.7 percent. Minus signs fill the July tables with a 0.3 percent decline for services a special concern. The decline, in part reflecting weakness in apparel, ends three months of prior gains and hints at easing demand at the base of the economy. And goods are also down, 0.4 percent lower for the first decline since February. Wholesale prices of food, pulled down by lower corn prices, fell in the month as did prices for energy and construction as well as both cars and light trucks. Rounding out the bad news is a 0.5 percent monthly decline in finished goods prices. This report will lower estimates for Tuesday's consumer prices, a report that never has shown much effect from the three or so brief months of price pressure at the wholesale level. This report will not fire up the hawks and, like the weak retail sales report also released this morning, does not point to a September FOMC rate hike.

Producer Prices Unexpectedly Slide -0.4%, Missing Expectations, As Prices For Clothing, Jewelry, Beef Tumble -- Just as moments ago a far weaker than expected retail sales report once again confounded economic watchers who, in the aftermath of the second month of surprisingly strong payrolls, were expecting the upward momentum to continue, so at the same time we got the latest producer price report, according to which PPI for final demand decreased 0.4% in July.  This was well below the consensus estimate of a 0.1% print, matching the lowest estimate of polled economists, and a substantial drop from last month's 0.5% increase. According to the BLS, the decline in the final demand index was led by prices for final demand services, which fell 0.3 percent. The index for final demand goods decreased 0.4%. Prices for "core" final demand, less foods, energy, and trade services were unchanged in July after rising 0.3 percent in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services increased 0.8 percent. As the BLS adds, nearly 60 percent of the decrease in prices for final demand services is attributable to margins for apparel, jewelry, footwear, and accessories retailing, which fell 6.0 percent, while a major factor in the decrease in the index for final demand goods was prices for beef and veal, which fell 9.8 percent.  The breakdown:

• BLS said final demand producer prices had risen 0.5% in June
• Final demand ex food, energy fell 0.3% m/m vs est. up 0.2%
• Final demand fell 0.2% y/y vs est. up 0.2%
• Final demand ex food, energy rose 0.7% y/y vs est. up 1.2%
• Final demand ex food, energy and trade services unchanged m/m
• Final demand personal consumption fell 0.4% m/m
• Final demand personal consumption fell 0.4% y/y
• Health care services (before adjusting for seasonal variations) rose 1.2% y/y; rose 0.3% m/m

 July 2016 Producer Prices Year-over-Year Inflation Remains Insignificantly Deflating.: The Producer Price Index year-over-year inflation remains insignificantly in contraction. The intermediate processing continues to show a large deflation in the supply chain. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate declined from -0.1 % to -0.2 %. In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower.  Removing food and energy (core PPI) was originally done to remove the noise from the index, however the usefulness in the twenty-first century is questionable except in certain specific circumstance.

Business Inventories August 12, 2016: Highlights Inventories swung into a favorable position at the end of the second quarter, up only 0.2 percent in lagging data for June which is far below a 1.2 percent jump in sales. The mix pulls down the stock-to-sales ratio one notch to a lean 1.39. Leading a 0.5 percent rise in retail inventories are auto inventories where a 0.9 percent increase may not prove that excessive given what proved to be a very strong July for auto sales. Wholesale inventories rose 0.3 percent in June while inventories at manufacturers, a sector where demand is soft, slipped 0.1 percent for a second straight month to ease the risk of overhang. Inventory data look well balanced going into third quarter, a quarter when demand (this morning's retail sales report notwithstanding) is expected to prove strong.

June 2016 Business Sales and Inventories Data Continues Mixed. - Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales decelerated compared to the previous month - and the rolling averages declined. Inventories shrunk relative to the previous month but inventory-to-sales ratios remain at recessionary levels. Econintersect Analysis:

• unadjusted sales rate of growth decelerated 0.1 % month-over-month, and down 0.5 % year-over-year
• unadjusted sales (but inflation adjusted) up 0.4 % year-over-year
• unadjusted sales three month rolling average compared to the rolling average 1 year ago decelerated 0.2 % month-over-month, and is down 1.3 % year-over-year.
• unadjusted business inventories growth decelerated 0.5 % month-over-month (up 0.5 % year-over-year with the three month rolling averages showing inventory growth now shrinking), and the inventory-to-sales ratio is 1.31 which is at recessionary levels (well above average for this month).

US Census Headlines:

• seasonally adjusted sales up 1.2 % month-over-month, down 0.6 % year-over-year (it was reported up 1.4 % last month).
• seasonally adjusted inventories were up 0.2 % month-over-month (up 0.5 % year-over-year), inventory-to-sales ratios were up from 1.37 one year ago - and are now 1.39.
• market expectations (from Bloomberg) were for inventory growth of 0.1 % to 0.3 % (consensus +0.1 %) versus the actual of +0.2 %.

The way data is released, differences between the business releases pumped out by the U.S. Census Bureau are not easy to understand with a quick reading. The entire story does not come together until the Business Sales Report (this report) comes out. At this point, a coherent and complete business contribution to the economy can be understood.

Auto Inventories-Sales Ratio Pushes Back To Recession Cycle Highs -- With ugly retail sales and wholesale inventories data rising, the business inventories data rose more than expected (+0.2% vs +0.1%) leaving the inventories-to-sales ratio still deep in recessionary territory. Notably while the overall ratio decline, autos increased to cylce highs at 2.28x. For the 18th month in a row, annual changes in sales declined and inventories rose.  Since the start of 2015, sales have declined YoY while inventories have risen...  And while the inventories-to-sales ratio dropped very modestly, it remains deep in recession territory...

E-commerce Forces Shift in Warehouse Building - WSJ - The rise of online shopping is forcing warehouse builders to redraw the map of logistics hubs on the East Coast. Over the weekend, FedEx FDX 0.38 % Ground, one of the largest transporters of parcels and other shipments, broke ground for its largest facility in the country, an 800,000-square-foot automated distribution center in Allen Township, Pa., adding a large chunk of space to the cluster of logistics real estate in the state’s Lehigh Valley area. “E-commerce is really changing the shape of the market,” said Perry Colosimo, a FedEx spokesman, in a written statement. “We conducted an exhaustive search across three states for the right location that would best enable us to meet this growing demand for our services … The Northeast region is a busy transportation corridor because of its population density and high concentration of businesses, and that trend is projected to continue.” Historically, the area around the central Pennsylvania towns of Harrisburg and York has hosted large clusters of warehouse space because of light zoning restrictions, access to several large city population centers and ample cheap land to build on. But in the last five years, as online retailers have begun to focus more on two-day and same-day package delivery, warehouse development in the Lehigh Valley, which is to the north and closer to New York City, has surged, according to brokerage CBRE Inc. Since the end of the Great Recession in the second quarter of 2010, no U.S. industrial market has grown as fast as the Interstate-78/Interstate-81 corridor, which includes the Lehigh Valley and parts of Central Pennsylvania, but excludes the Philadelphia market. Developers have added 56 million square feet of space, increasing the size of the market by 25% over that period, exceeding double-digit percentage growth in Houston; Columbus, Ohio; and the Inland Empire area east of Los Angeles. Tenants including Wal-Mart Stores Inc., Dollar General, Uline Inc., Ocean Spray and PetSmart Inc. have added nearly 7 million square feet of distribution space in the last three years. This year alone, Samsung Electronics Co. , Stitch Fix and Isuzu Motors have signed large warehouse leases in the area.

Port of Oakland Reports Record Container Volumes in July - WSJ - The Port of Oakland, Calif., reported record container volumes in July, driven by a surge in empty containers on both the export and import side. Dockworkers handled nearly 30% more empty containers—48,521 20-foot equivalent units for export and 17,017 import TEUs—in July. Empty containers are usually moved, in anticipation of trade growth, to places where they’re expected to be filled with goods before shipping back. “With holiday shipments set to commence, this could be the start of something good,” said the port’s maritime director, John Driscoll.While August has been a peak month for trade at Oakland and other West Coast ports in recent years, some industry groups have predicted a lull during the usual peak this year. The most recent Global Port Tracker report, released monthly by NRF and research firm Hackett Associates, estimated import cargo across the nation’s major ports would be up 1.4% year-over-year in July, then down 2% in August and down again 2.6% in September. Oakland is a major hub for U.S. agricultural exports other shipments destined for Asian markets. Over the past year, exports have lagged behind nationwide as the dollar gained strength, making U.S. goods more expensive to overseas customers. But the dollar has lost some ground recently, and Oakland has reported a slight resurgence in export volumes. Port officials are hoping the trend will continue. July saw a higher number of loaded export and import containers moving through the Port of Oakland. On the export side, the port handled 77,573 TEUs, which was up 3.6% from last July. Dockworkers handled 1% more loaded import containers, a total of 80,508 TEUs, compared with the same month last year. Oakland, the nation’s eighth-largest container port, was the first major U.S. port to report July cargo volumes. Officials said July was the port’s busiest month in 10 years. During the month of July, the port received 153 visits from container ships, up from 136 during the same period in 2015.

This U.S. Industry Fought Cheap Chinese Imports and Won, But Not for Long - With imports of Chinese wooden furniture soaring in 2003, John Bassett III, a prominent member of a wealthy Virginia furniture family, convinced a majority of furniture makers to bring a “dumping” case against Chinese competitors for selling goods at below-market prices. The U.S. manufacturers won and received payments of more than $300 million from the government over the following decade. Chinese imports of wooden furniture, burdened by high tariffs, stalled. The efforts of the 78-year-old JBIII, as he is known, were celebrated in the bestseller “Factory Man.” Actor Tom Hanks’ production company is developing a miniseries based on the book. “We were fighting for our lives,” said the charming, loquacious Mr. Bassett. “I went to the front lines (of the furniture industry) and said, ‘Guys, let’s do this together.’” But the industry remains divided whether Mr. Bassett’s strenuous efforts helped very much. U.S. wooden furniture employment continued to sink, furniture factories continue to close, and Asian furniture imports continued to climb, even though Vietnam overtook China as the top exporter to the U.S. of wooden furniture. Some U.S. manufacturers who imported Chinese furniture and opposed the trade case remain embittered. “We wound up paying the tariffs,” said Alex Bernhardt Jr., chief executive of family-owned Bernhardt Furniture Co., which closed some North Carolina factories and imported wooden furniture from China and elsewhere in Asia. “That was our money going to our competitors” in the U.S. Bernhardt switched its domestic manufacturing to upholstered furniture, which is custom-made and is tougher for Asian factories to match.

Import and Export Prices August 11, 2016: Cross-border price pressures continue to show some life. The July headline for import prices is up only 0.1 percent but when excluding petroleum, where prices fell back sharply following a series of double-digit monthly gains, prices rose 0.5 percent. The 0.5 percent gain doesn't look staggering but it is the sharpest gain in more than five years, since April 2011. Pressure on the import side is centered in food prices which jumped 3.3 percent in the month with the year-on-year rate for food moving back into the plus column to 1.4 percent. Non-petroleum industrial supplies also show pressure, up 2.1 percent in the month. Petroleum prices fell 3.6 percent with a drop in crude offsetting a big swing higher for natural gas. Turning to the export side of the report, export prices rose 0.2 percent but here too the core reading, which for exports excludes both food and energy, shows a bit more pressure at plus 0.3 percent. Year-on-year, export prices improved slightly but still remain negative at minus 3.0 percent with import prices also showing improvement but also negative at minus 3.7 percent. Global demand is holding steady and is perhaps firming slightly based on today's price report. Watch for producer prices on tomorrow's calendar and on next week's calendar the key consumer price report where several months of pipeline price pressure have yet to appear.

Import and Export Price Year-over-Year Deflation Moderated Again in July 2016.: Trade prices continue to deflate year-over-year - although the rate of deflation again declined this month. Import Oil prices were down 2.5 % month-over-month, and export agricultural prices down 0.4 %.

• with import prices up 0.1 % month-over-month, down 3.7 % year-over-year;
• and export prices up 0.2 % month-over-month, down 3.0 % year-over-year..

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

Import Prices Dip For 24 Consecutive Months As China Exports Most Deflation In 6 Years -- Following May's 1.4% MoM spike - the highest since 2011 on the back of rising energy prices - June's import prices rose an upward revised 0.6% MoM, while moments ago we learned courtesy of the BLS that in July import prices barely stayed positive, rising just 0.1% sequentially, and down 3.7% compared to last July. This is the 24rd month in a row of year-over-year import price declines with China's exported deflation at 2010 lows. Unlike last month, when imports excluding food and fuels declined sequentially, in July, the core import price category posted a 0.5% rebound driven by metals prices which spiked by 5.9% in the month. Whatever the reason, the May "energy" spike has now all but disappeared.

 NFIB: Small Business Optimism Index increased Slightly in July -- From the National Federation of Independent Business (NFIB): Small Business Optimism Plateaus The Index of Small Business Optimism rose one-tenth of a point in July to 94.6 ... according to the National Federation of Independent Business (NFIB). Reported job creation remained weak in July, with the seasonally adjusted average employment change per firm posting a decline of -0.03 workers per firm, although better than June’s -0.17 reading. Fifty-three percent reported hiring or trying to hire (down 3 points), but 46 percent reported few or no qualified applicants for the positions they were trying to fill. Fourteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem. ... Twenty-six percent of all owners reported job openings they could not fill in the current period, down 3 points from, the highest reading in this recovery. This graph shows the small business optimism index since 1986.

Some Small-Business Owners Trim Expansion Plans, Cite New Labor Law - Small-business owners say they are shouldering higher costs and scaling back expansion plans because of a revised federal rule that gives employees more leverage in settling workplace grievances. The new policy, intended to hold businesses accountable for labor-law violations against people whose working conditions they control but don’t claim as employees, was put in place last year through a ruling by the National Labor Relations Board, which referees workplace disputes and oversees union-organizing elections. The rule, expected to affect fast-food, construction and other industries reliant on contract workers and employees of franchisees, also aims to ensure workers can unionize and collectively bargain with businesses that help control their fates. Some businesses “want to have active involvement in the determination of terms and conditions of employment and in the direction of the employees at work, but they don’t want to take responsibility for it,” said Richard Griffin, the NLRB’s general counsel. The policy broadens the circumstances in which two businesses can be counted as employers of the same group of workers, reversing the NLRB’s 30-year-old standard for determining such “joint-employer” status. The agency is now beginning to rule on a body of test cases that could detail how the standard will apply, but some businesses—particularly those in the franchising industry—have started making decisions based on potential outcomes, underscoring how just the prospect of a regulatory change can impact U.S. workplaces. The change could pull franchisers—ranging from big brand companies such as McDonald’s to smaller operations—into labor disputes involving workers at their networks of independent owner-operators, or franchisees. The brand companies face the risk of having to pay back wages to workers fired for protesting low pay or trying to join a union; the companies also could be swept into collective-bargaining talks alongside store owners they say have total control over the workers at the stores. Franchisees, meanwhile, say they could lose their independence to hire, fire and manage workers as they please.

You Ask, We Answer: Didn’t the U.S. Lose 1 Million Jobs in July? -- Every month, the Bureau of Labor Statistics publishes and news outlets report a headline figure showing the net number of jobs created during the previous month. Last week, The Wall Street Journal reported the labor market added 255,000 jobs in July, a healthy gain that buoyed markets, reset expectations for the Federal Reserve’s next step on interest rates and could influence the upcoming presidential election. But that was a seasonally adjusted number. In reality, the labor market shed more than one million jobs. At first glance, that looks pretty bad. As a result, several readers, a very few analysts and some conspiracy theorists (again) questioned the seasonal adjustment process and the actual health of the economy. First, why does the Labor Department seasonally adjust? Well, because if you step back, the raw numbers look like a lot of noise. Seasonal adjustment is an attempt to identify and account for normal shifts caused by, for example, school schedules, holidays, weather and similar phenomena that affect hiring. The goal is a better view of underlying economic trends. School’s out, so bus drivers, cafeteria workers and other staff are predictably out of work. Over the past decade, the education industry has shed an average of 95,100 jobs each July, transit and ground passenger transportation industry (bus drivers) 56,200 and local government education 1.2 million. Here’s how the Bureau of Labor Statistics describes it: In the establishment survey, payroll employment in education declines by about 20% at the end of the spring term and later rises with the start of the fall term, obscuring the underlying employment trends in the industry. Because seasonal employment changes at the end and beginning of the school year can be estimated, the statistics can be adjusted to make underlying employment patterns more discernible. The seasonally adjusted figures provide a more useful tool with which to analyze changes in month-to-month economic activity.Here’s how it looks in a chart.

More Employment Graphs: Prime Age Participation, Duration of Unemployment, Unemployment by Education and more - Bill Mcbride - A few more employment graphs ... Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate was unchanged in July at 81.2%, and the 25 to 54 employment population ratio increased to 78.0%. The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s. This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more. The general trend has been down for all categories, and the "less than 5 weeks", "6 to 14 weeks" and "15 to 26 weeks" are all close to normal levels. The long term unemployed is at 1.3% of the labor force, however the number (and percent) of long term unemployed remains elevated.This graph shows the unemployment rate by four levels of education (all groups are 25 years and older). Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and all four groups were generally trending down - although the rate has somewhat flattened out recently. Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment. Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Government Statistics May Be Wrong, But They're Not Manipulated - Justin Fox -- I can think of lots of reasons to question or criticize the unemployment rate, gross domestic product and other economic numbers that the U.S. government puts out. Manipulation by politicians looking to win elections is not one of them. Why don’t I worry about this? First, because I know a little bit about the people who put together our nation’s economic statistics. The Bureau of Labor Statistics, Bureau of Economic Analysis and Census Bureau are run on a day-to-day basis by career employees, not political appointees. Even the appointees are often career staffers who get promoted, and many have served under multiple administrations. When top statistics-agency officials do leave government, it’s often for jobs in academia. Credibility with peers is generally of far more value (economic and otherwise) to these people than anything a politician could do for them.   That’s not to say that some politician might not try to influence them -- which brings me to the second reason I’m pretty confident overt political manipulation isn’t happening. Word would get out. As Republican-leaning economist Douglas Holtz-Eakin told Marketplace last week:  If political superiors were to attempt to force the BLS to come up with the quote “right answer,” lower the unemployment rate, the career staff would be calling you and leaking this to every whistleblowing outfit under the sun. As best I can tell, the worst case that has come to light of the White House meddling with a statistical agency involved Richard Nixon, who pushed out BLS Commissioner Geoffrey Moore, to some consternation in statistical circles. But Moore’s replacement, Julius Shiskin, was a lifelong government statistician who ended up being reappointed by Jimmy Carter, and there’s no indication that Nixon tried to alter the actual unemployment numbers.

BLS Just "Revised" Away Obama's "Fastest" Wage Growth Since The Crisis  -- Back February 2016, Obama took to the stage at a press conference to boast about job growth and "most importantly" how the stronger job market was "finally starting to translate into bigger paychecks."  He  Obama's specific comments were:  Most importantly, this progress is finally starting to translate into bigger paychecks.  Over the past six months, wages have grown at their fastest rate since the crisis.  And the policies that I’ll push this year are designed to give workers even more leverage to earn raises and promotions. Turns out that revisions to historical real wage growth figures issued by the Bureau of Labor Statistics yesterday are actually fairly "inconvenient" for Obama.  Time to get the band back together for a reunion of that "doom and despair" tour.   In yet another stunning tribute to the "accuracy" and "consistency" of economicpropagandadata being reported by our government agencies, the Bureau of Labor Statistics yesterday reported a massive downward revision of the 1Q 2016 YoY real wage growth from +4.2% to -0.4% (a 4.6% swing).  But we wouldn't worry much about it because the revisions resulted in only "small" changes in the underlying data according to the BLS: Indexes of all hours-related measures in the business, nonfarm business, and nonfinancial corporate sectors show historical revisions because hours in the base year of 2009 were revised; resulting revisions to percent changes are small. We guess "small" would be one way to describe a 4.6% swing in YoY real wage growth...we would probably choose something more like "abysmal" or "disastrous" but we're not ones to split hairs.  Revisions to manufacturing wages and durable manufacturing wages were even worse.  Real manufacturing YoY wage growth was revised from +2.8% to -4.3% (a 7.1% swing) while real durable manufacturing YoY wage growth was revised from +1.9% to -5.6% (a 7.5% swing).    

Weekly Initial Unemployment Claims decreased to 266,000  -- The DOL reported: In the week ending August 6, the advance figure for seasonally adjusted initial claims was 266,000, a decrease of 1,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 269,000 to 267,000. The 4-week moving average was 262,750, an increase of 3,000 from the previous week's revised average. The previous week's average was revised down by 500 from 260,250 to 259,750. There were no special factors impacting this week's initial claims. This marks 75 consecutive weeks of initial claims below 300,000, the longest streak since 1970.  The previous week was revised down 2,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Labor Market Conditions Index August 8, 2016: Nonfarm payrolls have risen a more-than-solid 255,000 and 292,000 the last two months but they barely register on the labor market conditions index, which at 1.0 in July and a revised negative 0.1 in June are completely flat. But it takes more than just payrolls to move this index which is a broad composite of 19 separate indicators and is considered experimental by policy makers. This index trended in the positive mid-single digits during 2013 and 2014 before it began to gradually move south. But even at only 1.0, July's result is relatively good for this index, the first in fact to make it in the positive column this year. Based on the long trend of this index, the labor market isn't that strong at all right now, yet Janet Yellen, back at June's FOMC press conference, downplayed the weight that this index carries with policy makers.

Productivity and Costs August 9, 2016: Output picked up in the second quarter but not quite as much as hours worked or compensation. Productivity fell 0.5 percent in the quarter for the third decline in a row. This is the longest negative streak in the history of this report which goes back to just after WWII. Unit labor costs rose 2.0 percent but, in a plus, were revised sharply lower in the first quarter which now shows a rare decline at minus 0.2 percent. But most readings in this report are not positive including the year-on-year rate for productivity which is down 0.4 percent for the first decline since second-quarter 2013. In an unfavorable contrast, year-on-year unit labor costs are up 2.1 percent. Lack of business investment is unfortunately a central negative of this cycle and it results in weakening productivity for the nation. Americans are working more hours but production isn't keeping up

2Q2016 (Preliminary): Headline Productivity Contraction Deepens Whilst Labor Costs Rise: A simple summary of the headlines for this release is that the growth of productivity contracted while the labor costs grew (headline quarter-over-quarter analysis). The year-over-year analysis also shows productivity in negative territory, and negative productivity is a usual indicator of a recession. I personally do not understand why anyone would look at the data in this series as the trends are changed from release to release - and many times significantly between the preliminary and final release..   The headlines annualize quarterly results (Econintersect uses year-over-year change in our analysis). If data is analyzed in year-over-year fashion, non-farm business productivity was down 0.4% year-over-year, and unit labor costs were up 2.1 % year-over-year. Bottom line: the year-over-year data is saying that costs are rising faster than productivity. Although one could argue that productivity improvement must be cost effective, it is not true that all cost improvement are productivity improvements. [read more on this statement] Further, the productivity being measured is "capital productivity" - not "labor productivity". [read more on this statement here] Even though a decrease in productivity to the BLS could be considered an increase in productivity to an industrial engineer, this methodology does track recessions. [The current levels are within recession territory]. Please note that the following graphs are for a sub-group of the report nonfarm > business.

Q2 2016 Labor Productivity Declines By -0.5% as Labor Costs Rise --  Robert Oak - The BLS Productivity & Costs report for Q2 2016 shows labor productivity decreased -0.5% annualized.  Output increased 1.2% and hours worked increased 1.8%.  Unit Labor costs increased only 0.5% in Q2 2015.  The reason labor productivity declined was because economic output grew less than worked hours.  For the 2015 year, annual productivity rose 0.9%.  For 2014, annual productivity was 0.8% and in 2013, 0.3%.  The average annual rate of productivity growth from 2007 to 2015 was 1.3%.  Output can be thought of what is produced from the fruits of labor. Examples would be the cars which come off the assembly line and burgers & fries being served up at the greasy spoon. Here is the BLS labor productivity formula: Labor productivity is calculated by dividing an index of real output by an index of the combined hours worked of all persons, including employees, proprietors, and unpaid family workers. , or Labor, is measured in hours only. Nonfarm Business Output directly correlates to real GDP, minus the government, farms,all of those nonprofits and our infamous, often illegal nannies and gardeners, and equivalent rent of owner occupied properties. The output, or is about 74% of real GDP reported. Farms only represent about 1% of output in today's economy. Labor productivity is reported as annualized figures and both indexes are normalized to the year 2009. The main productivity numbers above are all business, no farms, where labor costs have a high ratio, about 60%, to output. These productivity statistics are referred to as nonfarm business. From a year ago, Q2 2015, productivity has declined -0.4%. This is the first decline of four quarters since 2013. Output increased 1.1%, and hours worked rose by 2.1%.

Wolf Richter: Declining Productivity Bodes Ill for Growth and Jobs  This cannot be good for jobs: In the second quarter, nonfarm business sector labor productivity – defined as output per hour worked – fell by an annual rate of 0.5% from the first quarter, the Bureau of Labor Statistics reported today. The third quarterly decline in a row. The last time it dropped for three quarters in a row was from Q3 1973 through Q3 1974 (5 quarters). Alas, in November 1973, the economy entered a recession. Several quarters in a row of declining productivity is not kind to the economy. The productivity decline in the second quarter this year was the result of output edging up at a seasonally adjusted annual rate of 1.2% while hours worked to obtain this output rose 1.8%. Year-over-year, productivity fell 0.4%. Here is what this looks like on a quarterly (blue columns) and year-over-year (red line) basis (chart via BLS): At the same time, unit labor cost rose 2.0% in the second quarter, the result of a 1.5% increase in hourly compensation and the 0.5% decline in productivity. Year-over-year, unit labor costs increased by 2.1%. Ideally, compensation rises to give workers more spending money, and productivity rises as much or more, so that workers and employers both come out ahead. But that’s not happening. So what’s wrong? Why is productivity growth so miserably low? And it’s not because Americans somehow forgot to work. Krishen Rangasamy, Senior Economist at Economics and Strategy, National Bank of Canada, put it this way: Borrowing by corporations for the purposes of stock buybacks instead of investment in machinery and equipment does little to enhance an economy’s capacity for growth. We’re getting more evidence of that in the US where the average age of fixed assets is the highest in half a century and productivity growth is the weakest on records. Given the productivity declines in the first half of the year, and even assuming productivity grows in the second semester at the fastest pace in six years, productivity growth in 2016 is set to be close to zero. As today’s Hot Chart shows, that would mean a six-year average of roughly 0.5% for productivity growth, the lowest ever recorded. That cannot be bullish for the US labor market.

 Productivity Slump Threatens Economy’s Long-Term Growth - WSJ: The longest slide in worker productivity since the late 1970s is haunting the U.S. economy’s long-term prospects, a force that could prompt Federal Reserve officials to keep interest rates low for years to come. Nonfarm business productivity—the goods and services produced each hour by American workers—decreased at a 0.5% seasonally adjusted annual rate in the second quarter as hours worked increased faster than output, the Labor Department said Tuesday. It was the third consecutive quarter of falling productivity, the longest streak since 1979. Productivity in the second quarter was down 0.4% from a year earlier, the first annual decline in three years. That was a further step down from already tepid average annual productivity growth of 1.3% in 2007 through 2015, itself just half the pace seen in 2000 through 2007, and the trend shows little sign of reversing. “In the short term, it’s hard to be anything other than pessimistic, just because this has been going on for so long now,” said Paul Ashworth, chief U.S. economist at consultancy Capital Economics. Productivity is a key ingredient in determining future growth in wages, prices and overall economic output. It has slowed dramatically since the information technology-fueled boom of the late 1990s, when strong productivity gains translated into robust growth for household incomes and the overall economy.The slowdown in recent quarters has likely been reinforced by weak business investment in new equipment, software and facilities that could help boost worker efficiency. Over time, persistently weak productivity would weigh on American living standards by restraining the economy’s ability to grow quickly and generate higher incomes without stoking too much inflation.

About that persistent slowdown in productivity… Click to enlarge. It’s from an interesting note by Elga Bartsch and colleagues at Morgan Stanley. Trapped by low productivity, the MS strategists reckon longer-term annual growth potential across the developed world currently stands at just 1.25 per cent, compared to the 2.75 per cent typically seen 20 years ago. So, instead of doubling about every 25 years, GDP might take 56 years to double from here. Lots of sober reading on this in the usual place.

One Sign That U.S. Productivity Growth Is Poised to Shoot Higher - -- Productivity growth was negative for the third consecutive quarter, defying economists' expectations for a pick-up of 0.5 percent. Meanwhile, the National Federation of Independent Business reported that the share of employers who say they're having trouble filling job openings remains relatively high. Like anything else, the cost of labor gets higher as it gets more scarce. This dynamic should incent businesses to start spending more on capital, rather than continuing to bid up wages, in order to boost production. Capital deepening, in turn, is a key driver of productivity: when workers have more/better/newer equipment, they're generally able to produce more output per hour.  "If labour scarcity rises - and/or labour quality weakens, this greater cost-of-hiring (of L) is the same as a relative drop in the cost of real capital (K)," he wrote. "A growing capital stock would be consistent with greater productivity growth."

 BLS: Job Openings "little changed" in June -- From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 5.6 million on the last business day of June, the U.S. Bureau of Labor Statistics reported today. ... ...The number of quits held steady in June at 2.9 million. The quits rate was 2.0 percent. Over the month, the number of quits was little changed for total private and increased for government (+18,000). The number of quits increased in state and local government education (+20,000) and was little changed in all other industries. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers.  Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in June to 5.624 million from 5.514 million in May. The number of job openings (yellow) are up 9% year-over-year. Quits are up 6% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is solid report with job openings just a little below the record high set in April 2016.

LMCI, JOLTS reports continue to suggest late cycle deceleration -- I have been generally unimpressed with the Job Openings and Labor Turnover Survey (JOLTS) for over a year, and like many others I have found the Labor Market Conditions Index a source of concern.  Since both were updated ths week, let's take an updated look. First of all, for the first time this year the LMCI rebounded into positivity (blue in the graph below) This is a pretty good indication that a recession is some ways off. But before you cheer too much, note that the LMCI does a pretty good job forecasting the direction of the YoY change in employment (red). So even with this month's good LMCI reading, the overall direction is still towards the negative. While I'm not forecasting any actual negative monthly job reports in the near future, even with the last two months' great numbers, the YoY payrolls graph still shows continued deceleration: Today's JOLTs report, which covers June, also shows continued deceleration. For over a year I have noted that the pattern was similar to that in late in the last expansion, and the June report was more of the same. First, here is a comparison of job openings (blue) and hires (red).  Through June, 2016 looks very much like 2006, or even early 2007. After making a new post-reession record five months ago, quits have since fallen back at their late 2015 level.  In the graph below, quits are inverted, and since they also appear very consistent with, and to slightly lead, the unemployment rate (red), that is also shown: If the recent pullback is establishing a new flat (or worse!) trend, then the unemployment rate probably made its cycle low a few months ago. In summary, both the LMCI and the JOLTS reports have been adding to the accumulating evidence that we are getting late in the expansion, but on the positive side, if we follow the 2001-07 template, and taking into account the recent improvement in the long leading indicators, there are stll another 12 - 24 months to go of jobs growth.

Job Opening Rise As Hiring Rebounds After Sharp Drop; Quits Decline -- Moments ago the BLS reported Janet Yellen's favorite labor market indicator, the JOLTS survey, which showed that in June (recall this report is 1 month delayed to the payrolls report), the number of job opening rebounded from a revised 5.514 million to 5.624 million, modestly missing expectations of 5.675 million largely in line with the range. The June job opening rate (job openings as a % of total employment plus openings) rose to 3.8% vs 3.7% prior month. From a net turnover standpoint, the number of hires less separations continued to track the BLS payrolls number closely, jumping to 292K in the past month, catching up to recent shortfalls. There was some good news in the pace of hiring, which after three months of declines, finally rebounded from 5.047MM to 5.131MM. However, as the annual rate of change shows, the hiring pace continues to slowdown compared to a year ago... ... hinting that the US jobs market may have peaked.

June 2016 JOLTS Job Openings Year-over-Year Growth Rate Moderately Improves.: Written by Steven Hansen The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings improved from last month. However, the growth rate trends declined in the 3 month averages. The number of unadjusted PRIVATE jobs openings - which is the most predictive of future employment growth of the JOLTS elements - shows the year-over-year growth moderately accelerated. The year-over-year growth of the unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) also moderately accelerated. The graphs below looks at the year-over-year rate of growth for job opening levels and rate. The relevance of JOLTS to future employment is obvious from the graphic below which shows JOLTS Job Openings leading or coincident to private non-farm employment. JOLTS job openings are a good predictor of jobs growth turning points - and have similar trend lines.. The graph below uses year-over year growth comparisons of non-seasonally adjusted non-farm private BLS data versus JOLTS Job Openings - and then compare trend lines.

To Switch or Not to Switch? How Workers’ Career Choices Could Help the Economy - If you lost your job today, would you look to find another like it, even if you knew your industry was shrinking? Or would you cut your losses and shift to a new career? The latter is a better choice for the economy and probably for you, researchers from Goldman Sachs’s Global Markets Institute say in a report released Thursday. But convincing an employer to spend money training you in new skills that you can turn around and take to another company is a very tough sell. So is convincing you to give up your seniority, potentially move somewhere new and make a costly investment in yourself to start at the bottom in a new industry—especially if you are an older worker. This conundrum is becoming more common for workers whose jobs are disappearing as more work is automated or outsourced, Goldman researchers argue. And it helps explain a persistent “jobs gap” between the types of jobs people want and the types of jobs that are available. It also reflects a shift in people’s economic roles—from “doing” the work to “organizing, coordinating and supervising” the complex tasks behind it, the paper explains. This has led to a rise in what Goldman researchers call “adaptive occupations,” which require workers to interact more frequently with other people and exercise their own judgment.

Too Old for Hard Labor, but Still on the Job - The New York Times: Blue-collar jobs are hard work. Eventually, most blue-collar workers find the wear and tear on their bodies too draining to continue. Moreover, many industrial companies are reluctant to hire or keep older workers as the number of such jobs shrinks. Yet many blue-collar workers, like their white-collar counterparts, can’t afford or don’t want to retire (often a combination of the two).The solution many are turning to is to switch to jobs that require less heavy lifting but still take advantage of their accumulated knowledge and skills. The downside? The pay is often less. One option is mentorship. With a worsening shortage of welders, machinists and other crafts workers, apprenticeship programs offer older skilled workers a less strenuous job opportunity: Teaching their craft to the next generation.“Blue-collar retirees are committed to their fields,” says Robert Eckardt, executive vice president at the Cleveland Foundation. “There is space for blue-collar people to mentor.”

 In Labor vs. Capital, Labor Is Now Winning - In Thomas Piketty’s bestseller “Capital in the Twenty First Century,” the French economist concluded from several centuries of data that capitalist economies inherently tend towards growing inequality. Specifically, when the return on capital is higher than the economic growth rate, the share of all income going toward the owners of capital (who tend to be wealthy) inexorably grows. At first glance, the data for the U.S. seemed to bear him out. Between 1980 and 2013, the share of gross domestic income going to wages and salaries ratcheted steadily down from around 58% to 53%, while the profit share grew. But closer examination revealed a different story. Gross domestic income contains not just labor income and profits but several other sorts of income. One is depreciation, a measure of how much income must be reinvested to maintain the current level of the capital stock. Its share of GDI has risen over time as business investment shifts to computer equipment and software, which depreciates rapidly. The second is rental income of persons, a measure of how much households benefit by in effect acting as their own landlords. That, too, has been rising over time with home prices and rents. (My calculations do not adjust for what homeowners pay in mortgage interest, which has been going down.) If these two categories are subtracted from GDI, there is little trend in labor’s share: between 1980 and 2007 it fluctuated around 67%. The profit share moves more sharply, averaging 11% while peaking well above that in the 1990s and mid 2000s.

Schrader bill would gut the Department of Labor’s new overtime rule | Economic Policy Institute: Rep. Kurt Schrader has introduced legislation (the Overtime Reform and Enhancement Act, or OREA) that would in two important ways undermine the Department of Labor’s new rule that expands the overtime rights of salaried employees who earn less than $47,476 a year ($913 per week). Rep. Schrader’s bill would delay by three years the rule’s increase in the exemption threshold, the salary level below which all workers are guaranteed overtime pay. The Department of Labor (DOL) rule raises this threshold from $23,660 to $47,476 on December 1, 2016, whereas Rep. Schrader’s bill would gradually increase it to this level by late 2019.1 Additionally, Rep. Schrader wants to eliminate the rule’s indexation of the threshold, which would raise it automatically every three years, as wages for salaried workers rise. Both of these changes would harm the low- and middle-income Americans whom DOL’s rule is designed to help. Rep. Schrader wants to reproduce the very disaster for working people the Department of Labor is seeking to prevent: an inevitable and significant loss of guaranteed overtime coverage due to inflation and wage growth. Failure to adequately update the salary threshold over 1975–2015 caused the share of the salaried workforce that was guaranteed overtime pay to fall from 49.6 percent to just 9.5 percent in 2015 (see Table 1). Had 49.6 percent coverage been maintained, some 26.6 million workers would have been covered, rather than the scant 5.1 million who actually were covered in 2015. Raising the salary threshold to $913 per week in 2015 would have allowed 17.6 million employees to enjoy overtime protection (12.5 million of whom would have newly obtained protection), but it would not restore the level of protection provided in 1975.

 Saving lives with the minimum wage: A different way to think about an old policy fight -- The political debate over increasing the federal minimum wage tends to focus exclusively on the economic effects that bumping up the current minimum of $7.25/hour would have on workers and businesses. That makes sense, given that the most immediate impact of altering the wage floor would be felt by workers in their bank accounts, and everybody likes getting a raise, so politicians who favor an increase talk primarily about how much more money low-wage workers will stand to earn. But by keeping the focus almost exclusively on the pocketbook, other potential benefits to bumping up wages go overlooked. For example, there’s a growing body of research suggesting that when you raise the minimum wage, people die less. This is the argument explored by J. Paul Leigh, a professor of Health Economics at UC Davis, in a recent editorial in the American Journal of Public Health. As Leigh points out, there’s a strengthening focus among researchers on the public health aspect of proposed minimum wage hikes. One recent study found that if every state in the country had bumped up its minimum wage by one dollar in 2014, “there would likely have been 2790 fewer low birth weight births and 518 fewer post-neonatal deaths for the year.” Another found that if New York City had had a $15 minimum wage between 2008 and 2012, as many as 5,500 premature deaths could have been avoided. Past studies have shown links between low wages and hypertension, and there’s evidence linking changes in the minimum wage to fluctuations in obesity levels. If you pause to consider the logic behind the argument, it makes perfect sense: a higher minimum wage would provide low-wage workers better access to higher quality medical care that might otherwise be out of their reach. And, as Leigh writes, there are less direct impacts to consider as well: “Increasing wages can improve psychological well-being and job satisfaction, increase the opportunity cost of engaging in unhealthy habits, and expand the ability to delay gratification.” The relationship between income and health is well-documented and consistent across all income groups. “Middle-class Americans are healthier than those living in or near poverty, but they are less healthy than the upper class,” the Urban Institute noted in a 2015 report. “Even wealthy Americans are less healthy than those Americans with higher incomes.”

There’s Now an App to Help Businesses Fight a Higher Minimum Wage - The latest weapon in the battle to block legislation that would boost minimum wages: an app to arm small businesses across America with alerts about state proposals. With the push of a few buttons, the mobile interface will enable them to identify and send their respective lawmakers personalized form letters. The goal is to get businesses to detail how higher pay floors would damage their businesses and affect workers and the economy. Dreamed up by the right-leaning Employment Policies Institute and developed by app-creation company Red Foundry, the “Wage Engage” app being unveiled Thursday takes the minimum-wage fight online, deploying a technological tool in the clash over whether employers should be able to set their own pay floors or be required to meet minimums set by others.Other wage-focused apps have been popping up to help women narrow gender-pay gaps with men who earn more for similar work, an issue drawing increasing attention from White House officials and corporate executives, and on the campaign trail.  At a White House Event in July, several apps were unveiled to educate women about pay differences in their fields and help them negotiate higher salaries. The event was the culmination of a two-month “hackathon” involving tech companies and data enthusiasts. Boosting minimum wages is more straightforward because unlike gender-pay gaps, they’re fully transparent. States and cities can go higher than the federal pay floor if they garner support, though bills have popped up to try to ban some cities from raising their minimums above the state level.

Millennial 'Guru' Urges Millennials Living "Paycheck-To-Paycheck" To "Spend Now, Save Later" -- The following five minutes of fantasy should blow most people's minds. On the one hand, a 'veteran' Wells Fargo asset manager urges Millennials living paycheck-to-paycheck to save "just $26 a week will get to $1 million... because time is on your side." And on the other hand is a Millennial 'guru' who proclaims Millennials should "spend now and save later..." The confusion builds as the 'guru' tries to explain how to travel the world, experience 'stuff', and enjoy life more is achievable with no money... simple - "millennials are getting married later"??Enjoy 5 minutes of sheer nonsense that sums up the world that The Fed and Obama have created - no consequences, no accountability, and no responsibility... because, after all, isn't it every young Americans' right to dop whatever they want whenever they want and if they doesn't work out, hey the government's got you covered!! We strongly urge readers to put down any sharp objects...

Mapping Millennials: Over-Educated, Under-Employed, Debt-Ridden, & "Looking To Make A Difference" In The World  (infographic) Millennials continue to puzzle the general population. Many Boomers are still trying to pinpoint how millennials approach life. They are trying to understand how to impress millennial colleagues, how to sell to them, or how to retain them as employees. Boomers want to know what it was like to grow up with today’s technology, and how that impacts one’s outlook. Even millennials are still perplexed by their own generation. Just because there is a lot being written about Gen Y in the media does not mean that anyone really understands anything. In fact, many millennials are truly unique, and can’t really be meaningfully categorized in any black or white box. The reality is that millennials were not shaped by just three TV channels – their culture stems from access to millions of different websites and Youtube channels, unfiltered points of view, a wealth of diversity, and recent world events. And while we don’t want to put millennials in a box, we do like to focus on data. Take away your own conclusions from the following infographic...

 "Poorer Than Your Parents?" New Study Shows 81% Of Americans Worse Off Than In 2005 --The McKinsey study Poorer than Their Parents? offers a new perspective on income inequality over the period 2005-2014. Based on market income from wages and capital, the study shows 81% of US citizens are worse off now than a decade ago. In France the figure is 63%, Italy 97%, and Sweden 20%. The numbers for the US and France differ radically once transfer mechanisms like food stamps and Obamacare subsidies are taken into consideration. The first set of numbers is easily believable. But the second?Who believes 98% of the US is better off after transfer payments are taken into consideration?The study also shows that 90% of French are better off than in 2005 taking into account government giveaways.I do not believe those numbers. We would not see so mach anger in France, the UK and the US if those numbers were true.The numbers in Italy, however, are easily believable. The study has some points that I do agree with:

1. The hardest hit are young, less-educated workers, raising the spectre of a generation growing up poorer than their parents.
2. The economic and social impact is potentially corrosive.
3. Nearly one-third of those who are not advancing said they think their children will also advance more slowly in the future, and they expressed negative opinions about free trade and immigration.
4. If the low economic growth of the past decade continues, the proportion of households in income segments with flat or falling incomes could rise as high as 70 to 80 percent over the next decade.
5. Even if economic growth accelerates, the issue will not go away: the proportion of households affected would decrease, to between about 10 and 20 percent—but that share could double if the growth is accompanied by a rapid uptake of workplace automation.

 Female Prisoners in the United States - Gender Matters --The conversation around police brutality and racial bias in the US criminal justice system is mostly about men, which is reasonable since more than 90% of the inmates are male. Women comprised 7% of the prison population in 2010 as compared to 4% in 1980 (The Sentencing Project). Here, however, is a look at some trends for women. In terms of race AND gender, the group experiencing the sharpest increase in incarceration since 2002 is White Females, whereas Black Females experienced a sharp decline. The graph below, recently posted on Twitter, is from a paper-in-progress by economists Rajiv Sethi (Barnard College) and Glenn Loury (Brown University).  The graph below, from The Sentencing Project, compares the number of female inmates by race. In absolute terms, female inmates are predominantly White, followed by Blacks and Hispanics.  The pattern for women is different from that of men, where the bulk of incarcerated males are Black. As of 2009, nearly “25.7% of women in prison were serving time for drug offenses,” as compared to 17.2% of men. Another reason why more women than men are incarcerated for drug crimes is something called the “girlfriend” problem. It seems that “the only means of avoiding a mandatory penalty is generally to cooperate with the prosecution by providing information on higher-ups in the drug trade.” However, these women are in most cases involved in the drug trade because of a partner who is a drug seller and these “girlfriends” have relatively little information to trade in exchange for a more lenient sentence. “In contrast, the “boyfriend” drug seller is likely to be in a better position to offer information, and so may receive less prison time for his offense than does the less culpable woman.” For more details on the changing racial dynamics of female incarceration, read this report by The Sentencing Project.

Chicago Police Officers Allegedly Caught High-Fiving After ‘Execution’ of Paul O’Neal - Chicago police officers were caught double-checking to make sure their body cameras were off and reportedly giving each other “high-fives” after the fatal shooting of 18-year-old Paul O’Neal in video released Friday by Chicago’s Independent Police Review Authority, reports CBS Chicago’s Charlie De Mar. As previously reported by The Root, O’Neal was shot and killed by Chicago police officers July 28 after allegedly crashing a stolen Jaguar into two police officers and then attempting to flee. Officers pursued O’Neal, shooting at him at least “five times,” according to a police officer. That turned out to be a severe underestimate. The video proved that at least 15 shots were fired.   The police officer who fired the shots allegedly believed that he had no choice but to shoot O’Neal, shouting at him on the video, “Get down! Hands behind your back! You shot at us, motherf–ker!” Other officers on the scene were not so sure, asking whether the teen really opened fire on them. It was later proved that O’Neal was unarmed. O’Neal later died at a local hospital. When the Chicago Police Department was asked why a police camera didn’t record the actual shooting, department spokesman Anthony Guglielmi told the Chicago Tribune that the CPD had only recently received the equipment.

American Paradox: It’s Never Been Cheaper for Cities and States to Borrow Money...And They Refuse to Do It - WSJ: Plunging global interest rates have made borrowing cheaper than ever. But instead of spending on aging roads, bridges and buildings, many state and local governments are scaling back. New government-bond issues have dropped to levels not seen in the past 20 years. Municipal borrowers issued about $140 billion in bonds for new projects last year. Adjusted for inflation, that is 53% lower than in 2006 and 21% lower than in 1996. So far this year, municipalities have borrowed $95.1 billion, about $10 billion more than at this time last year. Seven years after the recession ended, voters and government officials remain scarred by the deep budget cuts they endured at the height of the financial crisis and the sluggish revenue growth that has constrained spending since then. “The collapse in interest rates corresponded with the recession and with a political trend toward antitax sentiment,” said Dan Seymour, an analyst with Moody’s Investors Service. ”Even as state and local governments are looking at lower bond yields, they are facing a public that is reluctant to pay more taxes.” As a share of the economy, state and local governments are investing less in capital projects than they have since the early 1980s, according to Commerce Department data. Last week, Hawaii became the latest state to pare new highway construction after legislators turned down a gas-tax increase. In May, California transportation officials announced a 28% cut to construction plans between now and 2021. New public-sector borrowing in the state last year dropped almost 40% from 2009. Florida officials went five years without approving any new borrowing by the state’s main construction program for public schools and universities despite a long list of projects.

A bit of cash can keep someone off the streets for 2 years or more - If someone is about to become homeless, giving them a single cash infusion, averaging about $1000, may be enough to keep them off the streets for at least 2 years. That’s the conclusion of a new study, which finds that programs that proactively assist those in need don’t just help the victims—they may benefit society as a whole.   Previous studies have concluded that a single period of homelessness can cost taxpayers $20,000 or more, in the form of welfare, policing, health care, maintaining homeless shelters, and other expenses. To combat homelessness, philanthropic organizations have either tried to prevent people from losing their homes in the first place or help them regain housing after they are already destitute. Funding for homelessness prevention programs is highly unpredictable, and thus many programs are often temporarily unable to give money to people about to lose their homes, even if they qualify for the assistance. That allowed economist James Sullivan of the University of Notre Dameand his colleagues to compare the eventual fate of individuals and families who called into a homelessness prevention call center in Chicago, Illinois, when funds were available versus those who called when funds were not.  The programs work by giving one-time cash quantities to people on the brink of homelessness who can demonstrate that they will be able to pay rent by themselves in the future, but who have been afflicted by some nonrecurring crisis, such as a medical bill.  The average amount paid out, according to Sullivan, is about $1000. The team tracked the two groups for several months. Those who called when funding was available—and received the cash infusion—were 88% less likely to become homeless after 3 months and 76% less likely after 6 months, the researchers report today in Science. “We found no evidence that this effect fades away,” Sullivan says. “There is evidence that it’s a sustained impact up to 2 years later.”

It Would Take 228 Years for Black Families to Amass Wealth of White Families, Analysis Says - Two hundred and twenty-eight years: That’s how long it would take for African-Americans to accumulate the same amount of wealth whites have now if current policies remain in place, according to a new analysis from the Corporation for Enterprise Development and Institute for Policy Studies. The stunning estimate is part of a study the two groups released this week on the racial wealth divide in the U.S., highlighting the growing disparity between Americans of color and everyone else, the policies that contributed to a widening divide and proposals to help reverse the trend. CFED and IPS looked at 30 years of data from the Federal Reserve’s Survey of Consumer Finances, which includes information on Americans’ balance sheets, income, pensions and demographic characteristics. Over the past 30 years, they found the average wealth of white families has grown by 84%, three times as fast as the rate for African-American families and 1.2 times the growth rate for Latino families.To put that in dollar terms, if the past 30 years were to repeat, whites would see their wealth increase by about $18,000 a year on average, while Latino household wealth would increase an average $2,250 a year and wealth for African-Americans would grow by just $750 annually. At the current rate, it would take until the year 2241 for the average black family to accumulate wealth equal to what white families have today. And it would take Latinos until 2097 to reach parity with whites, the report said, assuming the average wealth of white families holds steady at today’s levels.

Migration in Puerto Rico: Is There a Brain Drain? - Puerto Rico’s population has been declining since 2004, falling nearly 10 percent from its peak, as shown in the chart below. Today, total population is below 3.5 million, lower than it was twenty-five years ago. While a decline in the Island’s birthrate is partially responsible, the main driver of this population loss is the out-migration of people from Puerto Rico to the U.S. mainland (see this Current Issues article for more details on these population trends).  Given Puerto Rico’s long-term economic malaise and ongoing fiscal crisis, it is no wonder that out-migration of the Island’s residents has picked up. Over the past five years alone, migration has resulted in a net outflow of almost 300,000 people, a staggering loss. It would make matters worse, however, if Puerto Rico were losing an outsized share of its highest-paid workers. But we find that, if anything, Puerto Rico’s migrants are actually tilted somewhat toward the lower end of the skills and earnings spectrum. Still, such a large outflow of potentially productive workers and taxpayers is an alarming trend that is likely to have profound consequences for the Island for years to come.

More adult Americans live with their parents and grandparents - Both the number and share of Americans living in multigenerational family households has continued to rise in recent years, according to a new study by the Pew Research Center, a nonprofit think tank in Washington, D.C. In 2014, a record 60.6 million people, or 19% of the U.S. population, lived in a multigenerational household, up from 42.4 million (17%) in 2009 and 27.5 million (12%) in 1980. Multigenerational families — households with two or more adult generations, or one that includes grandparents and grandchildren — is growing among nearly all racial groups and age groups, says D’Vera Cohn, a senior writer and editor at Pew. There are some demographic reasons. The Asian and Hispanic populations are growing more rapidly than the white population, Cohn’s analysis of the latest U.S. Census Bureau data found, “and those groups are more likely than whites to live in multigenerational family households.” What’s more, foreign-born Americans are more likely than the U.S.-born people to live with multiple generations of family, and Asians and Hispanics are more likely than whites to be immigrants. Some 28% of Asians lived in multigenerational households versus 25% of Hispanics and African-Americans and 15% of Caucasians.

Donald Trump, Hillary Clinton Say They’ll Ease the Burden of Child-Care Costs - Republican presidential candidate Donald Trump promised Monday to make child care tax-free, drawing focus to the escalating pressure facing parents of young children. Families will be able to “fully deduct the cost of child care from their taxes,” Mr. Trump said in a speech Monday in Detroit. He said more details will be released in the coming weeks. The cost of child care is now poised to become a larger part of the presidential campaign. Those costs, rising at nearly twice the rate of inflation since the recession ended, have caused families with young children to find themselves stretched despite years of steady hiring and a declining unemployment rate. The cost of raising a child born in 2013 until 18 is $245,340, an almost $20,000 inflation-adjusted increase from a decade earlier, according to Agriculture Department data.  In May, Democratic candidate Hillary Clinton introduced a proposal to limit child-care costs to 10% of a family’s income. In 41 states, the cost of sending a 4-year-old to full-time preschool exceeds 10% of a median family income, according to the left-leaning Economic Policy Institute. She also proposed universal preschool for 4-year-olds. The candidate hasn’t provided specifics on how to pay for those plans. At the Republican National Convention last month, Mr. Trump’s daughter, Ivanka Trump sought to tie high child-care costs to the wage gap between men and women. “Gender is no longer the factor creating the greatest wage discrepancy in this country, motherhood is,” she said. “As president, my father…will focus on making quality child care affordable and accessible for all.”Mr. Trump’s proposal for a tax deduction would seem to favor higher-income families. Many low-wage workers don’t pay federal taxes, in part because they benefit from other policies aimed at helping working parents, including the child- and dependent-care tax credit and the earned-income tax credit.

 Trump’s childcare plan fails low-income taxpayers -- In his economic speech yesterday, Donald Trump suggested an outline of his childcare plan: allow parents to fully deduct the average cost of childcare spending from their taxable incomes. One problem with this approach is that in 2015, according to the Tax Policy Center, about 45% of all taxpayers had zero or negative individual income tax. In other words, a large fraction of low and middle income taxpayers already have no tax liability, so providing them an additional deduction on their taxable income to further reduce their tax liability is unlikely to have any impact. If this deduction is not capped, the benefits of this policy will likely be concentrated among upper-middle and higher income taxpayers, who can already reduce their tax liability with the Child Tax Credit and the Child and Dependent Care Credit.  Since those with higher incomes are more likely to itemize deductions than lower income taxpayers, tax credits would more effectively help low income taxpayers. Even so, unless tax credits are made refundable, they are unlikely to bring any additional benefits to lower income households who already pay no tax. For example, my analysis of the IRS data shows that the benefits of nonrefundable or partly refundable tax credits largely accrue to upper-middle or higher-income households.

Detroit Public Schools split raises risk of default on state-aid debt - Crain's Detroit Business: Michigan's plan to bail out the troubled Detroit public schools is putting debt backed by state aid at risk of falling into default if the bonds aren't refinanced by mid-October. Ratings have been slashed twice by S&P Global Ratings since late June on the district's debt by a total of six levels to junk. Michigan's restructuring of the district's finances diverts state payments on about $370 million of bonds sold in 2011 and 2012 to a newly created school district that doesn't have any responsibility for the old debt. The state still lacks a plan to refinance the bonds, and S&P said absent a plan, it would likely consider this a distressed exchange that would merit being labeled as a default. "S&P was in its rights to downgrade," said Tamara Lowin, director of research at Rye Brook, N.Y.-based Belle Haven Investments, which oversees $5.3 billion of municipal debt and doesn't own any district debt. "There was debt outstanding for which the revenue stream has disappeared. That is in itself alarming." The restructuring approved by state lawmakers and Gov. Rick Snyder was designed to the give Detroit's schools, reeling from the same population decline that bankrupted the city, a "clean slate," Snyder said when he signed the bill June 21. Moody's Investors Service, in a report issued a week later, said the restructuring was "credit positive" for bondholders "given that the district was teetering on bankruptcy and was reportedly unable to make payroll absent an immediate infusion of revenue."

DPS debt ratings cut on default fears: Michigan’s plan to bail out Detroit Public Schools is putting debt backed by state aid at risk of falling into default if the bonds aren’t refinanced by mid-October. Ratings have been slashed twice by S&P Global Ratings since late June on the district’s debt by a total of six levels, relegating them to junk status. “Detroit Public Schools and the Michigan Department of Treasury are in the process of refinancing the bonds with a goal to have this completed prior to Oct. 1, 2016,” district spokeswoman Chrystal Wilson said Wednesday. “We are diligently working on this task.” Michigan’s restructuring of the district’s finances diverts state payments on about $370 million of bonds sold in 2011 and 2012 to a new, debt-free Detroit school district that doesn’t have any responsibility for the old debt. The state still lacks a plan to refinance the bonds, and S&P said that without one, it would likely consider the DPS debt a distressed exchange that would merit being labeled as a default. “S&P was in its rights to downgrade,” “There was debt outstanding for which the revenue stream has disappeared. That is in itself alarming.” Under a $617 million rescue plan approved in June by state lawmakers, the Detroit district was split in two. The new, debt-free Detroit Public Schools Community District is to open next month with about 46,000 students in 97 schools, while the debt of the former Detroit Public Schools is to be paid off with a combination of state aid and collections from the district’s 18-mill non-homestead levy, which is collected on businesses and second homes.

Chicago Schools Budget Uses Pension Overhaul to Close Gap - Bloomberg: Chicago school officials presented a budget that relies on the state of Illinois passing an overhaul of its underfunded pension system and assumes that the teachers’ union will agree to pay more into their retirement funds. The $5.4 billion operating budget for the fiscal year that began July 1 is more than $230 million smaller than last year’s spending plan, district officials said. The plan relies on the state providing the district with an additional $215 million for its pension bills, which lawmakers and Governor Bruce Rauner have agreed to shell out only if the state comes up with a plan to restructure its own retirement system. “The fiscal ’17 Chicago public schools’ budget is balanced without gimmicks or without operational borrowing,” Forrest Claypool, chief executive officer of the school system, told reporters on Monday. "Today marks the return to financial stability for the coming school year.”The district won some relief from Illinois’s stopgap budget. The six-month spending plan approved at the end of June allows Chicago to establish a property tax levy up to $250 million specifically to help cover the teachers’ pension fund. The retirement system was only 52 percent funded as of June 30, 2015. The school system also secured $131 million of additional state funding from a so-called equity grant to bolster districts with high concentrations of students in poverty.  While there’s no new operational debt planned, the district is still negotiating short-term lines of credit with large banks, Claypool told reporters at a press conference in Chicago. The board of education has $6.7 billion of outstanding long-term debt and $870 million of outstanding short-term debt, school documents show. The 2017 proposal also assumes that the Chicago Teachers Union agrees to a contract that is similar in framework to the agreement that district officials reached with union leadership in January, according to Claypool. Rank-and-file employees ultimately rejected the accord, leaving the district without a contract.

 The teacher pay gap is wider than ever: Teachers’ pay continues to fall further behind pay of comparable workers Summary:

• What this report finds: The teacher pay penalty is bigger than ever. In 2015, public school teachers’ weekly wages were 17.0 percent lower than those of comparable workers—compared with just 1.8 percent lower in 1994. This erosion of relative teacher wages has fallen more heavily on experienced teachers than on entry-level teachers. Importantly, collective bargaining can help to abate this teacher wage penalty. Some of the increase in the teacher wage penalty may be attributed to a trade-off between wages and benefits. Even so, teachers’ compensation (wages plus benefits) was 11.1 percent lower than that of comparable workers in 2015.
• Why this matters: An effective teacher is the most important school-based determinant of education outcomes. It is therefore crucial that school districts recruit and retain high-quality teachers. This is particularly difficult at a time when the supply of teachers is constrained by high turnover rates, annual retirements of longtime teachers, and a decline in students opting for a teaching career—and when demand for teachers is rising due to rigorous national student performance standards and many locales’ mandates to shrink class sizes. In light of these challenges, providing adequate wages and benefits is a crucial tool for attracting and keeping the teachers America’s children need.
• Introduction and key findings:

 In A New Bid To Push H-1B Program, Microsoft Manufactures Claim U.S. Students Can’t Hack It In Tech -- Leaching off last week’s DNC Convention, tech industry-behemoths Facebook, Microsoft, and Amazon hosted a mini-conference amidst the gathering elite aimed at building awareness of the supposed lack of tech-education among America’s youth. The policy-push comes off Microsoft’s ‘National Talent Strategy’ hatched a few years back; an initiative which the company’s own general counsel apparently admitted was nothing but a ‘manufactured crisis’ really geared to serve the industry’s H-1B immigration agenda. Indeed, if America really did have an ‘education crisis’ in the STEM-fields, why do so many of the hundreds of thousands of H-1B professionals imported here every year come from places that do far worse educationally than we do? The H-1B program was created in 1990 following claims from the then-brand new tech lobby that American professionals with sufficient tech-skills were in short supply. Twenty-five years on, that labor market-shortage has apparently still not been corrected with the industry spending hundreds of millions of dollars a year lobbying Congress to import more and more tech-professionals from abroad. But this recent push of the ‘K-12 crisis’-narrative may be signalling a messaging-pivot from the industry. This would only make sense. With negative stories abound in the media this past election cycle, from lawsuits and congressional inquiries into Disney and SoCal Edison’s mass layoffs to the flurry of bills being introduced to curb H-1B abuses, even reliably globalist news outlets such as the New York Times and Huffington Post have come around on this issue. Recently, the latter attacked top officials within the Obama State Department for fast-tracking thousands of Indian H-1B visa applications in 2011 in violation of federal law.

The Feds Don't Care If You Dropped Out of College. They Want Their Money Back -  When it comes to collecting on student loans, the U.S. Department of Education treats college dropouts the same as Ivy League graduates: They just want the money back. New data show the perils of that approach. Dropouts who took out loans to finance the degrees they ultimately didn't obtain often end up worse off for attending college. Unlike their peers who earn degrees, dropouts generally don't command higher wages after leaving school, making it harder for them to repay their student debt. The typical college dropout experienced a steep fall in wealth from 2010 to 2013, figures from the Federal Reserve in Washington show, and an 11 percent drop in income—the sharpest decline among any group in America.It should therefore come as no surprise that half of federal student loan borrowers who dropped out of school within the past three years are late on their payments, according to Education Department figures provided to Bloomberg. More than half of those delinquent borrowers are at least 91 days behind. By comparison, just 7.2 percent of recent college graduates are more than three months late on their debt¹. These debtors are struggling despite the widespread availability of repayment plans meant to prevent distress. That doesn't need to be the case. "Many borrowers believe that getting a better payment plan with their servicer is like buying a car—a high stake, pulse-pounding negotiation they are likely to lose," said Legal Services NYC, which represents low-income New York City residents with student loan problems.Treasury Deputy Secretary Sarah Bloom Raskin has publicly questioned whether the government's loan contractors are doing right by borrowers. The consequences—ruined credit scores, the loss of occupational licenses, and wage garnishments—"can have a serious impact on our economy," she said last month.

Even Endowments Like Harvard,Former Top Investors in Hedge and Private Equity Funds, No Longer Beat Boring Stocks and Bonds -- Yves Smith - We’ve criticized CalPERS for sticking with investment strategies long past their sell-by date. Our very first post, in December 2006, pointed out that CalPERS had admitted that it wasn’t getting adequate performance from hedge funds. Yet CalPERS rationalized sticking with these managers because they supposedly provided useful portfolio diversification. But that argument was also bogus, since CalPERS could have created similar return profiles for vastly lower fees than the “2 and 20” it was paying to hedge fund managers. It took CalPERS a full eight years to act on this information and exit hedge funds….save ones that offered low-fee “alternative beta”.  CalPERS and other limited partners have been even more reluctant to kick the private equity habit. The big reason, as CalPERS’ staff has repeatedly said, is that they believe that private equity is their potential knight in shining armor as far as enabling them to meet their overall portfolio return target of 7.5% is concerned. But that belief is based on the bogus logic of regarding past performance as a predictor of future results, even when the top player in the industry, who have every incentive to sell hope, are warning that returns in the future will be lower than in recent years. And those results haven’t been impressive. One indicator of the declining standing of private equity is that even its most successful investors are no longer able to achieve superior results by relying on high leverage, high risk “alternative investment” strategies like private equity and hedge funds. What may have looked like genius might instead have been luck. After Volcker broke the back of inflation in 1982, the US was on a long-term trend of disinflation and declining bond yields. Where do you want to be when return requirements are falling? In risky assets. More specifically. strategies that normally look like walking on the wild side, such as levered investments in risky assets, can deliver particularly juicy payoffs.

Bill Gross Chides CalPERS for Its 7.5% Returns Assumption; Illinois Set to Lower Target -- Yves Smith - More and more experts are criticizing CalPERS and other public pension funds for sticking with outdated, unrealistic return assumptions in the light of the “new normal” of post-crisis super-low and even negative policy interest rates. The latest to weigh in is bond maven Bill Gross. Gross’ perspective is particularly important because at Pimco and presumably now at Janus, Gross is in the circle of bond heavyweights which means that he interacts on a regular basis with Fed officials and thus has a perspective that CalPERS and its advisers lack. From Bloomberg: Fund managers that have been counting on returns of 7 percent to 8 percent may need to adjust that to around 4 percent, Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, said during an Aug. 5 interview on Bloomberg TV. Public pensions, including the California Public Employees’ Retirement System, the largest in the U.S., are reporting gains of less than 1 percent for the fiscal year ended June 30… Public pensions have been hurt by the Fed’s zero-rate policy that Gross says has led to “erosion at the margins of business models” such as the ones used for funding public pensions, which depend on assumptions about returns over time horizons of 30 years or more. “Pensions have to adjust,” said Gross. “They have to have more contributions and they have to reduce benefit payments.”  If you look at the short clip in the Bloomberg article, Gross has taken a very risk averse posture, and is at zero duration which is tantamount to being in cash. Gross’ view, like that of Jeff Gundlach of Doubleline, is based on seeing a dearth of sensibly priced investments at these risk levels. He called bonds “a liability, not an asset” as current levels and sees stocks as equally unattractive given weak fundamentals and the exposure to large losses if interest rates increase. Other experts see embracing risk and leverage as CalPERS has, in its desperation to achieve unrealistic return levels, as dangerous for other reasons: that political instability in advanced economies can produce major dislocations, and risky assets are the worst place to be.

Milliman analysis: Record-low interest rates drive another increase in the pension funding deficit: Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In July, these pension plans experienced a $5 billion decrease in funded status due to a $29 billion increase in in pension liabilities that eclipsed a strong month for asset returns. The funded status for these pensions was essentially flat, shifting from 75.6% to 75.7%. "Everyone is thinking about records this week with the Olympics underway, but a record-low discount rate is not something these pensions will be applauding," said Zorast Wadia, co-author of the Milliman 100 PFI. "The discount rate's plunge to 3.33% blew away the prior record of 3.41% from January of 2015. Year-to-date, these low rates have contributed to a $186 billion increase in pension liabilities."Looking forward, under an optimistic forecast with rising interest rates (reaching 3.58% by the end of 2016 and 4.18% by the end of 2017) and asset gains (11.2% annual returns), the funded ratio would climb to 80% by the end of 2016 and 92% by the end of 2017. Under a pessimistic forecast (3.08% discount rate at the end of 2016 and 2.48% by the end of 2017 and 3.2% annual returns), the funded ratio would decline to 73% by the end of 2016 and 66% by the end of 2017. To view the complete Pension Funding Index, go to http://us.milliman.com/PFI. To see the 2016 Milliman Pension Funding Study, go to http://us.milliman.com/PFS/.

Medicaid expansion under ACA linked with better health care for low-income adults - Two years after Medicaid coverage was expanded under the Affordable Care Act (ACA) in their states, low-income adults in Kentucky and Arkansas received more primary and preventive care, made fewer emergency department visits, and reported higher quality care and improved health compared with low-income adults in Texas, which did not expand Medicaid, according to a new study led by researchers at Harvard T.H. Chan School of Public Health. The findings provide new evidence for states that are debating whether to expand or how to expand coverage to low-income adults. The study will be published August 8, 2016 in JAMA Internal Medicine. The researchers found similar benefits for residents in Kentucky--which expanded using Medicaid managed care--and Arkansas--which used federal Medicaid funding to subsidize private insurance, the so-called "private option." "What this means is that it doesn't matter so much how states expand coverage," said lead author Benjamin Sommers, assistant professor of health policy and economics at Harvard Chan School and assistant professor of medicine at Harvard Medical School. "What matters is whether they expand at all."  So far, more than 30 states and the District of Columbia have chosen to expand coverage under the ACA. In numerous states the debate over expansion continues and in Arkansas and Kentucky, newly elected governors have proposed scaling back or overhauling their expansions.

U.S. employers expect health care costs to increase 5.0% in both 2016 and 2017 - -- Employers expect total health care costs (both employer and employee) to increase 5.0%1 in both 2016 and 2017, up from 4.0% in 2015, according to early findings from the 21st annual Best Practices in Health Care Employer Survey by Willis Towers Watson (WLTW).2 In absolute dollars, employers expect average employee per-year costs to rise to $12,338 in 2016 and nearly $13,000 in 2017. Despite these cost pressures, 81% of employers will make relatively modest changes to employee premium contributions and other cost-sharing provisions such as deductibles and out-of-pocket limits for 2017. “With employee affordability concerns paramount, in 2017 employers will focus primarily on changing coverage provisions for costly services to manage cost,” said Julie Stone, a national health care practice leader of Willis Towers Watson. “These include more restrictive pharmacy benefits, the continuing addition of surcharges for working spouse and dependent coverage, and offering incentives to encourage employees to use centers of excellence for specialty services.” The survey found that nearly nine in 10 (88%) employers identified managing pharmacy spending generally for high-cost specialty drugs specifically as their top priority over the next three years. Planned actions include:

• Ensuring appropriate utilization. Today, 61% of employers have added programs to ensure appropriate use of high-cost drugs, up from 53% in 2015; 85% are considering doing so by 2018.
• Addressing specialty pharmacy spending that occurs through the medical benefit plan. Today, 39% of employers have adopted this strategy, up from 26% in 2015; 82% will consider it by 2018.
• Differentiating benefit coverage to influence site of care. Today, 19% of employers have made such changes; another 43% are considering them for 2018.

Balance billing” and “drive-by doctors” are contributing to growing out-of-pocket medical costs. -- Surprise medical bills from out-of-network providers are an all-too-common phenomenon, and in many cases a legal one. As insurers shrink the number of providers they contract with to participate in their networks to save money and crack down on the nation’s growing medical expenditures, consumers are more and more likely to inadvertently encounter an out-of-network provider and get balance-billed in the process. Last year, a Consumers Union survey found that over a two-year period, 30 percent of those with private health insurance received a surprise medical bill. In 2008, BusinessWeek estimated consumers paid at least $1 billion in balance-billing charges annually, a number that has almost certainly grown substantially. Since that time, after all, out-of-pocket medical costs for households with employer-provided health insurance have increased by more than 50 percent. Even if a hospital is part of your insurance plan’s network, the same isn’t necessarily true of the providers within it. Consumers get hit with balance bills because in many places they’re powerless to stop them. In only a minority of states is there significant regulation of balance billing by doctors and other medical providers, but loopholes remain. New York offers some of the most significant protection, with prohibitions on balance billing in emergencies and in situations like Perry’s; even there, self-funded employer health plans—which many large corporations use to cover their employees—are exempt. Pennsylvania, where Perry lives, currently offers limited protection from balance billing in emergency situations, though there is a proposal on the table that would further limit the practice in some situations. The Obama administration recently proposed an initiative that would mandate hospitals attempt to ensure patients receive services from providers that accept their insurance, but almost no one expects any movement on that issue in perpetually gridlocked Washington.

Health insurers seek rate increases as Missouri readies for regulatory authority -- stltoday.com: Health insurers are planning to raise premiums for individual plans in Missouri in 2017 — and some price hikes may be substantial, according to filings with the federal government. In the St. Louis area, Coventry is seeking the biggest increase: a 21 percent premium hike that it says will affect about 133,500 Missourians. Coventry was acquired by health insurance giant Aetna in 2013. Elsewhere in the state, even bigger price hikes — some as high as 34 percent — are planned by Humana in Kansas City, Blue Cross Blue Shield of Kansas City and Cox Health Systems Insurance Company in Springfield. But starting next year a dramatic shift will occur. For the first time, the state of Missouri will have the power to review what health insurers plan to charge consumers, taking that duty away from the federal government, which some have criticized for its lack of transparency. For the last few years, ever since President Barack Obama’s health care law revamped coverage options for individuals, the U.S. Department of Health and Human Services has been reviewing carriers’ rates, and grading them as either reasonable or unreasonable. The federal agency, however, didn’t have the power to disapprove rates — and neither will Missouri. But consumer advocates say the process, which will allow the state’s own experts to analyze and report on proposed rate increases, will be much more transparent. And the department will determine if the rates are excessive, inadequate or unfairly discriminatory.

Central Coast residents face steep increases for Obamacare: She had to give up her employer’s health insurance at a time when she needed it most. So Anguiano, who is 60, bought a health plan through Covered California, the state’s health insurance exchange. She liked the coverage, which she and her farmworker husband could afford because of government subsidies. Now, with Covered California announcing its rate increases for next year, Anguiano and others in her region face the steepest price increases in the state. Even though Anguiano qualifies for subsidies, she’s not sure if she’ll be able to afford her plan next year. “I am willing to pay a little more, as long as I can afford it,” Anguiano said. “But it does worry me, especially if [premiums] continue to rise this much every year.” Covered California’s 13.2 percent average premium increase for 2017, announced two weeks ago, would concern any consumer. But people such as Anguiano, who live in the region made up of Monterey, Santa Cruz and San Benito counties, face increases of up to 28.6 percent, by far the largest among the exchange’s 19 pricing regions.

Health Insurance on the Rise for 2017 -  CNY -- Health insurance rates are on the rise.   Last week, State Officials from the Department of Financial Services announced that premiums could see a rise of nearly 17 percent for individuals and 8 percent for small group insurers. . "Insurance companies historically for however long they have been around have always blamed the rising cost of medical care and pharmaceuticals.  So that’s a go to thing. Sure inflation, it happens a lot more people are on Medicaid right now. Those are people who very much need healthcare who in the long run are going to cost a lot of money if they go uninsured," says Steve Wood of ACR Health’s Insurance Program. ACR Health is a multi-health facility that offers preventative healthcare and low-cost health insurance plans. "If you’ve come to see a navigator, come back and see us. We’ll go through the options for you and be able to maybe find lower cost options for you. Because things change, as your family gets bigger your income limits get bigger as well so, you quality for much more as your family gets bigger." More than two million people are enrolled in the Affordable care Act, Obamacare. The next enrollment period is November 1st. This announcement of higher costs could impact the presidential election. "The New York State of health is self-sustaining Andrew Cuomo very much believes in this. He’s expanded Medicaid, introduced the essential plan is very invested in the health of New York State residents because it's a self-sustaining system like mass. Just like other states have them and they've had them before Obama. I would hope that New York State stays with New York State of health but we don't know what's going to happen. We just don't know."

Insurers win chance to seek higher Obamacare premiums: In an effort to prevent more insurers from abandoning the Obamacare exchange in Tennessee, the state's insurance regulator is allowing health insurers refile 2017 rate requests by Aug. 12 after Cigna and Humana said their previously requested premium hikes were too low. Cigna and Humana filed to increase last year's premiums an average of 23 and 29 percent, respectively, on June 10. But in the interim, both insurance companies have told state regulators that the requests would not cover the expected claims, said Kevin Walters, spokesman for the Tennessee Department of Commerce and Insurance. If granted, the higher requests would mean bigger jumps in monthly premiums for many people. "In an effort to balance affordability and availability, the department will allow insurers to refile rate requests on the marketplace in order to prevent possible withdrawal," Walters said. “This is not an easy decision and Tennessee is not alone in choosing to allow insurers to refile their requests." Spokespeople for Cigna and Humana could not immediately comment on the intent to refile. Neither have yet submitted a revised request. If companies file revised requests, they will be required to have representatives meet with state staff to explain the increase, Walters said.

Blue Cross Blue Shield seeks to raise some Obamacare plans by as - (WBRC) - Blue Cross Blue Shield, in filings with the federal government, is seeking to raise its Affordable Care Act plans by as much as 40 percent, affecting more than 160,000 people, according to the  filings.

• Blue Value Gold - 37.0% (increased 28% in 2016, increased 8.51% in 2015)
• Blue HSA Gold - 36.0% (increased 28% in 2016, increased 8.51% in 2015)
• Blue Cross Select Gold - 40.3%  
• Blue Secure Silver - 40.6% (increased 28% in 2016, increased 8.51% in 2015)
• Blue Value Silver - 40.8% (increased 28% in 2016, increased 8.51% in 2015)
• Blue Cross Select Silver - 41.5%
• Blue Saver Bronze - 26.1% (increased 28% in 2016, increased 8.51% in 2015)
• Blue HSA Bronze - 23.5% (increased 28% in 2016)
• Blue Protect - 23.4% (increased 28% in 2016, increased 8.51% in 2015)

Humana and United Healthcare are dropping coverage in 2017, leaving BCBS as the only provider in Alabama.

An Average 43 Percent Increase To Buy Healthcare Coverage Through ACA in State -- Mississippians could see a substantial increase in healthcare premiums purchased through the Affordable Care Act. The Insurance Department approved rate hikes. The Mississippi Insurance Department approved an average rate increase of 43 percent for Humana Insurance Company. It's one of two insurers selling policies through the Affordable Care Act's federal exchange in the state. Bob Williams with the department says the majority of Humana customers covered through the ACA receive a subsidy, which will help offset the rate hike. He explains the rates involve a number of factors. "It depends on the county in state you're in. It depends on your actual policy that you have with Humana. It depends on what you've picked the actual policy that you picked. It is a Gold Plan. It is a Silver Plan, said Williams. The insurance department also approved a seven percent increase for Magnolia Health the other insurer. Attorney Pepper Crutcher who represents United Healthcare, says the government agreed to reimburse insurers for their losses, but last year said they would pay 12.6 percent on the dollar. Also, the ACA needs young enrollees to balance the cost of covering those who are older and sick. Crutcher says the mandate requiring people enroll was water-downed and penalties aren't enforced, so companies are raising their rates nationwide. "This year is the first time that insurers are pricing coverage through the exchange in most markets to really reflect the losses they expect to take on that coverage," said Crutcher.

As insurers leave Arizona, Obamacare consumers face higher costs this fall | Local | azdailysun.com: – Insurance companies have one more day to let Arizona regulators know if they will drop or limit coverage under Obamacare, but this much is already certain: Coverage will still be available, but it will cost more. Five insurance companies that had offered coverage in the Affordable Care Act marketplace have told state regulators that they will opt out or scale back coverage when the next open season for Affordable Care Act coverage begins Nov. 1. There will still be coverage, but with fewer providers experts say costs will likely go up “much higher in 2017 than they had in the past couple of years.” A national estimate by the Kaiser Family Foundation predicts that premiums for one of the lower-costs plans could rise as much as 9 percent next year, compared to 2 percent this year. In Arizona, those higher premiums could hit more than 100,000 people. “The general trend is, as premiums are going up they are going up faster then certainly consumers would like and even supporters of the law expected or hoped,” said Michael Cannon, the director of health policy studies at the Cato Institute. Insurance companies have until Tuesday to let state regulators, and their customers, know whether they will still be offering coverage at all or scaling back plans when the next open enrollment period under the Affordable Care Act begins on Nov. 1.

ObamaCare Sicker Shock - WSJ - Why average premiums are soaring 18% to 23% across the country. The Affordable Care Act is now rolling into its fourth year, and even liberals are starting to concede that the insurance exchanges are in distress and Congress may have to reopen the law. Premiums are high and soaring; insurers have booked multimillion-dollar losses and are terminating plans; and the customer pool is smaller, older and less healthy than the official projections. The natural result is another round of rate shock for 2017. Insurers in 49 states have submitted their premium requests to regulators, and the average “enrollment-weighted” rate increase, which accounts for market share, is in the range of 18% to 23%. The Congressional Budget Office projected 8%.Liberals call this evidence anecdotal and premature, and they’re right that bad anecdotes are easy to find: Geisinger Health System in Pennsylvania, a model of the integrated care that ObamaCare attempts to promote, wants a 40% rate increase for its insurance arm. The other liberal claim is that insurance commissioners will approve rate increases somewhat smaller than the insurer requests (maybe) and that consumers can switch to cheaper plans (assuming any are left). But consider New York, which last Friday became the second state to finalize rates for 2017. The 19.3% rate increase the insurers requested on average for the individual market came down to 16.6% after regulatory fly-specking. The New York political class is hailing this as a great victory, but overall health-care costs aren’t rising by near 16%, and middle-class incomes aren’t either. Then there are such approved Empire State rates as high as 29.2% (Metro Plus and North Shore), 29% (UnitedHealthcare of New York) and even 89% (Crystal Run). And New York is one of the bright spots.

Cost, Not Choice, Is Top Concern of Health Insurance Customers - Most Americans with health insurance get it through their employers or from government programs like Medicare and Medicaid. The marketplaces were created under the health care law to give the millions of people not covered in those ways a way to buy health plans. While major insurers continue to make profits over all, they say that the economics of the marketplaces do not work for them. Insurers can offer marketplace plans at four different coverage tiers, and the government subsidizes the premiums for millions of people. The thinking was that enough healthy people would buy insurance to balance out the costs for the not-so-healthy. But things are not going exactly as envisioned. People shopping in the marketplaces are overwhelmingly choosing the cheapest plans they can find, according to a federal analysis. In 2014, two-thirds of people went for the lowest- or second-lowest-priced plans in each of the tiers. In 2015, about half chose the cheapest plans. The pricing pressure is playing out on multiple fronts. People with expensive medical conditions, knowing that they need reliable coverage, seem willing to pay a little more for plans offered by the large companies. Those plans tend to have a wider choice of doctors and a stronger brand name, and the insurers say the people signing up are sicker than they expected. Healthy and young people — who are essential to insurers to offset the costs of care for unhealthy people — are regularly turning to whatever plan is cheapest, including those from little-known insurers or with the smallest networks of hospitals and doctors. Many other young and healthy people, particularly those not eligible for generous subsidies, are shunning plans altogether, finding all of the prices too high. That decision puts them at risk of tax penalties. By some estimates, about 10 million people are signed up, fewer than half of the 21 million expected by now. All of this has the major insurance companies, as they finish their third year of selling individual policies under the law, reevaluating their role in the marketplace.

Obamacare On "Verge Of Collapse" As Premiums Set To Soar Again In 2017 -- If Obamacare enrollments continue their current trend and insurers continue to hike premiums at alarming rates then Republicans may not have to worry about "repealing and replacing Obamacare" as it might just work itself out "naturally".  The 4th open enrollment period for Obamacare begins on November 1, 2016 and industry experts are warning that another year of tepid demand from "young and healthy" Americans could force more insurers out of the exchanges effectively marking the end of Obamacare as we know it.  According to a story published by The Hill, 11 million people bought health insurance through the exchanges for 2016 which was drastically below the Congressional Budget Office's initial projection of 21 million.  Well we're shocked!  Turns out that whole "adverse selection bias" was a real thing.  So you're telling us that young, healthy people don't want to pay for insurance they know they'll never use?  We guess America's youth can actually do basic math, after all.  Apparently they were able to figure out they would rather take the lower tax associated with Obamacare penalties than the larger tax associated with buying a healthcare policy they'll never use.  We guess Millennials are a little less enthusiastic about embracing socialism when the costs are coming out of their pockets. With America's youth continuing to shun health insurance, insurers are all racking up massive losses on the exchanges.  For many insurers the losses will simply result in massive premium hikes but others have decided to withdraw from the exchanges all together.  In fact,UnitedHealthCare recently announced plans to exit most state exchanges by 2017(see our post entitled "Largest US Health Insurer Exits California, Illinois Obamacare Markets")

ObamaCare Is Failing Exactly The Way Critics Said It Would -- Aetna's decision to abandon its ObamaCare expansion plans and rethink its participation altogether came as a surprise to many. It shouldn't have. Everything that's happened now was predicted by the law's critics years ago. Aetna CEO Mark Bertolini said that this was supposed to be a break-even year for its ObamaCare business. Instead, the company has already lost $200 million, which it expect that to hit $320 million before the year it out. He said the company was abandoning plans to expand into five other states and is reviewing whether to stay in the 15 states where Aetna (AET) current sells ObamaCare plans. Aetna's announcement follows UnitedHealth Group's (UNH) decision to leave most ObamaCare markets, Humana's (HUM) decision to drop out of some, Blue Cross Blue Shield's announcement that it was quitting the individual market in Minnesota, and the failure of most of the 23 government-created insurance co-ops. And it follows news that insurance companies are putting in for double-digit rate hikes that in some cases top 60%, and news that the Congressional Budget Office has sharply downgraded its long-term enrollment forecast for the exchanges. Who could have envisioned such problems? Not ObamaCare backers. They were endlessly promising that the law would create vibrant, highly competitive markets that would lower the cost of insurance. Critics, however, were spot on. They said that, despite the individual mandate, ObamaCare wouldn't attract enough young and healthy people to keep premiums down. The Heritage Foundation, for example, said that under ObamaCare, "many under age 35 will opt out of buying insurance altogether, choosing to pay the penalty instead." That's just what has happened.

Next president faces possible ObamaCare meltdown | TheHill: The next president could be dealing with an ObamaCare insurer meltdown in his or her very first month. The incoming administration will take office just as the latest ObamaCare enrollment tally comes in, delivering a potentially crucial verdict about the still-shaky healthcare marketplaces.The fourth ObamaCare signup period begins about one week before Election Day, and it will end about one week before inauguration on Jan. 20. After mounting complaints from big insurers about losing money this year, the results could serve as a kind of judgment day for ObamaCare, experts say. “The next open enrollment period is key,” said Larry Levitt, senior vice president of the Kaiser Family Foundation. The Obama administration has struggled for several years to bring young, healthy people into the marketplaces, which is needed to offset the medical costs of older and sicker customers. These problems are coming to light this year, as insurers get their first full look at ObamaCare customer data. Some, like UnitedHealth Group, say they’ve seen enough and are already vowing to leave the exchanges. Levitt and other experts warn that if the numbers don’t improve this year, more insurers could bolt. That would deal a major blow to marketplace competition while also driving up rates and keeping even more people out of the exchanges. Already, many insurers this year are proposing substantial rate hikes with the hopes of making up for higher recent medical costs. The average premium increase next year is about 9 percent, according to an analysis of 17 cities by the Kaiser Family Foundation. But some hikes are far higher: Blue Cross Blue Shield has proposed increases of 40 percent in Alabama and 60 percent in Texas.

Obamacare is hazardous to smokers’ health -- A new report in Health Affairs has found that the smoking penalties imposed by the Obamacare health plans have not succeeded in getting smokers to quit. Even worse, the penalties have deterred some smokers from obtaining health insurance in the first place. The health insurance plans offered on the exchanges established by the Affordable Care Act (ACA) cover smoking cessation treatment with no cost sharing. As a further “nudge” to quit smoking, the insurance plans charge tobacco users up to 50 percent more in premiums than non-users. For purposes of the surcharge, a Department of Health and Human Services regulation defines tobacco use as self-reported consumption of “any tobacco product, including cigarettes, cigars, chewing tobacco, snuff, and pipe tobacco, four or more times a week within the past 6 months.” Unfortunately, the “choice” architects who devised the surcharge made a bad choice – at least according to an analysis of the first year of ACA coverage by a team of Yale School of Public Health researchers led by Abigail Friedman. They found that during 2014, smoker-related insurance surcharges had a chilling effect on smokers’ purchase of coverage in the 35 states and the District of Columbia where smoking penalties were applied.

Big alcohol is working to undermine marijuana legalization, Wikileaks confirms -- A deeper look into Wikileaks’ dump of Democratic National Committee emails may prove an agenda against both Bernie Sanders and marijuana legalization. While many major news outlets jumped on the obvious fact that DNC Chair Debbie Wasserman-Schultz and other officials were chained in an email questioning Bernie Sanders’ religion to undermine his support among voters, Marijuana.com’s Tom Angell dug deeper to find a daily e-newsletter sent to Capitol Hill insiders that included included a paid advertisement from the Wine & Spirits Wholesalers of America (WSWA) warning against the dangers of marijuana. In the May 24, 2016 edition of Huddle, a newsletter produced by the Politico website, the WSWA’s advertisement reads: While neutral on the issue of legalization, WSWA believes states that legalize marijuana need to ensure appropriate and effective regulations are enacted to protect the public from the dangers associated with the abuse and misuse of marijuana.

Hackers turn to health care, where records fetch bigger bucks - Today, according to cybersecurity specialists, criminals hoping to scoop up valuable personal data are increasingly targeting health care companies — from local doctor’s offices to major health insurers. More than 100 million health care records were compromised in 2015 alone. Federal records show that almost all of those losses came from just three attacks on health insurance providers: Anthem Inc., Premera Blue Cross, and Excellus Health Plan Inc. At the same time, data breaches in the retail industry are plummeting. Last year marked a four-year low for reported breaches of records of retailers, with just 5.7 million compromised, according to research from IBM Security. For consumers, cybercriminals’ shift toward health care records can have alarming consequences. Losing a credit card number can be resolved relatively quickly once fraud is noticed, and banks have tested systems for refunding money and shutting down bogus accounts. But there’s little of that in the health care system, which collects enough personal data — Social Security numbers, addresses, phone numbers, next of kin — to attract sophisticated data thieves. Advertisement “If someone steals your medical records, there’s no one you can call,” said Caleb Barlow, a vice president for IBM Security in Cambridge. “Are you going to call 911 and say, ‘Hey, somebody stole my medical records?’ That’s going to be an interesting conversation.” The surge in health care attacks has gotten the attention of industry leaders, particularly after the spike in compromised data recorded last year.

Whistleblower on Medical Research Fraud: ‘Positive Results Are Better for Your Career’ -- SPIEGEL Interview With Doctor Peter Wilmshurst -  Semi-retired British cardiologist Peter Wilmshurst -- described in 2012 by the British Medical Journal as a "successful and cheerful whistleblower" -- began his crusade against dishonesty in medical research in 1986. In the course of the 66-year-old's career, he conducted studies for pharmaceutical and medical devices companies, and unlike many of his colleagues, never hesitated to publish negative results. He's been the subject of multiple cases of legal action and risked bankruptcy and his reputation to expose misconduct in the pharmaceutical industry. Today he advises and supports other whistleblowers with the organization "Patients First." He sat down with SPIEGEL to discuss mistruths and fraud in medical research and why he decided to challenge the pharmaceutical industry.

  Parents may face jail if their kids are on vegan diets: In Italy, there is a proposed law that could affect parents who impose vegan diets on their kids. If passed, parents could be sentenced to jail for up to four years. If one politician gets her way, parents who provide their children with an inadequate diet will face up to four years in jail. The politician, Elvira Savino of the Forza Italia party, wrote that kids potentially lack nutrients such as zinc, B12 and iron when they are on a vegan diet. In turn, anemia and neurological problems can develop. The proposed law, nicknamed Savino Law, comes after a occurrences involving kids malnourished because of a poorly-constructed vegan diet was forced on them by their parents. In one case, a one-year-old baby was taken away from his parents. This was because he was hospitalized due to severe calcium deficiency. The boy was on a vegan diet. This is one of the four cases involving vegan kids being removed from their parents in the country in the last 18 months. Savino said throughout Italy, there is a belief that even the most rigid form of a vegan diet can result in significant health benefits. She said as long as a person is an informed adult, then there's nothing wrong with making the choice to follow this diet. She said when minors are involved, then it becomes an issue. As of now, the law has yet to pass. If it does, then those who are legally responsible for kids under 16 who show signs of malnutrition resulting in long-term health problems could be sentenced up to four years behind bars.

Mussolini Would Be Proud: Italy Proposes Jailing "Reckless" Vegan Parents -- If parliamentarian Elvira Savino has her way, Italian parents who insist on a vegan diet for their children will risk up to four years in jail. In her shockingly tyrannical over-reach, the center-right party member seeks to "stigmatize the reckless and dangerous eating behavior imposed by parents” who make children go vegan. "I have nothing against vegans or veganism as long as it is a free choice by adults," she told Reuters in a telephone interview on Wednesday, days after she presented the proposed law in the lower house Chamber of Deputies. "I just find it absurd that some parents are allowed to impose their will on children in an almost fanatical, religious way, often without proper scientific knowledge or medical consultation," she said. "Do-it-yourself on these matters terrorizes me." As GrubStreet.com reports, under the 'Savino' law, according to La Repubblica, raising anyone under the age of 17 on such a diet would be an offense punishable by up to six years in prison.

Harris County newborn becomes first Zika death in Texas | khou.com: – A baby born in a Harris County hospital has become the first infant to die from Zika in the U.S. and the first Zika-related death in Texas. The Harris County Public Health Department confirms it received a positive Zika test result on the infant who was born with birth defects, including microcephaly. The mother had traveled to El Salvador during her pregnancy where it is suspected she became infected. Doctors say she didn't know she had contracted Zika. She gave birth a few weeks ago. “The saddest outcome of Zika’s health effects often impact the most vulnerable. We are devastated to report our first case of Zika-associated death and our hearts go out to the family,” stated Umair A. Shah, MD, MPH, Executive Director of HCPH. “While this is a travel-associated case, we know that prevention is key to reducing the risk of Zika virus infection." Zika-related brain damage in fetuses "is one of the saddest congenital birth outcomes imaginable," . "The case highlights that ZIka is not just producing babies with small heads... We should expect many similar deaths, and also stillbirths." Shah said there are 28 travel-associated cases of Zika in Harris County and 99 in the state.

US politicians are failing in the fight against the Zika virus in the United States — Zika is a growing problem in the US–and partisan politics may make it much worse. As of this week (Aug.3), 1,825 cases of Zika had been identified in the continental US, and 15 babies had been born with Zika-related birth defects, including microcephaly, which causes debilitating health problems. Yet the US government has failed to reach an agreement on funding Zika prevention and research, risking our health by using the epidemic as an opportunity to advance political agendas. It’s America’s poor that stand to suffer most. A divisive political climate has crippled America’s response to epidemics like Zika, according to Dr. Georges C. Benjamin, executive director of the American Public Health Association. “As a rule we have seen more and more dysfunction around things in the public health sphere which were never controversial before,” Benjamin says. “Public health has always been controversial, but [outbreak funding] has never really been debatable.” Unfortunately, recent changes in the political climate, exemplified by the battle over the Affordable Care Act, have made this funding contentious like never before. While politicians have wasted time figuring out how to handle Zika, the virus has gotten a foothold in the US. In Florida last week, four cases of Zika caused by local transmission were identified. Early last month, a Utah man died from Zika, and doctors don’t know how it killed him or how he contracted the disease. If the US doesn’t respond to the virus’ spread quickly and effectively, we risk it becoming a full-blown epidemic.

"Zika Zone" Turns Into Ghost-Town As Planes Spray Neurotoxic Insecticide Over Florida Residents -- According to shop owners and managers in the town of Wynwood, Flordia – also known as the “Zika Zone” – the area has been noticeably empty of the usual crowds that form to see the local murals and shop at local businesses.  The slow down in pedestrian traffic coincides with the intensified effort by the state of Florida to combat the mosquitos which carry the Zika virus by blanketing the town of Wynwood with insecticide. “There’s a bunch of restaurants here and now we have new shops. So we have a lot of people come in for brunch and tourists who wanna see the murals and shop around,”Candelario explained. “But it’s not like that due to the Zika virus.” Last week the state of Florida started a campaign to kill off the Aedes species of mosquito by spraying an insecticide called Naled over a 10-mile radius surrounding the Wynwood area.At least 15 people in the city’s Wynwood area are believed to have been infected with the virus through mosquito bites. According to Cornell Univerisity, the Organophosphate chemical Naled is moderately to highly toxic by ingestion, inhalation and dermal absorption. From Cornell.edu: Vapors or fumes of naled are corrosive to the mucous membranes lining the mouth, throat and lungs, and inhalation may cause severe irritation. A sensation of tightness in the chest and coughing are commonly experienced after inhalation. As with all organophosphates, naled is readily absorbed through the skin. Skin which has come in contact with this material should be washed immediately with soap and water and all contaminated clothing should be removed. In laboratory tests, Naled exposure caused increased aggressiveness and a deterioration of memory and learning. It was also shown to interfere with prenatal brain development and has a cancerous byproduct. From the No Spray Coalition: Naled’s breakdown product DICHLORVOS (another organophosphate insecticide) interferes with prenatal brain development. In laboratory animals, exposure for just 3 days during pregnancy when the brain is growing quickly reduced brain size 15 percent.

Scientists discover what’s killing the bees and it’s worse than you thought - As we’ve written before, the mysterious mass die-off of honey bees that pollinate $30 billion worth of crops in the US has so decimated America’s apis mellifera population that one bad winter could leave fields fallow. Now, a new study has pinpointed some of the probable causes of bee deaths and the rather scary results show that averting beemageddon will be much more difficult than previously thought. Scientists had struggled to find the trigger for so-called Colony Collapse Disorder (CCD) that has wiped out an estimated 10 million beehives, worth $2 billion, over the past six years. Suspects have included pesticides, disease-bearing parasites and poor nutrition. But in a first-of-its-kind study published today in the journal PLOS ONE, scientists at the University of Maryland and the US Department of Agriculture have identified a witch’s brew of pesticides and fungicides contaminating pollen that bees collect to feed their hives. The findings break new ground on why large numbers of bees are dying though they do not identify the specific cause of CCD, where an entire beehive dies at once.  When researchers collected pollen from hives on the east coast pollinating cranberry, watermelon and other crops and fed it to healthy bees, those bees showed a significant decline in their ability to resist infection by a parasite called Nosema ceranae. The parasite has been implicated in Colony Collapse Disorder though scientists took pains to point out that their findings do not directly link the pesticides to CCD. The pollen was contaminated on average with nine different pesticides and fungicides though scientists discovered 21 agricultural chemicals in one sample. Scientists identified eight ag chemicals associated with increased risk of infection by the parasite. Most disturbing, bees that ate pollen contaminated with fungicides were three times as likely to be infected by the parasite. Widely used, fungicides had been thought to be harmless for bees as they’re designed to kill fungus, not insects, on crops like apples. “There’s growing evidence that fungicides may be affecting the bees on their own and I think what it highlights is a need to reassess how we label these agricultural chemicals,”

Pesticides used to help bees may actually harm them - Pesticides beekeepers are using to improve honeybee health may actually be harming the bees by damaging the bacteria communities in their guts, according to a team led by a Virginia Tech scientist. The discovery, published in the journal Frontiers in Microbiology, is a concern because alterations can affect the gut's ability to metabolize sugars and peptides, processes that are vital for honeybee health. Beekeepers typically apply pesticides to hives to rid them of harmful parasites such as Varroa mites.  "Although helpful for ridding hives of parasites and pathogens, the chemicals in beekeeper-applied pesticides can be harmful to the bees," said Mark Williams, an associate professor of horticulture in the College of Agriculture and Life Sciences and lead author. "Our research suggests that pesticides could specifically impact the microbes that are crucial to honey bee nutrition and health." For the project, the team extracted genomic data from honeybees that lived in hives that were treated with pesticides (three different kinds) and compared with those that were not. Samples were pulled from hives in three separate Blacksburg locations. Honeybees from chlorothalanil-treated hives showed the greatest change in gut microbiome, said Williams, who is also affiliated with the Fralin Life Science Institute.

Unsafe levels of toxic chemicals found in drinking water of 33 states - Levels of a widely used class of industrial chemicals linked with cancer and other health problems — polyfluoroalkyl and perfluoroalkyl substances (PFASs) — exceed federally recommended safety levels in public drinking-water supplies for 6 million people in the United States, according to a new study led by researchers from the Harvard T.H. Chan School of Public Health and the Harvard John A. Paulson School of Engineering and Applied Sciences (SEAS). “For many years, chemicals with unknown toxicities, such as PFASs, were allowed to be used and released to the environment, and we now have to face the severe consequences,” said lead author Xindi Hu, a doctoral student in the Department of Environmental Health at Harvard Chan School, Environmental Science and Engineering at SEAS, and Graduate School of Arts and Sciences. “In addition, the actual number of people exposed may be even higher than our study found, because government data for levels of these compounds in drinking water is lacking for almost a third of the U.S. population — about 100 million people.” PFASs have been used over the past 60 years in industrial and commercial products ranging from food wrappers to clothing to pots and pans. They have been linked with cancer, hormone disruption, high cholesterol, and obesity. Although several major manufacturers have discontinued the use of some PFASs, the chemicals continue to persist in people and wildlife. Drinking water is one of the main routes through which people can be exposed.  The study found that PFASs were detectable at the minimum reporting levels required by the EPA in 194 out of 4,864 water supplies in 33 states across the United States. Drinking water from 13 states accounted for 75 percent of the detections: California, New Jersey, North Carolina, Alabama, Florida, Pennsylvania, Ohio, New York, Georgia, Minnesota, Arizona, Massachusetts, and Illinois, in order of frequency of detection.

 2016 Third Warmest for U.S. Through July | Climate Central: In the midst of the dog days of summer, the U.S. is still having its third-hottest year on record through July. The month also saw two states — New Mexico and Florida — clinch their hottest July, while Alaska continued to stay on track for its warmest year in the books. For the contiguous U.S., the year-to-date temperature was 54.3°F (12.4°C), or 3.0°F (1.7°C) above the 20th century average, according to data released Monday by the National Oceanic and Atmospheric Administration. Every state was warmer than average for the same period. “The January-July period was the third warmest by a fairly wide margin,” NOAA climatologist Jake Crouch said in an email. The U.S. has been just one hotspot on the planet, which is having its warmest year on record by a good margin. The globally hot year is largely the result of the excess heat trapped by ever increasing amounts of greenhouse gases in the atmosphere.

Weaker La Nina event expected this year, WMO says: (Reuters) - A La Nina event, which affects rainfall and temperatures in the tropics, may develop in the third quarter of the year but it is likely to be weak and far less intense that El Nino that ended in May, the United Nations weather agency said on Thursday. La Nina cools the sea surface temperatures in the tropical eastern and central parts of the Pacific Ocean, whereas its opposite phenomenon, El Nino, warms them. "Even if it develops it is likely to be a relatively weak La Nina event," Rupa Kumar Kolli, chief of the climate applications and services division of the World Meteorological Organization (WMO), told a briefing. "If La Nina does develop, it typically peaks around the end of the year. We would see it tapering off at the beginning of the year," he said, referring to 2017. The WMO said last week that the earth is on track for its hottest year on record and warming at a faster rate than expected. "If a La Nina occurs, it tends to have the opposite effect and attenuates down a bit the global temperatures," said Maxx Dilley, director of WMO climate prediction and adaptation branch.

U.S. weather forecaster maintains forecast for La Nina in fall or winter  (Reuters) - A U.S. government weather forecaster on Thursday reduced its outlook that La Nina conditions would develop in next few months but said it still expected the weather phenomenon to occur this fall or winter. The National Weather Service's Climate Prediction Center said in its monthly forecast that La Nina was "slightly favored" to develop through October. That was a small change from July, when it stated the conditions were "favored" to occur. The agency maintained its forecast of a 55 percent to 60 percent chance that La Nina would develop during the fall and winter of 2016/17. La Nina, which tends to occur unpredictably every two to seven years, is characterized by unusually cold temperatures in the equatorial Pacific Ocean. The agency's predictions follow a damaging El Nino weather period. While typically less harsh than El Nino, severe La Nina occurrences have been linked to floods and droughts that can roil commodity markets. Colombian coffee farmers are already bracing for torrential rains associated with La Nina that can damage crops, and cooler temperatures across the United States could boost demand for heating oil. Slightly below-average sea surface temperatures across the eastern equatorial Pacific Ocean were observed during the past month, the government forecaster said, adding the event would likely be weak if it occurred.

Data centers' water use has investors on high alert - Data centers, used by governments and large corporations to house their computer systems, have one big environmental problem: They get hot. To keep them from overheating, large data centers can pump hundreds of millions of gallons of water a year through the facilities, according to company reports. That high demand for water has some investors concerned, especially in places where natural water resources are becoming ever more precious, like tech-heavy California. "We definitely want our portfolio companies to be cognizant of their water use and take the appropriate steps to minimize their water use and recycle water," said Brian Rice, portfolio manager at the California State Teachers' Retirement System, which manages about $189 billion in assets as of June 30. He cited water usage as a concern at data centers as well as at other portfolio companies, such as those in agriculture. California—home to companies running some of the world's biggest data centers—houses more than 800 of the facilities, the most of any U.S. state, according to Dan Harrington, research director of 451 Research LLC, a technology consulting firm. Water usage there is especially a concern as the state's drought pushes into its fifth year. California Governor Jerry Brown issued an executive order in May to extend statewide emergency water restrictions, establishing long-term measures to conserve water.

Meet the California Couple Who Uses More Water Than Every Home in Los Angeles Combined -- Lynda Resnick and her husband, Stewart, also own a few other things: Teleflora, the nation's largest flower delivery service; Fiji Water, the best-selling brand of premium bottled water; Pom Wonderful, the iconic pomegranate juice brand; Halos, the insanely popular brand of mandarin oranges formerly known as Cuties; and Wonderful Pistachios, with its "Get Crackin'" ad campaign. The Resnicks are the world's biggest producers of pistachios and almonds, and they also hold vast groves of lemons, grapefruit, and navel oranges. All told, they claim to own America's second-largest produce company, worth an estimated $4.2 billion. The Resnicks have amassed this empire by following a simple agricultural precept: Crops need water. Having shrewdly maneuvered the backroom politics of California's byzantine water rules, they are now thought to consume more of the state's water than any other family, farm, or company. They control more of it in some years than what's used by the residents of Los Angeles and the entire San Francisco Bay Area combined. Such an incredible stockpiling of the state's most precious natural resource might have attracted more criticism were it not for the Resnicks' progressive bona fides. Last year, the couple's political and charitable donations topped $48 million. They've spent $15 million on the 2,500 residents of Lost Hills—roughly 600 of whom work for the couple—funding everything from sidewalks, parks, and playing fields to affordable housing, a preschool, and a health clinic.

Stunning Images From America's Most Important Aquifer -- The Ogallala aquifer stretches from South Dakota all the way south to Texas and is the largest aquifer in the United States holding as much water as Lake Huron at 2.9 billion acre feet.  The Ogallala single handedly turned the arid High Plains region of the midwest into a $20 billion a year agricultural powerhouse that produces one-fifth of the country's wheat, corn and beef cattle.  The problem is that the water in the Ogallala, like many aquifers in the world, is being pumped dry.  In many places the aquifer is dropping a foot a year and in other places it has already run dry.  According to a note published in the National Geographic: For the past 60 years, the Ogallala has been pumped out faster than raindrops and snow melt can seep back into the ground to replenish it, thanks largely to irrigation machinery like the one sleeping nearby. As a result, in parts of western Kansas, the aquifer has declined by more than 60 percent during that period. In some parts, it is already exhausted. The decline is steady now, dry years or wet. In 2015 rain was exceptionally heavy—50 to 100 percent above normal. Even so, water levels in the wells dropped again. The irrigation era may come to be called the “great pump up,” bookending the other man-made High Plains disaster—the “great plow up,” when 5.2 million acres of native grasses were torn out, setting the stage for the Dust Bowl. “A couple of generations from now,” says Burke Griggs, a water law expert who teaches at Washburn University in Topeka, “people are going to look back and say: What the hell were they thinking?” The issue of water management is very complicated with usage often regulated by arcane rules that vary drastically by state.  As a perfect example, the Ogallala depletion has been most pronounced in Northern Texas where water is not publicly owned allowing landowners to pump as much as they want.  In other states like Kansas and Nebraska water is considered a public good and states are able to restrict pumping.  That said, limits in Kansas and Nebraska still exceed the sustainable yield of the basin which results in annual declines. For their part, farmers have invested substantial capital in irrigation infrastructure and water conservation technology in recent years but those advances haven't been enough to offset acreage growth in the region.As the chart below illustrates, in Finney County, Kansas, farmers have been consistently pumping roughly 350,000 acre feet of water from the Ogallala each year which exceeds the sustainable yield of the basin by about 275,000 acre feet or 90 billion gallons annually.

Farmland Bubble Bursts As Ag Credit Conditions Crumble - Aside from a brief pause during the "great recession" of 2009, Midwest farmland prices have been bubbling up for over a decade with annual price increases of 15%-30% in many years.  Private Equity and low interest rates no doubt played a role in creating the farmland bubble as "excess cash on the sidelines" sought out investments in hard assets (see "Is TIAA-CREF Investing In Farmland A Harbinger Of The Next Asset Bubble?").  No matter the cause, data continues to indicate that the farmland bubble is bursting. 2Q 2016 agricultural updates from the Federal Reserve Banks of Chicago, Kansas City and St. Louis indicate continued income, credit and farmland price deterioration for Midwest farmers.  Lender surveys also suggest that as many as 30% of Midwest farmers are having problems paying loan balances.  Declining asset values and incomes have also causedbanks to tighten lending standards which has only served to accelerate the decline.  In Kansas' 10th District (which includes MO, OK, KS, NE), values of non-irrigated and irrigated cropland declined 3% and 5%, respectively, in 2Q 2016.  In fact, 2Q 2016 marks the 6th consecutive quarter of YoY declines for irrigated cropland values.  Between 2002 to 2014, the value of both irrigated and non-irrigated cropland declined in only one other time in 3Q 2009.

Las Vegas Water-Rationing Looms Amid "Structural Drought" In US Southwest -- Lake Mead is the largest reservoir in the US, supplying water to Arizona, Southern California, southern Nevada and northern Mexico. As such, its levels can provide a useful indication of the water situation in the US Southwest. And the picture right now is anything but comforting.  At 1073ft above sea level, the July reading at the Hoover Dam was the lowest elevation since the reservoir was filled in the late 1930s, lower even than the first threshold (1075ft) that triggers emergency rationing measures across several states. However, the crucial measurement is not the current level but the mid-August assessment by the Bureau of Reclamation for 1 January 2017. And if it is below that threshold an official water shortage at Lake Mead will be declared.  As indicated by the box in the graph above, the latest January estimate suggests that cutbacks may be avoided this time around – if only barely. But the bigger picture clearly shows a relentless decline in water levels at Lake Mead since the start of the millennium, with no indication of a reversal. As less water falls from the sky more has to be pumped from the ground to meet demand. Back in July 2014 a study by NASA and University of California, Irvine, estimated that the Colorado River Basin lost nearly 53 million acre feet of freshwater – almost double the volume of Lake Mead – in just nine years. More than 75 percent of that loss came from underground resources. And because nobody really knows how much groundwater is left, it is impossible to accurately predict when that resource (which in many cases took thousands of years to form) will run out.

Desperate Times for Cambodia’s Farmers - The first rainfall this year did not arrive until early June to Pursat, a province located in the northwest of the country, where land looked bare and thirsty at the height of the planting season. The devastating drought, which the government has described as the worst since 1979, adds to poor rainfall last year, when peasants had to dip into the drinking water dispensed by the government to irrigate their crops. Soy Hourn and her neighbors in Pursat say they do not remember anything like this in more than a decade. “The radio said this year it would rain more than the previous [year], so we keep trying,” explained Phaly, a 27-year-old farmer. Her family and the dry land surrounding her small wooden shack were waiting impatiently for precipitation. In Southeast Asia, the year is divided into two periods: the dry season and the rainy season, which usually reaches Cambodia in May and lasts until October. The arrival of the rains is key for farmers in the region — it’s when they start planting and wells for the rest of the year are filled. After six months of the dry season, the months before the monsoon are usually difficult for farmers in the area, but conditions worsened dramatically in 2015 and 2016 with the arrival of El Niño, a weather phenomenon that causes excessive heat and decreased rains, in addition to food shortages. On average, El Niño occurs at intervals of two to seven years and can last up to 18 months. According to the predictions of climatologists, the 2015-16 phenomenon could be the strongest ever recorded.  Even with the arrival of the rains, there is no respite for farmers. Scientists now fear the arrival of La Niña, a weather phenomenon with opposite effects from El Niño. La Niña, which brings floods, could come in September, coinciding with the second planting season. The alarm recalls 2011, when heavy rain arrived after a prolonged drought. The combination caused flooding, displacement, agricultural losses, and the deaths of 2,000 people in the region.

 Pakistan has more glaciers than almost anywhere on Earth. But they are at risk. - With 7,253 known glaciers, including 543 in the Chitral Valley, there is more glacial ice in Pakistan than anywhere on Earth outside the polar regions, according to various studies. Those glaciers feed rivers that account for about 75 percent of the stored-water supply in the country of at least 180 million.  But as in many other parts of the world, researchers say, Pakistan’s glaciers are receding, especially those at lower elevations, including here in the Hindu Kush mountain range in northern Khyber Pakhtunkhwa province. Among the causes cited by scientists: diminished snowfall, higher temperatures, heavier summer rainstorms and rampant deforestation.  To many, the 1,000-square-mile Chitral Valley has become a case study of what could await the rest of the world if climate change accelerates, turning life-supporting mountains into new markers of human misery.  “It’s already happening here, and my thinking is, in the coming years it will just go from bad to worse,” said Bashir Ahmed Wani, a Pakistani forestry specialist with the Asian Development Bank. Over the past six years, the Chitral Valley has also experienced three major floods that many Pakistani scientists attribute to climate change. The floodwaters killed more than 50 people and stranded hundreds of thousands while undercutting a once-vibrant tourist industry still struggling to rebound after Sept. 11, 2001.

Ecologist Investigation: How the largest inland fisheries in the world are being destroyed : Investigative reporter, TOM FAWTHROP has just returned from the site of the Don Sahong - a hydrodam being constructed in the middle of an eco-paradise of wetlands in Southern Laos where over 200 fish species have been recorded.Four Thousands Islands (Sipangdon) in southern Laos, has long beguiled explorers tourists and locals with its vast number of islets, spectacular waterfalls and 26 major islands. Over a stretch of 50 kms the mighty Mekong River splits into seven major braided channels. This pristine area of precious wetlands screamed out for international protection as provided for under the Ramsar Convention, a protection that has been embraced by Cambodia just two kilometres away across the border. But the Lao authoritarian state opted for a hydropower dam, rather than Ramsar protection for endangered dolphins, the abundant fisheries and one of the region's most cherished waterscapes. Malaysian real estate company Mega-First MFCB has selected the worst possible site for the dam which has blocked the only channel (out of the seven channels) that is deep enough and wide enough for large fish to migrate, a channel that has provided an all year round effective fish passage around the rapids, rocks and waterfalls over the millennia. The Don Sahong dam construction launched in January 2016 has already stopped the water flow along the Hou Sahong channel (see the video) disrupting fish navigation and depriving hundreds of fishing families of their livelihood. Earth-moving machinery, trucks and several thousand Chinese workers from construction giant Sino-hydro, which signed the contract with Mega-First Malaysia, have occupied Saddam Island and built a bridge to the mainland. The acting director of the Cambodia's Inland Fisheries Institute, Chheng Pen told the Ecologist "The fish are trapped in dry season. It became a killing zone for two months. The migratory fish could not move upstream deeper into Lao because the water was too shallow."

Great Barrier Reef: Cost Of Fixing Water Quality Likely To Top $6B, Queensland Govt. Commissioned Report Finds: The Great Barrier Reef — the world’s largest living structure — is in trouble.  Recent surveys have shown that over 90 percent of the 1,400 mile structure has been affected by some level of coral bleaching — an event that occurs when corals, stressed by rising water temperature and acidity, expel the symbiotic algae living within their tissues. This bleaching event, which is the worst in the reef’s history, has killed 35 percent of its corals in the northern and central regions. While climate change-triggered ocean acidification and warming are the main culprits, the damage has been further exacerbated by sediments flowing onto the Great Barrier Reef as well as by fertilizer and pesticide runoff from farming. In order to give the bleached corals in the region a better chance of recovering, activists have long demanded, among other things, immediate implementation of steps to improve the water quality in the removing land-based pollutants.A new report commissioned by the Queensland government has now provided an estimate of what this is likely to cost over the next decade — 8.2 billion Australian dollars ($6.3 billion). The money would be needed to reduce sediment runoff into the Great Barrier Reef by up to 50 percent below 2009 levels by 2025, and to cut nitrogen levels by up to 80 percent — targets that are part of the federal government’s Reef 2050 Plan.

Fake Fish Habitat, Brought to You by BP Relief Money - A freak tourist attraction lures scuba divers to a spot off Fort Lauderdale, Florida: an undersea graveyard of discarded tires, more than half a million of them, stretching across the ocean floor. In the deep violet light at 70 feet, the sight is shocking: steel-belted radials covering an area the size of 27 football fields.   The tires were dropped into the water in the 1970s in an attempt to create an artificial reef to attract fish, which in turn would attract fishermen. But the plan failed. The bundles of tires broke up, ruining part of an actual coral reef and attracting few fish. Left behind was a barren waste dump of tires that environmental agencies are still trying to clean up. No one is building tire reefs anymore. But state and local governments in the Gulf of Mexico are receiving billions of dollars in compensation money from the BP Deepwater Horizon oil spill over 15 years to restore habitats and compensate for economic and recreational losses. Some states, such as Texas and Florida, are using several million of these dollars—at least $45 million—to build a different kind of artificial reef, made of concrete pyramids, tubes, and boulders. They may be a hit with fish and fisherman alike, but many scientists consider artificial fishing reefs to be blots on the marine environment—glorified fishing gear that lures fish to waiting hooks. Scientists also worry about their tendency to attract non-native species, such as the orange cup coral, which kills and outcompetes native corals. And some scientists say that by changing soft bottom to hard bottom, these artificial habitats have opened the way to the arrival of ciguatera, a toxin whose microscopic host requires firm surfaces to survive and was rarely before found in the gulf. Ciguatera sickens people who eat infected fish.

With droughts and downpours, climate change feeds Chesapeake Bay algal blooms - Nitrogen-rich agricultural runoff into the Chesapeake Bay presents an ongoing environmental and economic concern for the bay's massive watershed. Pollution from fertilizer application feeds algal blooms that poison humans and marine life, and devastate fisheries. While efforts to restore the bay have been successful during the past several years, a study led by Princeton University researchers shows that weather patterns tied to climate change may nonetheless increase the severity of algal blooms by changing how soil nutrients leach into the watershed. Extreme rainfall cycles caused by increased climate variability flush larger amounts of nitrogen-containing nutrients from fertilizer and other sources into the Susquehanna River, which carries them into the Chesapeake Bay, according to a report in the journal Geophysical Research Letters. Moreover, a spike in rainfall can increase nitrogen levels in the bay even if the amount of fertilizer used on land remains the same. These chemicals feed explosive algae growth that can produce toxins that harm people, fish, wildlife and drinking water. Decaying algae also suck oxygen from the surrounding water, creating a low-oxygen state known as hypoxia that results in "dead zones" that suffocate fish and other species important to the aquatic food chain.

We’re trashing the oceans — and they’re returning the favor by making us sick -- Six years ago, in a bracing TED talk, coral reef scientist Jeremy Jackson laid out “how we wrecked the ocean.” In the talk, he detailed not only how overfishing, global warming, and various forms of pollution are damaging ocean ecosystems — but also, strikingly, how these human-driven injuries to the oceans can be harmful to those who live on land. Toxic algal blooms, for instance, can actually damage air quality near the coast. “The coast, instead of being paradise, is harmful to your health,” he said. We saw a striking example of this earlier this summer off the coast of Florida, when a toxic bloom that began in Lake Okeechobee — fanned by high levels of nitrogen and phosphorous pollution — spread to Florida’s coast after flows from the swollen lake were released to keep water levels down.Now, unfortunately, new research suggests yet another example. In a new study published Monday in the Proceedings of the National Academy of Sciences, a team of researchers find that Vibrio bacteria, tiny marine organisms capable of causing deadly infections in both human and also fish, are becoming more prevalent in North Atlantic coastal regions as ocean waters warm. (We’re causing that overall trend of warming, of course, by driving climate change, though there are also natural oscillations at work here.) Indeed, human infections caused by these critters are also on the rise. The research finds these are growing at an “unprecedented rate” along the U.S. Atlantic coast and also the coasts of Northern Europe.

More than 60 percent of Maldives' coral reefs hit by bleaching -- More than 60% of coral in reefs in the Maldives has been hit by “bleaching” as the world is gripped by record temperatures in 2016, a scientific survey suggests. Bleaching happens when algae that lives in the coral is expelled due to stress caused by extreme and sustained changes in temperatures, turning the coral white and putting it at risk of dying if conditions do not return to normal. Unusually warm ocean temperatures due to climate change and a strong “El Nino” phenomenon that pushes up temperatures further have led to coral reefs worldwide being affected in a global bleaching event over the past two years. Preliminary results of a survey in May this year found all the reefs looked at in the Maldives, in the Indian Ocean, were affected by high sea surface temperatures. Around 60% of all assessed coral colonies, and up to 90% in some areas, were bleached. The study was conducted by the Maldives Marine Research Centre and the Environmental Protection Agency, in partnership with the International Union for Conservation of Nature (IUCN).“Our survey was undertaken at the height of the 2016 event and preliminary findings of the extent of the bleaching are alarming, with initial coral mortality already observed. “We are expecting this mortality to increase if bleached corals are unable to recover.”

U.S. coast at risk of hidden contamination: There's a hidden underground battle going on between fresh water and seawater in the U.S., and for the first time scientists have pinpointed where each side is "winning." A new study in the journal Science found that one-fifth of the coastal United States is at risk of contamination between fresh and salt water. Though huge quantities of the two types of water mix all the time as streams and rivers flow into the ocean, it's the below-ground mixing that can be especially troublesome. "It's a two-way street of vulnerability," said Ohio State University hydrogeologist Audrey Sawyer, lead author of the study. Underground freshwater can carry harmful pollution as it makes its way into the ocean, creating coastal dead zones and toxic algal blooms. “This freshwater is right underfoot, flowing around leaky gas and septic tanks,” Sawyer said in an article that accompanied the study in Science. Seawater can also "contaminate" our underground freshwater aquifers: "It takes only a small amount of sea water to render drinking water non-drinkable, so saltwater invasion is a big concern," she added. Though this transfer has been going on long before humans arrived on the scene, it is only recently that we've been polluting the water and also become increasingly reliant on groundwater for drinking and irrigation. The study "removed the cloak from hidden groundwater transfers between land and sea,” said hydrologist Cedric David of NASA's Jet Propulsion Laboratory, which was also involved in the research. The study found that 9% of the U.S. coastline — including southeastern Florida, Southern California and Long Island, New York — have water supplies that are susceptible to seawater contamination. This is especially concerning in places like California, which has begun to use more groundwater with surface supplies running low during the state's devastating drought. On the other side, 12% of the coast, including the northern Gulf Coast, northern Atlantic Coast and Pacific Northwest, is where the ocean is most at risk of freshwater contamination from septic tanks and fertilizer runoff.

No major US hurricanes in 11 years. Odds of that? 1-in-2,300 --- On Thursday some meteorologists (who are by nature a cheesy lot) had an opportunity to channel their inner Dixie Chick and sing "Goodbye Earl" as yet another hurricane went into the Yucatan Peninsula to die. Most of the rest of the United States yawned—another hurricane in the Atlantic, and no harm done. But the hurricane was remarkable precisely because of this. Earl, which attained a maximum wind speed of 80 mph before striking Belize, marked another in a long line of hurricanes that have formed in the Atlantic basin—the Atlantic Ocean, Caribbean Sea, and Gulf of Mexico—but have not affected the United States.  Consider some of the following statistics: the last hurricane to reach the Gulf of Mexico was Ingrid in September, 2013. The current, nearly three-year-long drought for the Gulf has not been equaled since at least 1851. The drought in hurricanes that make Florida landfalls is even more pronounced. The Sunshine State, which juts into the Atlantic Ocean like a lightning rod for tropical weather, has not been hit by a hurricane since Wilma (2005). Earl was in fact the 67th Atlantic hurricane in a row to not make landfall in Florida, according to hurricane scientist Phil Klotzbach. The previous record was a mere 33 hurricanes, a streak between Hurricanes David (1979) and Elena (1985). For major hurricanes, storms with 111 mph winds or stronger, a drought exists as well. According to data from another hurricane scientist, Brian McNoldy, a major Atlantic hurricane hasn't hit the United States in 3,938 days, again since Wilma hit Florida in 2005. That streak is longer than any other in the long Atlantic record, greater even than the 3,315-day drought from 1860 to 1869. Since Wilma, a remarkable 27 major hurricanes have developed in the Atlantic basin, but all have avoided the United States. Klotzbach said the odds of none of those striking the United States is 1-in-2,300.

 A stunning prediction of climate science — and basic physics — may now be coming true --A lot of people deny climate change. Not many, though, deny gravity.  That’s why a recent animation released by NASA’s Jet Propulsion Laboratory — well, it came out in April, but people seem to be noticing it now — is so striking. Because it suggests the likely gravitational imprint of our changing climate on key features of the Earth in a way that’s truly startling.  The animation uses measurements from NASA’s squadron of GRACE satellites (Gravity Recovery and Climate Experiment), which detect changes in mass below them as they fly over the Earth, to calculate how the ocean changed from April 2002 until July 2013, based on corresponding changes in the mass of the continents. The resulting animation suggests the oceans gained mass overall, as seas rose, albeit with seasonal variations that result from water moving from the continents into the seas and back again.  But in key areas where glaciers have been melting — coastal Alaska, West Antarctica and, above all, Greenland — it suggests something very different happened. Here, the animation finds that the ocean actually fell, and in some places by as much as 50 millimeters (2 inches) over this short decadal span:  It’s important to stress that the animation above shows a mathematical inference based on gravitational measurements and a model that extends them to the oceans, rather than a direct sampling of sea levels around Greenland’s remote coasts. It also doesn’t take into account other factors that affect sea level, such as ocean temperatures, currents and salinity.  But if it is right, well, then it’s showing exactly what climate scientists have long been predicting would happen. “When an ice sheet loses mass, for example, the gravity drops locally (remember that gravity is proportional to mass) — meaning the gravitational attraction between the continent and surrounding ocean diminishes, thus causing the ocean mass to move to the farfield,”

Climate change warning signs getting stronger - The Blade: Climate change is becoming more pronounced across our planet, with effects in the Great Lakes region including anything from more toxic algae to faster evaporation of Great Lakes water.Other documented Great Lakes impacts include higher shipping costs, more pollen, more Lyme disease, and changes in wintering habits of some birds that have been migrating across this part of North America for thousands of years. Climate change has received little attention in the 2016 presidential campaigns of Republican Donald Trump and Democrat Hillary Clinton, save for Mrs. Clinton’s call for lower emissions and more renewable energy jobs during her Democratic National Convention acceptance speech. It never once was brought up during the 2012 debates between Republican Mitt Romney and his Democratic opponent, President Obama. But the warning signs — those telltale symptoms that scientists call “indicators” — continue getting stronger, as documented in two more major reports that came out recently. One of them, the State of the Climate in 2015 report issued by the American Meteorological Society, shows 2015 was the hottest year on record for global temperatures, surpassing the previous record set in 2014. Led by the National Oceanic and Atmospheric Administration, State of the Climate is a collaboration of 450 scientists from 62 countries. Among its many findings: A massive algal bloom stretching hundreds of miles from central California to British Columbia last year was partly because of unusually warm Pacific Ocean water. And 2015 marked the 36th consecutive year that glaciers high up in mountains, known as alpine glaciers, retreated.

Arctic Sea Ice Getting Terribly Thin - (see graphics) A temperature rise (from preindustrial levels) of more than 10°C (18°F) could eventuate by the year 2026, as illustrated by the image below and as discussed in an earlier post. The high temperature anomaly that occurred in February 2016 was partly caused by El Niño. Nonetheless, there is a threat that the February 2016 anomaly was not a peak, but instead was part of a trend that points at what is yet to come.  As the image below shows, 93.4% of global warming goes into oceans. Accordingly, ocean heat has been rising rapidly and, as the image below shows, a trend points at a huge rise over the coming decade. Ocean temperature rise affects the climate in multiple ways. A recent study confirmed earlier fears that future increases in ocean temperature will result in reduced storage of carbon dioxide by oceans. Importantly, ocean temperature rises will also cause Arctic sea ice to shrink, resulting in albedo changes that will make that less sunlight gets reflected back into space, and more sunlight instead gets absorbed by the Arctic Ocean. Arctic sea ice is losing thickness rapidly. The image on the right shows that the thicker sea ice is now almost gone (image shows sea ice on August 6, 2016, nowcast). The image below gives a comparison of the years 2012, 2013, 2014 and 2015 for August 6.  The situation looks even more threatening when looking at the Naval Research Laboratory image below, produced with a new model and run on August 3, 2016, valid for August 4, 2016. The image below, by Jim Pettit, shows Arctic sea ice volume.The Arctic Ocean is feeling the heat carried in by the Gulf Stream. The image on the right shows sea surface temperature anomalies from 1971-2000. Sea surface temperatures off the coast of North America are very high, with anomalies reaching as high as 33.1°C, as the image below shows. Much of the heat accumulating in the Gulf will be carried by the Gulf Stream to the Arctic Ocean over the coming months.The image on the right shows Arctic sea surface temperature anomalies on August 7, 2016, as compared to 1961-1990. Note the black areas where sea surface temperature anomalies are above 8°C. Similarly, the image below shows global sea surface temperature anomalies. Note that sea surface temperatures in the Arctic Ocean will remain around freezing point as long as there is sea ice present. Once the sea ice is gone, though, surface temperature will rise rapidly.

An epic Middle East heat wave could be global warming’s hellish curtain-raiser -- — Record-shattering temperatures this summer have scorched countries from Morocco to Saudi Arabia and beyond, as climate experts warn that the severe weather could be a harbinger of worse to come.   In coming decades, U.N. officials and climate scientists predict that the mushrooming populations of the Middle East and North Africa will face extreme water scarcity, temperatures almost too hot for human survival and other consequences of global warming.   If that happens, conflicts and refugee crises far greater than those now underway are probable, said Adel Abdellatif, a senior adviser at the U.N. Development Program’s Regional Bureau for Arab States who has worked on studies about the effect of climate change on the region.  “This incredible weather shows that climate change is already taking a toll now and that it is — by far — one of the biggest challenges ever faced by this region,” he said. These countries have grappled with remarkably warm summers in recent years, but this year has been particularly brutal.  Parts of the United Arab Emirates and Iran experienced a heat index — a measurement that factors in humidity as well as temperature — that soared to 140 degrees in July, and Jiddah, Saudi Arabia, recorded an all-time high temperature of nearly 126 degrees. Southern Morocco’s relatively cooler climate suddenly sizzled last month, with temperatures surging to highs between 109 and 116 degrees. In May, record-breaking temperatures in Israel led to a surge in ­heat-related illnesses. Temperatures in Kuwait and Iraq startled observers. On July 22, the mercury climbed to 129 degrees in the southern Iraqi city of Basra. A day earlier, it reached 129.2 in Mitribah, Kuwait. If confirmed by the World Meteorological Organization, the two temperatures would be the hottest ever recorded in the Eastern Hemisphere.

 Climate change will claim 160,000 lives a year in India by 2050 - As many as 160,000 people will die every year in India by 2050 due to decreased food production because of climate change, an Oxford University study has predicted. India ranks second in the mortality forecast after China, where as many as 248,000 are expected to die for this reason. Surprisingly, the US ranks fifth, after Vietnam and Bangladesh. Asked whether China wouldn’t face fewer deaths than India, considering that India will have overtaken its population by around 2030, and China has a higher standard of living, Marco Springmann, lead author of the study by the Oxford Martin Future of Food programme in the university, told thethirdpole.net, “It also depends on mortality rates and the magnitude of climate and yield shocks. The US comes in fifth because of its high population and its vulnerability to climate shocks.” Worldwide, there would be 529,000 more deaths due to climate-related factors midway this century. The study, which was published in the UK health journal Lancet in March, used models to estimate the health impacts due to shortages of food crops caused by changes in climate. It assessed the risk to human health caused by reduced consumption of fruits and vegetables, red meat consumption and changes in body weight. This could lead to deaths due to heart disease, stroke, cancer and other ailments. “In our study, we accounted for the feedbacks between grain as feedstock and grain for human consumption, and we took into account standard population projections,” Springmann said. It calculated the change in the number of deaths attributed to climate-related factors to lowering of body weight and reduction in diet in different emissions scenarios – ranging from high to medium to low.

How America Rising Ties the GOP Establishment to the Stalkers Harassing Bill McKibben and Tom Steyer - DeSmogblog - For the past few months, when they dare venture out to the supermarket, to church, or to a climate rally, Bill McKibben, Tom Steyer, and other climate activists are being stalked by a team of GOP-trained camera operators. The so-called “trackers” with the cameras are working for a group called America Rising Squared (aka America Rising Advanced Research or AR2), and publishing the occasional “embarrassing” display of alleged hypocrisy on a website called CoreNews.org.   DeSmog first covered this new “creepy” campaign back in May, and since then, the harrassment has only gotten worse, as Bill McKibben writes in Sunday's New York Times. In his op-ed, “My Right Wing Stalkers” (the web headline is: “Embarrassing Photos of Me, Thanks to My Right-Wing Stalkers”), McKibben describes what it's like to live under surveillance, and the psychological toll that it takes on him and his family. (One particularly infuriating detail: McKibben's daughter believes that she, too, is being filmed in public.)  McKibben writes:  To be watched so much is a kind of never-ending nightmare. And sometimes it’s just infuriating. I skipped the funeral this summer of Patrick Sorrento, an important mentor to me at my college newspaper, because I didn’t want my minder to follow me and cause a distracting spectacle. When my daughter reports someone taking pictures of her at the airport, it drives me nuts. I have no idea if it’s actually this outfit; common decency would suggest otherwise, but that seems an increasingly rare commodity. Almost as startling as the tactics of the campaign is how closely it is tied to the mainstream Republican establishment. Core News (and by extension, America Rising Squared) might have the look and feel of a Right Wing lunatic fringe campaign funded by the darkest of oil and gas money. But in actuality it's a foundational block of a prominent GOPopposition research firm, the heads of which have collectively spent decades working for big name Republicans like Mitt Romney, Marco Rubio, John McCain, and even the National Republican Congressional Commitee and the Republican National Committee itself. 

  Global climate deal likely to enter into force in 2016: study | Reuters: A global agreement on climate change looks likely to enter into force this year, a study showed on Friday, making it harder for Republican Donald Trump to pull out if he wins the U.S. presidency. Countries accounting for 54 percent of greenhouse gas emissions have signaled intent to ratify this year, according to the tally of national pledges by the Marshall Islands which is a strong backer of the plan agreed in Paris in December. That is just a fraction short of the required 55 percent of emissions, and support from at least 55 nations, the Pacific island nation said. The deal formally enters into force 30 days after the twin threshold is crossed. "What we agreed in Paris at the end of last year will likely now have the force of the law by the end of this year," Marshall Islands President Hilda Heine wrote in a report compiled by her foreign ministry. "This is a big recognition of the urgency with which we must now get on with the job." The Paris Agreement aims for a massive shift in global energy use to phase out greenhouse gas emissions, mainly from burning fossil fuels, in the second half of the century in favor of cleaner energies such as solar and wind power. So far, an official U.N. count shows that 22 states accounting for just 1.08 percent of emissions have formally ratified the deal, part of efforts to limit rising temperatures and more floods, droughts and rising seas. China and the United States, the top emitters accounting together for 38 percent, have promised to join this year. Other big emitters including Australia, Canada, Mexico and Indonesia also plan to sign up in 2016, the Marshall Islands study said.

Scientists warn world will miss key climate target -  Leading climate scientists have warned that the Earth is perilously close to breaking through a 1.5C upper limit for global warming, only eight months after the target was set. The decision to try to limit warming to 1.5C, measured in relation to pre-industrial temperatures, was the headline outcome of the Paris climate negotiations last December. The talks were hailed as a major success by scientists and campaigners, who claimed that, by setting the target, desertification, heatwaves, widespread flooding and other global warming impacts could be avoided.  However, figures – based on Met Office data – prepared by meteorologist Ed Hawkins of Reading University show that average global temperatures were already more than 1C above pre-industrial levels for every month except one over the past year and peaked at +1.38C in February and March. Keeping within the 1.5C limit will be extremely difficult, say scientists, given these rises.These alarming figures will form the backdrop to the Intergovernmental Panel on Climate Change talks in Geneva this month, when scientists will start to outline ways to implement the climate goals set in Paris. Dates for abandoning all coal-burning power stations and halting the use of combustion engines across the globe – possibly within 15 years – are likely to be set. Atmospheric heating has been partly triggered by a major El Niño event in the Pacific, with 2016 expected to be the hottest year on record. Temperatures above 50C have afflicted Iraq; India is experiencing one of the most intense monsoons on record; and drought-stricken California has been ravaged by wildfires. Stanford University’s Professor Chris Field, co-chair of the IPCC working group on adaptation to climate change, told the Observer: “From the perspective of my research I would say the 1.5C goal now looks impossible or at the very least, a very, very difficult task.

Climate inertia: Imagine you’re on a supertanker that needs to change its direction in order to avoid a collision. What would you do? Would you continue going full steam ahead until you can see the collision object right in front of you? Or would you try to change course early, knowing that changing a supertanker’s course takes a considerable amount of time? The supertanker’s inertia means that you have to act in time if you wish to avoid a collision. The climate system also has a tremendous amount of inertia built in. And like with the supertanker, this means that early action is required if we want to change the climate’s course. This inertia is a crucial aspect of the climate system, both scientifically but also societally – but in the latter realm it’s a very underappreciated aspect. Just do a mental check: when did you last hear or read about the climate’s inertia in mainstream media or from politicians? The inertia of the climate system could be compared to that of a supertanker: if we want to change its course, it’s important to start steering the wheel in the desired direction in time. Why is it so important? Because intuitively many people might think that as soon as we have substantially decreased our CO2 emissions (which we haven’t), the problem will be solved. It won’t, not by a very long shot. Even if we reduce CO2 emissions to zero over a realistic timeframe, the CO2 concentration in the atmosphere – and thus also the global average temperature- will remain elevated for millennia, as can be seen in the figure below. The total amount of carbon we put in the atmosphere over the course of a few hundred years will affect life on this planet for hundreds of thousands of years. And if we want to reduce the amount of warming that we commit the future to, we need to reduce our carbon emissions sooner rather than later. The longer we postpone emission reductions, the stronger those emissions reductions would need to be in order to have the same mitigating effect on long-term warming.

Court backs Obama’s climate change accounting | TheHill:  A federal appeals court is upholding the Obama administration’s accounting of the costs of greenhouse gas emissions as applied to a Department of Energy (DOE) regulation. In a unanimous decision late Monday, the Chicago-based 7th Circuit U.S. Court of Appeals rejected an industry-backed request to overturn a 2014 rule that set energy efficiency standards for commercial refrigerators. In doing so, the court specifically backed the so-called social cost of carbon, President Obama’s administration-wide estimate of the costs per metric ton of carbon dioxide emitted into the atmosphere — currently $36. The DOE used the carbon cost in its cost-benefit analysis, justifying the rule in part because of the amount of climate change regulators believe it would avoid. It’s the first time a court has considered the legality of the carbon accounting, according to the Institute for Policy Integrity at New York University, which supports the policy and filed a brief backing the DOE in the case. Congressional Republicans, business interests and energy companies have criticized the accounting as bad math and improper forecasts. The court said the carbon cost is entirely within the DOE’s discretion to use. “To determine whether an energy conservation measure is appropriate under a cost‐benefit analysis, the expected reduction in environmental costs needs to be taken into account,” the judges wrote. “We have no doubt that Congress intended that DOE have the authority under the [Energy Policy and Conservation Act] to consider the reduction in SCC.” They went on the say that the industry challengers were incorrect in stating that the carbon cost is “irredeemably flawed,” concluding instead that “DOE’s determination of SCC was neither arbitrary nor capricious.”

Earth’s resources used up at quickest rate ever in 2016 - France 24: In just over seven months, humanity has used up a full year's allotment of natural resources such as water, food and clean air – the quickest rate yet, according to a new report. The point of "overshoot" will officially be reached on Monday, said environmental group Global Footprint Network -- five days earlier than last year. "We continue to grow our ecological debt," said Pascal Canfin of green group WWF, reacting to the annual update. "From Monday August 8, we will be living on credit because in eight months we would have consumed the natural capital that our planet can renew in a year."The gloomy milestone is marked every year on what is known as Earth Overshoot Day. In 1993, the day fell on October 21, in 2003 on September 22 and last year on August 13. In 1961, according to the network, humankind used only about three-quarters of Earth's annual resource allotment. By the 1970s, economic and population growth sent Earth into annual overshoot. "This is possible because we emit more carbon dioxide into the atmosphere than our oceans and forests can absorb, and we deplete fisheries and harvest forests more quickly than they can reproduce and regrow," the network said in a statement.

Mass Extinction: The Early Years - When did the sixth extinction begin, and who is responsible for it? One way to tackle these questions is to consider the increasingly influential notion of the Anthropocene. The term, first put into broad use by the atmospheric chemist Paul J. Crutzen in 2000, refers to the transformative impact of humanity on the Earth’s atmosphere, an impact so decisive as to mark a new geological epoch. The idea of an Anthropocene Age in which humanity has fundamentally shaped the planet’s environment, making nonsense of traditional ideas about a neat divide between human beings and nature, has crossed over from the relatively rarified world of chemists and geologists to influence humanities scholars such as Dipesh Chakrabarty, who proposes it as a new lens through which to view history. Despite its increasing currency, there is considerable debate about the inaugural moment of the Anthropocene. Crutzen dates it to the late eighteenth century, when the industrial revolution kicked off large-scale emission of carbon dioxide into the atmosphere. This dating has become widely accepted despite the fact that it refers to an effect rather than a cause, and thereby obscures key questions of violence and inequality in humanity’s relation to nature.

  Are Conservationists Worrying Too Much About Climate Change? - Watson and Sean Maxwell, a doctoral student at the University of Queensland, used the new data to identify and rank the existential threats to nearly nine thousand species, ranging from otters to lilies. In a commentary published today in the journal Nature, they report that almost three-quarters of the species they studied are threatened by overexploitation—human activities such as logging, fishing, and hunting. More than sixty per cent are threatened by the conversion of habitat to farmland and timber plantations. (Many species face multiple threats.) Less than twenty per cent, however, are currently endangered by the many effects of climate change—drought, extreme temperatures, severe storms, and flooding.Like other conservationists, Watson and Maxwell were already well aware that poaching and agriculture posed serious threats to many species. But even they were surprised by how dramatically the effects outstripped those of climate change. Much like the causes of human death, the current causes of species loss appear to be inversely proportional to the media attention—and, to some extent, the research and funding attention—they receive.Much has been written about the challenges of covering climate change as news: its effects are often uncertain, gradual, and distant, and its causes are multiple (i.e., you, me, and everyone else). Unlike the proverbial house fire, whose effects are immediate and easy to photograph, climate change is narratively impaired. But, compared with other threats to biodiversity, it has the advantage of relative novelty and, in recent years, of urgency, as international negotiators race to keep the rise in average global temperatures below the measurable, if somewhat arbitrarily identified, threshold of two degrees Celsius. Habitat loss and overhunting, on the other hand, are stories almost as old as humanity. They rarely make news—until it’s too late for the species involved.

 Dairy groups blast methane reductions: 'Cows expel gas so they don't explode' -  California’s attempt to curb emissions of methane, a powerful greenhouse gas, is facing vocal opposition from a dairy industry that fears government meddling in the flatulence of its cows. The California Air Resources Board (ARB) has set a goal of slashing methane emissions by 40% by 2030, from 2013 levels, and has targeted the belching and farting – known as “enteric fermentation” – of California’s 5.5 million beef and dairy cows, as well as the manure they create. A strategy document produced by the regulator states that improved manure management practices, new diets for cattle and “gut microbial interventions” could help cut the amount of methane released into the atmosphere. State legislators are currently considering a bill to enforce these suggestions.  Methane, primarily emitted from agriculture and the fossil fuel industry, doesn’t linger in the atmosphere as long as carbon dioxide. But it is 25 times more potent as a greenhouse gas over a 100-year period.  California has moved to limit methane after the state’s glowing reputation for climate action received a nasty blow by a natural gas leak this year in the mountains above Los Angeles that took 112 days to plug and spewed 97,100 metric tonnes of methane into the atmosphere. But the state’s dairy industry has criticized the crackdown on methane leaking from cattle, launching a social media and email campaign that claims the ARB is overstepping its remit and raises the specter of exploding cows.

Europe Aims to Close Loophole on Wood Energy - European officials are moving to close a loophole that promotes the burning of wood for electricity by an industry that’s felling American trees, and a new report they commissioned has laid bare the urgent need for reform. European Union climate rules treat woody biomass energy as if it’s as clean as solar or wind energy, despite it releasing more heat-trapping carbon dioxide for every megawatt of electricity produced than coal. Producing wood pellets for fuel can also foster climate-changing deforestation. The European Commission, which advises European Union lawmakers, last week identified myriad environmental hazards from the transatlantic wood energy trade in a 361-page report. The loophole in Europe’s climate policies is a veritable accounting error that has led to national energy subsidies that are financing a burgeoning industry. The subsidies are paying for wood pellet fuel to be produced at newly built mills in the American South, where trees are plentiful and forest protections are minimal.

Feds shop ocean off the Outer Banks to build wind turbines (AP) — The Obama Administration is inviting companies to bid for the right to build wind energy turbines off North Carolina’s Outer Banks. The Interior Department on Friday announced a proposed lease sale for 122,000 acres beginning about 28 miles off Kitty Hawk that includes part of the Outer Continental Shelf. The government has previously announced lease availability for two offshore areas near Wilmington and four areas offshore of South Carolina. The Bureau of Ocean Energy Management will host public events in Raleigh and Kitty Hawk next month to describe the auction process. Once leases are awarded, there would be environmental studies of the specific areas and reviews of specific turbine construction plans. The first operational wind farm in U.S. offshore waters may begin generating power off Rhode Island later this year.

TPP crusaders head west - The nationwide campaign surrounding the Trans-Pacific Partnership is showing no signs of letting up, with the deal’s critics beginning to ramp up efforts to speak out against the agreement and the administration reaching deeper into its lineup to get some of its lesser-known players out on the field. On Thursday it was NOAA’s turn to throw its voice into the mix, with Undersecretary of Commerce for Oceans and Atmosphere Kathryn Sullivan, also a former astronaut, holding an event in Seattle focused on the TPP and the environment — a combination it branded as a “hot topic during this election year.”  Sullivan’s visit follows a similar tour across Washington last month by Interior Secretary Sally Jewell, who returned to her hometown of Seattle to meet with more than 150 business leaders at a Washington Council on International Trade event. Jewell, like Sullivan, focused on TPP’s effect on the environment, saying good trade policies could play a role in advancing efforts to protect it. Commerce Secretary Penny Pritzker and Treasury Secretary Jack Lew also talked up the deal at various cities earlier this month. Pritzker did a tour of California, Ohio and Colorado, while Lew made the case for TPP in Minneapolis. Not to be outdone, however, the anti-TPP coalition will head to Seattle and Portland next week. Well-known liberal activist groups like CREDO and Public Citizen are teaming up there with unions, like the Communications Workers of America, and music groups, including one of the members of Chumbawamba, to raise awareness about what they call the “flawed trade deal.”

U.S. must bury coal to save miner jobs: Interior secretary | Reuters: From Appalachia to Wyoming, surging demand for cheap natural gas, tougher environmental regulations and multiple coal company bankruptcies have left behind a devastated coal business, lost jobs and billions of dollars in cleanup work. Many of the jobs are gone for good, but ex-miners can repair the damaged land and shape a post-coal economy, Interior Secretary Sally Jewell said on a recent visit to coal country, offering up a future starkly different from Donald Trump's. Trump, the Republican presidential candidate, promises to return coal country to its glory days by repealing environmental regulations. "We will put our coal miners and steel workers back to work," he said in a speech in Detroit on Monday. Jewell, standing atop an abandoned mine last week on Thursday, had a different message from the Obama administration. The United States, she said, will shift to cleaner renewable energy. Coal will continue to play a role but a diminished one. She said Washington will not abandon coal communities. "There is a brighter future for coal country if we step up and fund reclamation projects," Jewell said to a crew of former miners at a ceremony for the first cleanup program to receive a grant under a new, $90 million federal pilot grant program.

Coal country jobs can go solar with modest retraining — study  -- As many as 150,000 workers from the U.S. coal mining and coal-fired power sectors could be retrained for jobs in the fast-growing solar photovoltaics (PV) industry at a relatively low cost to business and governments, according to new research from public policy and engineering experts.  The analysis, published in the journal Energy Economics by scholars at Michigan Technological University and Oregon State University, is among the first to calculate the labor force impacts of one of the most sweeping U.S. energy-sector transitions of the last century. Its relevance is heightened by recent policy positions staked out by the Republican and Democratic presidential nominees.  Joshua Pearce, an associate professor of materials science and electrical and computer engineering at Michigan Tech, said the findings should offer hope for depressed coal communities as well as quantitative evidence that the U.S. energy sector is more dynamic than many of the doom-and-gloom scenarios offered by the coal lobby. "People owe it to themselves to ignore the politics and look closely at the facts," Pearce said in an email. "Economics will drive the future electrical supply to be made up of far more solar and far less coal. In short, the future of the U.S. domestic coal industry is not bright."  Among the factors dimming coal's future, Pearce and fellow researcher Edward Louie of Oregon State found, are price competition from alternative energy resources, including natural gas, wind and solar power; steep cost declines in renewable energy technologies; and tightening U.S. and global regulations on emissions from coal-fired plants, including emissions of mercury, sulfur dioxide, and carbon dioxide.

  As nuclear power plants close, states need to bet big on energy storage: Pacific Gas and Electric (PG&E) recently started the process of shutting down the Diablo Canyon generation facility, the last active nuclear power plant in California. The power plant, located near Avila Beach on the central Californian coast, consists of two 1,100 megawatt (MW) reactors and produces 18,000 gigawatt-hours (GWh) of electricity a year, about 8.5 percent of California’s electricity consumption in 2015. It has been, up until this point, the single largest electrical generation facility in the state. Looming over the imminent closure of Diablo Canyon is California State legislative bill SB 350, or the Clean Energy and Pollution Reduction Act of 2015. The act is a cornerstone of the state’s ongoing efforts to decarbonize its electricity grid by requiring utilities to include renewable sources for a portion of their electrical generation in future years. The mandate also requires utilities to run programs designed to double the efficiency of electricity and natural gas consumption. But a number of significant unanswered questions remain about this ambitious energy policy, as the planned closing by 2025 of Diablo Canyon illustrates. Can utilities supply electricity around the clock using these alternative generation sources? And crucially, can energy storage technologies provide the power on demand that traditional generators have done?

 NY nuclear plant scheduled to close saved by new owner (AP) — A week after New York regulators adopted a subsidy policy for nuclear plants, Exelon Generation says it will assume ownership of the FitzPatrick plant in upstate New York, saving it from closing. The Entergy Corp. plant by Lake Ontario employs more than 600 people and produces enough electricity to power more than 800,000 homes. Chicago-based Exelon, which runs the nearby Nine Mile Point reactors, will benefit from ratepayer subsidies that compensate nuclear reactors for clean emissions. Subsidies are estimated at $965 million the first two years and could reach $7.6 billion over 12 years. Entergy in November announced plans to close the 41-year-old plant, citing high operational costs, low natural gas prices and a “flawed” energy market. The $110 million deal, subject to regulatory approval, is expected to close next year

 Customers Could Pay $2.5 Billion for Nuclear Plants That Never Get Built - Bloomberg: Utilities including Duke Energy Corp., Dominion Resources Inc. and NextEra Energy Inc. are being allowed by regulators to charge $1.7 billion for reactors that exist only on paper, according to company disclosures and regulatory filings. Duke and Dominion could seek approval to have ratepayers pony up at least another $839 million, the filings show. The practice comes as power-plant operators are increasingly turning to cheaper natural gas and carbon-free renewables as their fuels of choice. The growth of these alternatives is sparking a backlash from consumers and environmentalists who are challenging the need for more nuclear power in arguments that have spilled into courtrooms, regulatory proceedings and legislative agendas. “Anything that hasn’t gotten off the ground yet isn’t getting built,” said Greg Gordon, a utility analyst at Evercore ISI, a New York-based investment advisory firm. “There is no economic rationale for it.” Only two of 18 nuclear projects proposed since 2007 are under construction. Those units, being built by Southern Co. in Georgia and Scana Corp. in South Carolina, are billions of dollars over budget and years behind schedule. In the meantime, the price of natural gas has dropped 38 percent since 2010. It’s now used to generate more than a third of the nation’s power, up from 24 percent six years ago.

Fortress Brexit: PRC Asks UK to Honor $23B Nuke Plant Deal  - The United Kingdom's referendum outcome to separate itself from Europe may arguably portend a move towards greater economic isolationism from the rest of the world. While some Brexiteers portray the move as an opportunity to strike deals with non-Europeans unshackled from the fetters of having to move together with 27 other European states, we shall wait and see. Certainly, the early evidence is not altogether promising.  One of the supposed benefits of going it alone for the UK is to take advantage of closer ties with fast-growing Asian nations. However, in the aftermath of Brexit, its new Prime Minister Theresa May has put into question the building of a new nuclear power plant in the UK with Chinese (and French, actually) involvement. To this the PRC warns of strained ties:China has a clear message for Britain: Dump a joint nuclear power project and you'll pay the price. A deal for a Chinese state-owned company to help build a nuclear plant in southwest England was announced amid much fanfare during a visit by President Xi Jinping last October. But the $23 billion Hinkley Point project is being reviewed by new British Prime Minister Theresa May, who succeeded David Cameron in the wake of the Brexit vote in June.That's not sitting well with China. "Right now, the China-U.K. relationship is at a crucial historical juncture," China's ambassador to Britain, Liu Xiaoming, wrote in an article for the Financial Times. "I hope the U.K. will keep its door open to China and that the British government will continue to support Hinkley Point — and come to a decision as soon as possible so that the project can proceed smoothly," he added. Actually, the preliminary project will be French-majority invested, with a second to follow that's China-majority invested. It's the latter that the PRC is eyeing more: Under the deal announced in October, China General Nuclear Power Corporation (CGN) would have a 33.5% stake in the power plant. France's EDF (ECIFY) will hold the rest. The bigger prize for China, though, is a related deal to build another nuclear power plant some 60 miles northeast of London, using its own reactor technology. It would have 66.5% of that venture.

Nuclear espionage charge for China firm with one-third stake in UK's Hinkley Point - The Chinese company with a major stake in the proposed Hinkley Point C nuclear power station has been charged by the US government over nuclear espionage, according to the US justice department. In a 17-page indictment, the US government said nuclear engineer Allen Ho, employed by the China General Nuclear Power Company, and the company itself had unlawfully conspired to develop nuclear material in China without US approval and “with the intent to secure an advantage to the People’s Republic of China”.CGNPC has a 33% stake in the £18bn Hinkley Point project in Somerset, which Theresa May has delayed partly because of concerns over China’s involvement. The delay prompted a warning earlier this week from the Chinese ambassador to the UK, who said that relations between the two countries are at a “crucial historical juncture”. Assistant US attorney general John P Carlin said: “Allen Ho, at the direction of a Chinese state-owned nuclear power company allegedly approached and enlisted US-based nuclear experts to provide integral assistance in developing and producing special nuclear material in China. “Ho did so without registering with the Department of Justice as an agent of a foreign nation or authorisation from the US Department of Energy”, Carlin continued. “Prosecuting those who seek to evade US law by attaining sensitive nuclear technology for foreign nations is a top priority for the National Security Division.”

Technician shortage in China ‘threatens nuclear plant safety’  -- A recently discovered cover-up of a mishap in a nuclear power plant about 200km west of Hong Kong has triggered concerns over a shortage of nuclear technicians that may threaten the safety of the plants, industry insiders said. There was a pressing need in China to train more nuclear engineers and other technicians as the nation spearheads efforts to build more reactors to meet its energy needs and greenhouse gas emission reduction targets. The cover-up of a pump failure in March 2015 at the Yang­jiang nuclear power station in Guangdong province was only made public in May this year when the environment ministry announced that was holding four operators responsible. The team leader lost his senior operator’s licence and was moved to a less sensitive post, while the remaining three received warnings. In a statement to the South China Morning Post on Thursday, China General Nuclear, which owns the Yangjiang plant said they had been kept in the dark for nearly a year about the pump failure. The company only found out the incident in February during a “self-inspection, self-correction campaign,” it said. Experts and industry insiders said a cover-up or a delay in reporting an incident should technically not happen because of strict safeguards and the fact that a pump failure could potentially lead to a shutdown of the power plant – making it more difficult to keep it at the dark.

30 Years After The Disaster: Ukraine Plans Huge Solar Farm In Chernobyl -- Energy independence, especially if you don’t particularly like the country you currently depend on, is a very strong motivator for the adoption of renewable energy. Ukraine has recently become a great case in point, after the announcement that it planned to turn part of the uninhabitable zone around the Chernobyl power plant into a large-scale solar farm. Chernobyl, the site of one of the worst nuclear disasters in the history of the world, cannot be used for much: farming is impossible, as are most other productive human activities. But there is a lot of sunshine in the area, which can be harvested and marketed using already existent power transmission infrastructure, according to Ukraine’s environment minister Ostap Semerak. Initial plans envisage the installation of 4 MW in solar capacity in Chernobyl by the end of this year. Semerak said that two investment firms from the U.S. and four energy companies from Canada have already expressed interest in the project. Solar power is a major part of Ukraine’s renewable ambitions. Last year, the government announced that over US$3 billion will be invested in the development of solar power farms by 2020, as part of efforts to achieve a portion of the 11% for renewables in the country’s energy mix. By the end of this year alone, Ukraine aims to have installed solar capacity of more than 570 MW. As of July 1 the total installed solar capacity in the country was 453 MW. Further plans are to have solar installed capacity of 1 GW, which will cost around $1.1 billion, according to preliminary estimates.

Why the Modern Nuclear Project Will Persist: At Least Until We Focus Action On Why It Is Persisting –  In Hiroshima, Japan, seventy-one years ago exactly from the midnight hour that I’m writing this, most people were asleep except for the night owls and diligent lovers. I’d guess that most especially the middle school students would uniformly be deep in the throes of the land of Nod, since on the morrow—August 6, a school day—they’d all be up bright and early to continue their physically taxing work in the August swampy swelter of the riverine confluences that underlay Hiroshima’s existence as a city.  Alas, very few of them would survive past 8:15 the next morning, at most a couple score eleven-to-fourteen-year-old kids from all the academies and classrooms of the entire area. What dreams they had that night of August 5th would form quite a novel, or play, or book of poetry, or documentary of pending loss. No matter what, in the fullness of time, the certainty is inescapable that something much, much worse than Hiroshima will happen to humankind if we insist on maintaining now-thermonuclear arsenals of megadeath.  The most obvious reason that this ultimately inevitable mass collective suicide continues to hang over our heads like a looming time bomb is that we haven’t figured out how to stop it, how to leave the Nuclear Fuel Fool Cycle behind.  For me, not knowing how to begin effecting such a monumental shift in the direction of life, I have just elected to write and produce and perform each year whatever I could manage, to bring attention back to this hideous pass in human history.

Kasich order creates hotline for oil and gas emergencies (AP) — Ohio Gov. John Kasich has ordered creation of a single-call notification system for oil-and-gas emergencies and authorized two state departments to start setting it up. An order Kasich signed Tuesday follows his veto last year of budget language he found inadequate that sought to streamline reporting of spills of oil, brine and other hazardous substances, fires, explosions and other emergencies. Rick Simmers, oil and gas chief at the Ohio Department of Natural Resources, says the new system will allow multiple state entities to coordinate and respond more quickly. The ODNR and the Ohio Department of Commerce are authorized to begin making the system’s rules. ODNR technical experts will help the Division of State Fire Marshal, EPA and Public Utilities Commission at the toll-free hotline at 1-844-OHCALL1, or 1-844-642-2551.

Executive order sets up one-call response to oil, gas emergencies in Ohio - Columbus Dispatch --Gov. John Kasich has issued an order that is designed to improve response to emergencies involving oil and gas facilities, which his office says will lead to faster and more effective reaction to explosions, leaks and other disasters.The executive order sets up a "one call" response system, which requires energy companies to call a state hotline within 30 minutes after an accident. The call will begin a process in which state agencies coordinate a response."This is set up to support the locals and make sure the necessary resources are available," said Bethany McCorkle, spokeswoman for the Ohio Department of Natural Resources.Local emergency officials would be in charge; state officials would mobilize to help. Kasich used his line-item veto last year to remove a provision that had a similar intent. At the time, he said he would revisit the issue after having a chance to study it.  With the order, temporary rules take effect immediately and will last for up to 120 days, allowing state agencies time to approve permanent rules.The immediacy of the rules is a concern for the Ohio Oil and Gas Association. The trade group says it will scrutinize Kasich's plan and work to address any problems during the rule-making process. The association "remains concerned on how the process was implemented as well as the broader impacts it may have on our membership due to the immediate effectiveness of this order,"

Hotline just first step in oil and gas regulations - The Star Beacon -- The state took a small step this week toward improving its — thus far — inadequate efforts to regulate the fracking industry.  On Tuesday, Ohio Gov. John Kasich ordered the creation of a single-call notification system for oil-and-gas emergencies. The goal is to streamline reporting of brine and oil spills as well as fires, explosions or other emergencies. It also mandates the Ohio Department of Natural Resources be alerted when an emergency happens — because ODNR regulates the fracking industry. While we have expressed concerns in the past about ODNR’s ability to do this task effectively, we applaud Kasich’s move because if the state is going to keep the agency in charge of oversight it ought to have actual oversight.  The system still needs to be set up by ODNR and the Ohio Department of Commerce, and the sooner the better. The new hotline will involve agencies such as the Division of State Fire Marshal, the Ohio Environmental Protection Agency and the Public Utilities Commission and allow them to be in direct contact with Department of Natural Resources experts.   The toll-free hotline will be 844-642-2551.  Kasich’s move comes after he vetoed proposed regulations in the budget he said did not go far enough and “would potentially limit essential notifications” with language that was “ambiguous and could result in unnecessary disputes regarding compliance.”   As for further efforts to impose regulations, a bill has been drafted which, among many other things, would codify Kasich’s executive order — Patterson points out until that is done another governor, perhaps one with stronger ties to the oil and gas lobby, could undo it. Yet the bill has received just one hearing so far, does not have a second one scheduled and lawmakers aren’t expected back in Columbus until after the election.

Medina County charter dispute goes to Supreme Court - athensmessenger.com: The Ohio Supreme Court is being asked to order the Medina County Board of Elections and Secretary of State Jon Husted to put a county charter issue on the Nov. 8 ballot. A lawsuit was filed Tuesday with the Supreme Court by five members of a committee that sought to put the charter on the ballot. The Medina County Board of Elections had a tie vote, with two Democrats favoring the charter going on the ballot and two Republicans voting against it. Husted broke the tie, voting against the charter being on the ballot. The lawsuit argues that Husted and the elections board members "are forbidden by pertinent constitutional principles from unilaterally exercising the power to peremptorily invalidate the (charter) petition because of their personal opinions about its content, constitutionality and legality." The lawsuit argues that the proposed charter correctly provides a form of government as required by the Ohio Constitution, and that there is no requirement that a county charter alter the existing form of government. The proposed charter would leave in place existing county government offices, but seeks to prohibit: the use of county water for high-volume hydraulic fracturing (fracking), disposal of fracking waste in the county, the new exploration for or extraction of gas and oil, and the siting or operation of new equipment to support extraction of oil or gas. Because the election is approaching, the lawsuit asks that the Ohio Supreme Court expedite its review of the case. Committees also sought to put charter proposals on the ballot in Athens, Meigs and Portage Counties, but the local boards of elections voted against it. Protests filed by the committees are pending before Husted, and those cases could also end up in the Supreme Court.

Husted opens charter dispute to outside parties - athensmessenger -  Ohio Secretary of State Jon Husted has given those involved in three county charter disputes until Wednesday to submit written briefs or arguments if they wish, before he rules on whether the charters should go on the November ballot. He is also allowing other interested parties to submit arguments. Husted on Thursday issued an advisory that set this Wednesday at 5 p.m. as the deadline for submitting arguments. ”My office will thoroughly review the materials submitted and render a decision according to statute,” Husted wrote. Boards of elections in three counties — Athens, Meigs and Portage — voted that petitions seeking to put county charters on the November ballot are invalid. The local committees promoting those charters filed protests, sending the matter to Husted. On Thursday, the senior elections counsel for the Ohio Secretary of State’s Office, sent an email notifying the County Commissioners Association of Ohio and several Ohio law firms of the protests and the deadline for submitting arguments.  In 2015, Husted ruled that proposed charters in three counties (including Athens County) should not go on the ballot. He also invited outside interested parties to submit arguments before he ruled. The County Commissioners Association of Ohio, American Petroleum Institute, Affiliated Construction Trades of Ohio and the Ohio Chamber of Commerce submitted arguments against the charters. Tish O’Dell, state organizer for the Community Environmental Legal Defense Fund, said that because Wednesday’s deadline is the same for everyone to file arguments, the county charter committees won’t be able to respond to arguments made by outside groups. The defense fund is providing legal advice to the charter committees in the three counties.

Citizens should continue to press Forest Service about fracking | Readers Forum - Roxanne Groff - This is a call to action for all citizens to rise up in protest. Authorizing modern slick-water, extremely high-pressure, high-volume, heavy-industrial horizontal drilling and fracking within the Wayne National Forest, as Kathleen Atkinson and Tony Scardina by their own admission are about to do, will place our national forest in serious jeopardy. Call now demanding that Regional Forester Kathleen Atkinson (414-297-3765) and Forest Supervisor Tony Scardina (740-753-0880) pull their heads out of the sand and face reality. Forest Service officials intentionally have placed their “heads in the sand.” Having created their own myopia, they see nothing and hear nothing, pretending there is nothing more to learn. They profess to know all about fracking, having developed their experience, they say, long ago before the mid-1990s when fracking in horizontal oil and gas wells became a heavy industrial process. As has been demonstrated again and again across the nation, including many incidents in Ohio, this modern, heavy-industrial process wreaks havoc on the environment, and its surface and subsurface impacts are far reaching. Moreover, sidestepping current White House policy, the Forest Service has not evaluated the effects of the federal agency’s decisions to allow fracking and concurrent releases of methane on climate change. The Forest Service is about to approve a poorly prepared Environmental Assessment (EA) authored by the federal Bureau of Land Management (BLM).

Forest Service Asked to Reject Fracking Plan in Ohio's Wayne National Forest - Center for Biological Diversity (press release) - — The U.S. Forest Service should reject a new oil and gas leasing plan in Ohio’s Wayne National Forest due to its failure to address serious concerns over fracking and climate change, conservation groups said today in a letter to the Service. The plan to allow dangerous hydraulic fracturing or “fracking” on 40,000 acres of the state’s only national forest would degrade streams and groundwater, fragment wildlife habitat and worsen climate change — issues inadequately addressed in the environmental analysis for the proposal — according to the letter from the Center for BiologicalDiversity, the Ohio Environmental Council and the Sierra Club. The groups also criticized the agency’s failure to quantify the plan’s greenhouse gas emissions, contrary to the Council on Environmental Quality’s new guidance issued to federal agencies last week. Under the guidance, the agency should disclose the full life-cycle greenhouse gas emissions of the proposed leasing in compliance with the National Environmental Policy Act, including emissions from burning oil and gas extracted from the Wayne, the letter asserts.  “Any proposal for new oil and gas leases on public land should include an analysis of its contribution to the climate change crisis,” said Nathan Johnson, an attorney with Ohio Environmental Council. “Legally and morally, any decision on federal fossil fuel must examine the impact that burning that fuel will have on all of us. Indeed, if we are to prevent the worst effects of climate change, the science tells us that all new federal fossil fuel leasing should be off limits.”The groups also highlighted the Forest Service’s failure to address groundwater and surface-water contamination risks from wastewater disposal and other fracking operations. While the agency claims that measures in its land-use plan, such as a prohibition on underground wastewater disposal, would protect water resources, these restrictions do not apply to neighboring private lands scattered throughout the forest. Horizontal wells required for fracking can reach oil and gas deposits two miles away and so need not be sited on federal land. Over three-quarters of the forest’s Marietta Unit, where the leasing is proposed, is private land. “The government’s plan is remarkably shortsighted in its failure to consider the full extent of fracking and wastewater disposal that could occur throughout the forest,” said Wendy Park, an attorney with the Center. “Water quality and wildlife will suffer regardless of where these activities occur.”

Rex Energy drilling in Carroll - New Philadelphia Times Reporter -- Rex Energy had a positive balance sheet and started production from two well pads in Carroll County’s Harrison Township during the second quarter. The company closed the quarter with a profit of $16 million, or 22 cents per share, according to a press release. Rex lost $46 million during the same quarter last year. The positive earnings were due to a stock conversion that raised $72.3 million. Rex also announced the sale of Illinois Basin assets for $40 million. The company’s operating revenue was $31.3 million, down 13 percent from the same quarter last year. Rex spent $23.3 million to drill eight wells, frack four wells and begin production from three wells. The company expects its joint-venture partners to reimburse $11 million for capital spent during the quarter. In Carroll County, Rex started production from its three-well Goebeler pad. The wells were drilled to an average lateral length of 7,360 feet and fracked in 41 stages. Each well had an average 24-hour sales rate equal to 2,100 barrels of oil, with 72 percent of the production from liquids. Rex also began production from its two-well Perry pad, which was drilled to an average lateral length of 6,350 feet and fracked in 36 stages. The company didn’t provide production figures. Rex is currently drilling its four-well Vaughn pad in Washington Township with average lateral lengths of 7,200 feet and expects production to start in the first quarter of 2017. The company projects production growth of 5 percent this year.

Feds, Pennsylvania settle Consol Energy water pollution suit (AP) — Consol Energy has agreed to pay $3 million to settle a claim that its Bailey coal mining complex in southwestern Pennsylvania repeatedly polluted nearby streams beyond what’s permitted under federal and state law. The Justice Department filed the federal lawsuit on behalf of the Environmental Protection Agency and the Pennsylvania Department of Environmental Protection. As part of the settlement, the energy company also agreed to make improvements to prevent contaminated discharges of mining wastewater from the Bailey Mine Complex in Greene and Washington counties to the Ohio River and its tributaries. “Today’s settlement ensures that our rivers remain safe for future generations to use and enjoy,” said U.S. Attorney David Hickton for the Western District of Pennsylvania.The lawsuit contended two of the mine’s water discharges exceeded daily pollution limits 188 times and the monthly limit 170 times from January 2006 through June 2015. The illegal pollution fouled streams near coal washing operations and slurry ponds near the Bailey, Enlow Fork and Bailey mines in Greene and Washington counties.

 Marcellus / Utica takeaway capacity to the Midwest, Canada -- Given their proximity to the Marcellus and Utica shale regions, the Midwestern states and Ontario would appear to be logical consumers of the increasing volumes of natural gas being produced in Pennsylvania, West Virginia, and eastern Ohio. The catch has been that the pipelines built years ago to serve the Midwest and Canada’s most populous province were designed to move gas into those regions from western Canada, the U.S. Gulf Coast, the Midcontinent and the Rockies, not the nearby Marcellus/Utica. That’s being corrected. Today we continue our look at how pipeline takeaway capacity will stack up against Northeast production over the next few years, with a focus on the Midwest and Ontario. In Part 1 of this series, we looked at the Northeast production outlook and prospects for growth under three commodity price scenarios and found that even our most pessimistic production scenario will mean at least a little growth for Northeast supply. In Part 2, we began our look at the takeaway capacity side of things, starting with the East corridor. As we mentioned, RBN’s Midstream Infrastructure Database Interface (MIDI) is tracking 24 projects totaling 18 Bcf/d of Marcellus/Utica takeaway capacity at varying stages in the development and regulatory approval process. (That’s not all the projects – it is the projects most likely to provide incremental takeaway capacity over the next few years.) We organized the takeaway projects into five corridors: to the East (New England and Mid-Atlantic states), to Canada, to the Midwest via Ohio, to the Gulf Coast via Ohio, and to the Southeast along the Atlantic Coast (see Figure 1 in Part 2). There are a total of six projects (3.3 Bcf/d) gunning for takeaway capacity out of the Marcellus/Utica to the New England and Mid-Atlantic states to the east, with the majority of that capacity coming online after 2017. However, as we noted in Part 2, pipeline development to heavily populated markets from Maine to New Jersey is especially fraught with public opposition and regulatory challenges that could cause delays or cancellations. We also noted that demand in New England and the Mid-Atlantic states will be highly seasonal –– relatively modest during the off-peak summer season and high during cold winter months when demand from space heating kicks in. Those incremental takeaway flows also will depend on demand growth within the region.

Midstream Infrastructure Database Interface -- RBN’s Midstream Infrastructure Database Interface – called MIDI – is an online toolset that links an energy project database and a mapping system.   The Project Database includes U.S. crude oil, NGL and natural gas pipeline projects that are under development or have been placed into service within the past few months.  Each commodity category (crude, gas, NGLs) has a Table View for details about the projects, and a Map View which displays a project map. MIDI also includes Featured Maps from selected RBN Drill Down Reports and blogs.  Each of these maps is described in the text of its report or blog source material.  Click to view MIDI help.

EPA’s science advisers challenge agency report on the safety of fracking --- Science advisers to the Environmental Protection Agency Thursday challenged an already controversial government report on whether thousands of oil and gas wells that rely on hydraulic fracturing, or “fracking,” systemically pollute drinking water across the nation.  That EPA draft report, many years in the making and still not finalized, had concluded, “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States,” adding that while there had been isolated problems, those were “small compared to the number of hydraulically fractured wells.” The conclusion was widely cited and interpreted to mean that while there may have been occasional contamination of water supplies, it was not a nationwide problem. Many environmental groups faulted the study, even as industry groups hailed it. But in a statement sure to prolong the already multiyear scientific debate on fracking and its influence on water, the 30-member advisory panel on Thursday concluded the agency’s report was “comprehensive but lacking in several critical areas.” It recommended that the report be revised to include “quantitative analysis that supports its conclusion” — if, indeed, this central conclusion can be defended.

Scientific Board Requests More Data on EPA Fracking, Water Study -- The U.S. Environmental Protection Agency’s (EPA) draft assessment of hydraulic fracturing’s impact on drinking water is lacking in several critical areas, scientific advisors working with EPA have concluded. The Scientific Advisory Board (SAB) – which includes members of academia, industry and interest groups – found EPA’s overall assessment approach to the hydraulic fracturing water cycle (HFWC) to be comprehensive. However, the SAB stated in an Aug. 11 letter that more information from EPA was needed to support the draft assessment’s conclusions. In a report released last year, EPA said it did not find evidence that potential mechanisms by which fracking could impact drinking water had led to widespread, systemic impacts on U.S. drinking water resources. EPA also stated in the June 2015 report that the number of identified cases where drinking water resources were affected were small compared with the number of hydraulically fractured wells. The SAB said it was particularly concerned that EPA did not support quantitatively in its conclusion about the lack of evidence of widespread, systemic impacts of hydraulic fracturing on drinking water resources and failed to describe the systems of interest, impact scale, or definitions of systemic and widespread.

Opponents of Seneca gas storage project reject downsize plan (AP) — Opponents of an expanded gas storage facility in the Finger Lakes say they’ll continue to fight the project despite the company’s proposal to downsize it in response to community concerns. Houston-based Crestwood Midstream Partners this week proposed changes to the Seneca Lake project that include elimination of rail and truck shipment facilities and resources to monitor and improve water quality in the lake that supplies drinking water for 100,000 people. The Department of Environmental Conservation has been considering a permit application for the expansion of propane storage facilities in depleted salt caverns along the lake since 2009. The opposition group Gas Free Seneca says in a statement that it is resolved to stop the project completely, saying it’s unsafe and inconsistent with the character of Seneca Lake communities.

Fracking linked to asthma attacks in Hopkins study - Asthma sufferers who live near wells in which hydraulic fracturing is used to extract natural gas are up to four times more likely to have an asthma attack than those who live farther away, according to new research from the Johns Hopkins University.The findings are the latest in a string of studies that have linked health problems to proximity to such wells, and come as Maryland prepares to lift a moratorium next year and issue permits for the controversial method of extraction known as "fracking.""Ours is the first to look at asthma, but we now have several studies suggesting adverse health outcomes related to the drilling of unconventional natural gas wells," said Sara G. Rasmussen, a study leader and doctoral candidate in the department of environmental health sciences at Hopkins' Bloomberg School of Public Health."Going forward, we need to focus on the exact reasons why these things are happening," she said, "because if we know why, we can help make the industry safer."  Under then-Gov. Martin O'Malley, a Democrat, Maryland imposed a moratorium on fracking in 2011 out of concerns about possible groundwater contamination, air pollution and earthquake activity. Under Gov. Larry Hogan, a Republican, the state recently released draft rules for use when the moratorium expires in the fall of 2017. Critics call the rules insufficient to protect air and water quality, while supporters say they are among the nation's most stringent.

Coast Guard: Well leaks up to 4,200 gallons of oil (AP) — The Coast Guard says an oil well leaked up to 4,200 gallons of crude oil near the mouth of the Mississippi River. The Coast Guard says the spill on Tuesday came from a well owned by the Texas Petroleum Investment Co. The spill is close to Main Pass, which is in the area where the Mississippi flows into the Gulf of Mexico. The agency says the company has hired OMI Environmental Solutions and Clean Gulf Associates to clean up the spill. The Coast Guard, the Louisiana Department of Environmental Quality, the Louisiana OilSpill Coordinator’s Office and the Louisiana Department of Wildlife and Fisheries are overseeing the response. The Coast Guard says the cause of the spill is under investigation.

Louisiana politicians go to court blaming Big Oil for coastal ruin The oil industry has left a big footprint on Louisiana, but its legacy is being questioned like never before with Democrat John Bel Edwards in the governor’s mansion. Turning state politics upside-down, leaders of both parties are taking Big Oil to court, seeking billions in damages for making the coast sink into the sea. Industry lawyers blame damage on levees built to control the Mississippi River. And one executive calls the lawsuits a hypocritical shakedown, given the industry’s $73 billion economic impact. A Delaware-sized stretch of Louisiana is gone forever, but the politicians hope to save what’s left.

 Suits could drive producers from coastal Louisiana: E&P group - A series of lawsuits, brought by local officials in southern Louisiana against dozens of oil and gas companies operating in the region, could drive drillers to abandon the state, resulting in the loss of millions of dollars of business, the head of the Louisiana Oil and Gas Association said Wednesday. About 10 suits have been filed against dozens of oil and gas operators alleging that the energy companies have violated the federal Coastal Zone Management Act by allowing erosion to eat up an untold number of acres of Louisiana's coastline. The suits represent a grave threat to the state's exploration-and-production industry, especially at a time when the industry has been hard hit by low oil and gas prices, LOGA President Don Briggs said in an interview Wednesday. "It's the kiss of death for drilling in South Louisiana," he said.The suits are being studied "in the board rooms where people make decisions of whether they're going to drill and operate in the coastal region of Louisiana," he said. "Why would they risk being sued over the various permits that they would acquire?" Although the suits have been working their way through the courts for a number of months, the industry won a victory recently when 24th Judicial District Court Judge Stephen Enright decided to dismiss a lawsuit filed by trial lawyers on behalf of Jefferson Parish. In that ruling, issued August 1, Enright found that the plaintiffs, including parish and state officials, had failed to avail themselves of existing administrative remedies pursuing their lawsuit.

Proposed Project to Expand Gulf of Mexico Port Capacity  - A new deepwater port project planned for Louisiana aims to complement existing Gulf Coast infrastructure to service the oil and gas industry. Located in western Louisiana on the Calcasieu Ship Channel just south of Lakes Charles, the Port Cameron project will allow for faster deployment of supply vessels, support and emergency services for exploration and production (E&P) activities in the U.S. Gulf of Mexico, Jack Belcher, executive vice president of HBW Resources LLC, told Rigzone. HBW is working with Port Cameron LLC to identify and secure customers for the new port. These customers include inventory management, rig support, transportation management and bonded warehouse and crew support. HBW is also seeking out vendors that support oil and gas operators and drillers, such as providers of cranes, lift trucks and dock side equipment, vessel companies, dockside vessel support, stevedores and air transportation support for rig crews. Port Cameron presents an opportunity for a brand new, modern port to be added to the Gulf Coast. Even with the oil price downturn, oil and gas activity in the Gulf of Mexico is expected to increase going forward, Belcher stated.

Environmental Racism Is Poisoning Houston —The smell in the Manchester neighborhood of Houston is like hot Cuban coffee—nutty, bitter and sweet. This isn’t coffee, though. This is the smell of benzene spewing from the nearby Valero oil refinery at 1.5-4.7ppm, the threshold at which most humans can begin to smell the chemical and what the Centers for Disease Control calls a possible indication of “acutely hazardous exposure.”  Paula’s house is sparsely furnished, with brightly painted walls. Her grandchildren are all over the place, curious about the audio recorder. Paula tells me the family has been living here for about four years: four adults and six children living in a three-bedroom house. “It’s okay. It’s peaceful, it’s quiet. Except all the chemicals that are around, but that’s about the only thing that concerns us.” The one-story house is right across the street from the Valero refinery. “Sometimes we see something that happens, and we get scared, and there’s been times that they have shut down the roads and they don’t let us know what’s going on. We have to go and ask. And they tell us, there’s nothing to worry about. But that’s about it.” “We’re planning to move as soon as we get a little bit more money together. We’re planning to move.” “My daughter, she works at a dry cleaner. My son, he works at a pharmacy, at CVS pharmacy. And the stepdad, he cuts yards.” She frets about the children not performing well in school. She says she suspects it’s because the teachers are bad, which may be the case as the area is poor and underserved more generally. But she does not mention that the pollution the children live and sleep and eat in may be damaging their ability to learn and putting them at risk for degenerative brain illnesses.

New rules credited for fewer Oklahoma quakes - The number of earthquakes related to fracking has fallen significantly in Oklahoma since last year, leading government experts to attribute the decline to increased regulation.  The state's rate of earthquakes was at times higher than that of California, which is considered the U.S. epicenter for naturally occurring earthquakes. The U.S. Geological Survey told USA Today that the reduction in earthquakes in the oil and gas state is mostly likely due to new regulations put in place to reduce the quakes' frequency. The state is still experiencing a whopping number of earthquakes after the regulations were put into place. It has had 448 earthquakes of a 3.0 magnitude or higher this year. But that's down nearly 20 percent from last year, when the state experienced 558 quakes in the same period, according to the U.S. Geological Survey. The practice of hydraulic fracturing, or fracking, is not the culprit in causing the earthquakes.  Instead, the quakes are associated with the disposal of the water used in the fracking process, which requires injecting the wastewater into underground aquifers.  The state has established a number of new regulations to control the rate of water injected into underground aquifers, which has been the proven cause of quakes not only in Oklahoma but also in places as far away as Ohio. Robert Williams, a geophysicist with the U.S. Geological Survey, said increased regulation of wastewater underground disposal related to oil and gas production could be one reason for the decline in earthquakes. At the same time, oil production has slowed, which means there is less water to dispose of from fracking wells, he said. The lower production is due to the global supply glut, where the oversupply of crude oil on the worldwide market has cut prices so low that it is not economical to drill.

Kansas tightens restrictions on oilfield water injections - Washington Times: - The Kansas Corporation Commission has further restricted the amount of oilfield wastewater that can be injected underground in southern Kansas in the hopes of further reducing the number of earthquakes in the region. Earlier restrictions led to a drop in earthquakes, mostly in Harper and Sumner counties, experts said. During a meeting Tuesday, the commission left in place an 8,000-barrel per day limit in five of the most quake-prone areas of those two counties. But it put a 16,000-barrel per day limit on the rest of those two counties and parts of Kingman, Sedgwick and Butler counties, The Wichita Eagle reported (http://bit.ly/2aFR3pe ). “We’ve taken action to see that we don’t have the seismic activity we’ve seen south of Kansas (mostly in Oklahoma),” said Commissioner Pat Apple, who approved the new restrictions along with Chairman Jay Emler. The commission’s order said it found that increased seismic activity is an immediate danger to the public health, safety, and welfare. Commissioner Shari Feist Albrecht filed a dissenting opinion favoring even stronger restrictions. She agreed with the KCC staff, which wanted to limit dumping to 12,000 barrels a day, saying she believes the 16,000-barrel limit “would do little to change the status quo and provide minimal data from which to draw any conclusions about the small-earthquake trend.”

Future unclear for northern Minnesota oil pipeline project (AP) — The future is unclear for a proposed oil pipeline that would cross northern Minnesota. Enbridge Energy on Tuesday announced it is investing in a different pipeline that would transport North Dakota crude oil — but not across Minnesota. The Canadian company has proposed the $2.6 billion Sandpiper pipeline that would run from the Bakken oil fields through Minnesota to a terminal in Superior, Wisconsin. Enbridge, based in Calgary, Alberta, and Houston-based Marathon Petroleum, a key partner in Sandpiper, are forming a joint venture to buy a stake in the Bakken Pipeline project, which would transport oil from North Dakota across the Midwest to Texas. Once the new Bakken pipeline deal is complete, the company will “evaluate the scope and timing” of Sandpiper, Enbridge said in a statement. In February, Enbridge said it expected to push back the startup date for Sandpiper to 2019. The pipeline proposal is going through the Minnesota regulatory process. Environmentalists contend Sandpiper would threaten ecologically sensitive areas. With Enbridge’s new pipeline investment, Sandpiper “will be put on the shelf,” Scott Strand, head of the Minnesota Center for Environmental Advocacy, told the Star Tribune. Strand’s group had pushed for a full environmental review of Sandpiper. Late last year the Minnesota Public Utilities Commission ordered a full environmental impact review of Sandpiper. Enbridge has said the state’s regulatory process is delaying Sandpiper and another project, a replacement pipeline to carry Canadian crude oil across northern Minnesota.

 Colorado anti-fracking initiatives hit signature target | Reuters: Environmental groups in Colorado on Monday said they collected enough signatures to add proposed anti-fracking initiatives to a state ballot in November, as long as their petitions make it through a validation review by the Secretary of State's office. One of the initiatives would strengthen the state's "setback" rules, requiring new oil and gas development facilities to be located at least 2,500 feet from occupied structures and areas of interest, such as parks. The second would transfer regulatory control of new oil and gas development to local governments. Both needed 98,492 signatures to make the ballot. "We made it over the hurdle of having the signatures needed to turn into the Secretary of State and now it's in their hands to go through the validation process," said Lisa Trope, an organizer with Food and Water Watch, one of the groups gathering the signatures. The Secretary of State's office will review the petitions in the coming weeks to ensure no duplicate signatures or unregistered voters were included. An issues committee for Coloradans Resisting Extreme Energy Development led the signature gathering process. A spokeswoman for that organization did not immediately respond to a request for comment. The initiatives come after the state's Supreme Court earlier this year struck down fracking bans approved by voters in the cities of Fort Collins and Longmont.

In Colorado, anti-fracking referendums clear ballot hurdle: Colorado is one step closer to having two statewide referendums on fracking go to the voters this fall after proponents turned in nearly 200,000 signatures Monday. A last-minute push over the weekend by proponents of the measures appears to have paid off for their cause, allowing them to gather more signatures ahead of the Monday deadline. A grassroots coalition called "Yes for Health and Safety Over Fracking" said it submitted enough signatures to place two initiatives on Colorado's November ballot. The Colorado secretary of state's office confirmed the petition signatures for the two oil and gas measures were turned in Monday before the 3 p.m. local deadline. "The office will now conduct a 5 percent random sample of submitted signatures to determine whether the proposals meet the threshold to make the ballot," a spokeswoman said. "To get on the ballot, proponents need to submit 98,492 valid voter signatures — 5 percent of the total votes cast for all candidates for Colorado secretary of state in the last general election." The state has until Sept. 7 to announce whether the two referendums meet the threshold to make the fall ballot. Initiative 75 would give local governments the authority to regulate oil and gas development, including restricting the practice of hydraulic fracturing, or fracking. Current state law allows local governments to regulate land use related to oil and gas development as long as it does not conflict with state law. Initiative 78 would force mandatory setbacks for oil and gas development in Colorado, including requiring any development or fracking to be located more than 2,500 feet away from both an "occupied structure" or "areas of special concern" such as public places and playgrounds as well as waterways.

Colorado Readies for 'All Out War' as Anti-Fracking Measures Advance to Ballot --  The government of Colorado has so far managed to quash efforts to halt the spread of fracking in that state, but come November, residents will finally have the chance to overpower the will of politicians and Big Oil and Gas. Petitioners on Monday submitted more than 200,000 signatures backing two separate initiatives to amend the Colorado constitution, specifically in regards to the controversial drilling method."This is a good day for Colorado, and it’s a good day for democracy," said Lauren Petrie, Rocky Mountain Region director of Food and Water Watch. "These initiatives will give communities political tools to fend off the oil and gas industry’s effort to convert our neighborhoods to industrial sites. This is a significant moment in the national movement to stem the tide of fracking and natural gas."Initiative 78 would establish a 2,500-foot buffer zone protecting homes, hospitals and schools, as well as sensitive areas like playgrounds and drinking water sources, from new oil and gas development. This expands the current mandate of a 500-foot setback from homes and, according to Coloradans Resisting Extreme Energy Development (CREED), is based upon health studies that show increased risks within a half mile of fracked wells and the perimeters of real-life explosion, evacuation, and burn zones. Colorado regulators say that, if passed, Initiative 78 could effectively halt new oil and gas exploration and production in as much of 90 percent of the state. Initiative 75 would establish local government control of oil and gas development, authorizing local municipalities "to pass a broad range of more protective regulations, prohibitions, limits or moratoriums on oil and gas development—or not," according to the grassroots group. This measure challenges a May ruling by the Colorado Supreme Court which said that state law overrides local fracking bans.

Energy group sues over canceled lease sales - An energy trade group is suing the Obama administration over canceled oil and natural gas lease sales in the West. The Western Energy Alliance on Thursday sued the Interior Department and the Bureau of Land Management (BLM), saying they are breaking congressional mandates by canceling several lease sales over the past two years.The group, which represents oil and natural gas companies, said the administration is working too closely with the anti-fossil fuel activists who have pushed officials to end lease sales on federal land. “Through protests and petitions, the Keep-It-In-The-Ground movement is trying to coerce BLM into violating the law by stopping all leasing on federal lands,” Kathleen Sgamma, the group's vice president of government and public affairs, said in a statement. “Yet without doing anything, activists could achieve the same goal just by leaving BLM to its own devices. Western Energy Alliance is simply asking the courts to compel BLM to follow decades-old law and hold quarterly lease sales in every oil and natural gas state.” Federal law directs the BLM to hold four lease sales annually in a handful of oil- and gas-producing states in the West, but the agency has canceled or postponed several such auctions there since 2015. Environmental advocates have threatened to protest several of the lease sales as part of their effort to ban fossil fuel development on federal land. They have often declared victory when the BLM cancels the sales.

 Steel company says it’s not liable for 2013 Casselton train derailment (AP) — A Pennsylvania steel company named in a lawsuit over a fiery oil tanker train derailment near Casselton says it should not be held liable for the 2013 accident. Standard Steel and BNSF are named in a complaint filed by Bryan Thompson, the engineer who was at the helm of the train when it derailed. Thompson says Standard Steel produced a defective axle that contributed to the crash, which he says left him with post-traumatic stress disorder. The steel company said in court documents filed Friday that the axles were properly designed and manufactured and that the suit should be dismissed. “Standard Steel admits that it knew its axles would be used on railcars, but denies that any of its axles were improperly designed or manufactured, and further denies that any of its axles created a substantial risk of harm,” says Elizabeth Sorenson Brotten, an attorney for the company. A National Transportation Safety Board investigation did not pinpoint the broken axle as the cause of the crash, but the NTSB ordered the industry to recall 43 axles made by Standard Steel in the same 2002 batch. Thompson’s suit says the axle was in “an unreasonably and dangerously defective condition” when it was sold and that the company failed to “adequately warn” Thompson or BNSF. The accident near Casselton on Dec. 30, 2013, happened when a train carrying soybeans derailed in front of Thompson’s train, causing the oil tanker train to also derail. The crash spilled about 400,000 gallons of crude oil and set off a fire that could be seen for miles.

State Health Council ratifies radioactive waste rules -  (AP) — North Dakota’s State Health Council ratified Tuesday a reapproval of rules allowing elevated levels of oilfield radioactive waste to be dumped at certain landfills. The 11-member advisory panel to the state Health Department voted unanimously to reapprove last year’s rules allowing 50 picocuries per gram of concentrations of TENORM — technologically enhanced radioactive material. It had been 5 picrocuries per gram. Picocuries are a measure of radioactivity. The rules are based on a $182,000 study it funded by Illinois-based Argonne National Laboratories that sought to determine the exposure risk of radioactive waste to oilfield and landfill workers and the public. The study originally was to be funded in part by the oil industry, but that was scrubbed after public criticism that it smacked of conflict of interest. Environmental groups had alleged last year’s advisory panel meeting was held illegally. Attorney General Wayne Stenehjem issued an opinion in March saying the panel violated state law by not providing adequate notice of the meeting. The North Dakota Energy Industry Waste Coalition and the Dakota Resource Council also are suing in state court over the rules, a lawsuit that attorney Sarah Vogel said Tuesday will proceed. More than 50 opponents turned out Tuesday to voice their displeasure with the rules, which regulators say are intended to crack down on the illegal dumping of radioactive oil filter socks, the tubular nets that strain liquids during the oil production process.

8,400 gallons of oil-saltwater mixture spills near Mohall - (AP) — A damaged injection line has caused a spill of about 8,400 gallons of a mixture of saltwater and oil in Bottineau County. The North Dakota Department of Health says the spill happened Wednesday about 3 1/2 miles north of Mohall. A representative of Texas-based Enduro Operating LLC, which operates the line, wasn’t immediately available to comment. Initial estimates show about 8,400 gallons of what’s known as produced water, a mixture of saltwater and oil that can contain drilling chemicals, was released onto a pasture. The department says no surface water has been impacted at this time. The Health Department says it will work with the company on plans for remediation.

Saltwater spill reported at well site near White Earth (AP) — North Dakota regulators say almost 20,000 gallons of oilfield wastewater has been contained and recovered at a saltwater disposal well in Mountrail County. Regulators with the state Oil and Gas Division say Houston-based Oasis Petroleum North America reported the 470-barrel spill on Wednesday at the well near White Earth. A barrel is 42 gallons. Officials say the spill was caused by a failed fitting that caused a tank to overflow. A state inspector has been on site investigating the spill. North Dakota Department of Mineral Resources spokeswoman Allison Ritter says no water sources were affected. Saltwater is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it.

 Drilling mishaps damage water in hundreds of cases -- When a pipeline break in North Dakota spilled salty, toxic drilling wastewater into a tributary of the Missouri River last year, it was national news. But it was only one of more than 640 oil and gas spills that affected groundwater or surface water in some way in 2015, according to a review of state and federal records by EnergyWire. Such spills can contaminate water with oil, salt, metals and even radiation. At nearly 3 million gallons, the January 2015 pipeline break north of Williston, N.D., was the largest spill reported to have affected water (Greenwire, Jan. 26, 2015). Most were far smaller. But 500,000 gallons of coalbed methane wastewater reached a small creek in southern Colorado in July 2015, and a 250,000-gallon spill from a West Texas well site in February 2015 reached the Pecos River. Water spills can create more problems than land spills because the contaminants spread faster, said Desirée Plata, an associate professor of chemical and environmental engineering at Yale University who has studied oil and gas spills. "If something is released to a solid piece of land, it does buy you time and manageability" to scoop up the material for treatment or burial elsewhere, she said. "The water's moving downstream before you have a chance to do anything about it." "Water is always key," Skinner said. "The minute water gets involved, it kicks off another level of variables, because it can travel and has the potential to affect so many people." Since 2009, nearly 2,500 spills have been reported to have affected groundwater in some way, according to the EnergyWire review. But that is likely an undercount, as many oil and gas agencies don't track whether spills affect water. Some don't even track spills at the state level.

North Dakota oil output drops 20K barrels daily in June (AP) — North Dakota’s oil production decreased by more than 20,000 barrels a day in June. The Department of Mineral Resources says the state produced an average of 1.02 million barrels of oil daily in June, down from 1.04 million barrels in May. North Dakota’s production record was set in December 2014 at 1.22 million barrels daily. North Dakota also produced 1.66 billion cubic feet of natural gas per day in June, up from 1.64 billion cubic feet daily in May. The June tally is the latest figure available because oil production numbers typically lag at least two months. There were 34 drill rigs operating in North Dakota’s oil patch on Friday, which is up six rigs from the June average.

New crude oil shipment applications on hold at Cherry Point (AP) — The Whatcom County Council has temporarily banned new permit applications for projects that ship crude oil and other unrefined fossil fuels out of Cherry Point. The 60-day moratorium unanimously approved Tuesday night prevents shipments or exports of fuels such as methane, coal or crude oil from tar sands not processed in that industrial zone north of Bellingham. The council says the emergency measure is needed to protect public health and safety, while the county weighs land-use changes at Cherry Point that could restrict future crude oil and other fossil fuel exports. In its ordinance, the council cited the dangers of increased shipments of crude oil by train and pipeline through the area and the need to prevent new permit applications while changes are considered. The moratorium, however, wouldn’t affect current shipments or projects. Cherry Point, located on Puget Sound with access to deep waters for shipping, is the site of an aluminum smelter and two oil refineries. In recent years, BP and Phillips 66 have expanded their facilities to accept crude oil shipments by train. In May, the U.S. Army Corps of Engineers denied a permit for a $700 million project to build the nation’s largest coal-export terminal at Cherry Point. The Lummi tribe successfully argued the project would interfere with its treaty-protected fishing rights. The terminal would have handled up to 54 million metric tons of dry bulk commodities, mostly coal, at Cherry Point for export to Asia.

Statement: Emergency Moratorium Stops All Unrefined Oil, Coal, and LNG Export Infrastructure Projects in Whatcom County, WA -- On Tuesday, July 26, 2016, the Whatcom County Council unanimously approved a 60-day emergency moratorium to immediately suspend approval of any proposed projects that could facilitate shipment of unrefined oil, coal or gas through Whatcom County. The move temporarily prevents permitting for new projects that would allow the shipment or export of crude oil, coal, or liquefied natural gas (LNG) from Cherry Point. The emergency moratorium was put into place while the county finalizes a Comprehensive Plan update that will inform future zoning regulation changes that could prevent permits for new projects facilitating the export of crude oil, coal, or fracked gases. Cherry Point is home to two oil refineries (BP and Phillips 66), a liquid petroleum gas (LPG) processing and export facility (PetroGas), and three pipelines that carry crude oil, natural gas, and refined petroleum products. In response, environmental organizations RE Sources for Sustainable Communities and Stand issued the following statements:

Why is some plastic recycling no longer cost-effective? Blame fracking - The past couple of years of relatively cheap crude oil and natural gas has upended the industry with the greenest image: recycling. Yes, it's still an advantage for many businesses and municipalities to recycle rather than have the junk hauled to a landfill. But only a few years ago, there was plenty of cash in reselling that trash - paper, plastics and metal - to provide a nice profit for the recycling companies and give money back to the cities and companies producing the waste. No longer. And if that doesn't turn around, it may mean some people will pay relatively more for trash pickup than if the market for recycling were better. The problem is not only about the cheap oil and gas made possible by fracking in America's shale fields, and particularly in Texas. It's also linked to a slump in the world demand for raw materials.A used plastic water bottle than once might have been turned into a few threads of polyester in a pair of Chinese-made jeans, woven into a carpet or been part of another bottle is now struggling harder to find a new home. Nationwide, around 200 of more than 7,000 scrap recycling companies have gone belly-up over the past couple of years, said Joe Pickard, chief economist for the Institute of Scrap Recycling Industries. Many others have throttled back operations, he said. "The price volatility makes it really hard for our guys to do business," he said.

Is This A Death Sentence For U.S. Strippers? -- There were a lot of predictions last year that 2016 would lead to the disappearance of many strippers – the oil well producers who take nearly depleted “stripper” wells and keep them running and producing a few barrels a day. This year is proving that strippers are much tougher than many analysts gave them credit for. While many strippers have taken action to cut back some of their less profitable wells, by and large, stripper production is much more resilient than many had expected. That reality holds important implications for the industry at large - more on that later though. The strippers are pursuing a variety of techniques to keep their leases active on wells and minimize their losses. The result is that while output has fallen from strippers, it is still significant as a portion of U.S. production according to the EIA. Getting reliable data on exactly how much production comes from stripper wells is nearly impossible because of the vast number of wells, and informality of the market. Strippers are facing new problems from proposed federal oil and gas regulations though. The oil price crunch has failed to force strippers to their knees, but the new federal rules might. The rules come from the U.S. EPA and relate to the production of methane from wells. For larger companies and more productive wells, the new rules are a nuisance, but not a serious threat to economic viability. For strippers producing 5, 10, maybe 15 barrels of oil per day at each well using inexpensive, and often antiquated equipment, the rules could be a death sentence."These new rules will cripple stripper and marginal well owners and operators, and on top of historically low oil prices, we are looking at total disaster," according to National Stripper Well Association Chairwoman Darlene Wallace. "By requiring the addition of new costly equipment requirements and expensive leak detection the economics within the oil and gas industry as a whole will be fundamentally changed, severely and forever."

Do Oil Companies Really Need $4 Billion Per Year of Taxpayers’ Money? - What would happen if the federal government ended its subsidies to companies that drill for oil and gas? The American oil and gas industry has argued that such a move would leave the United States more dependent on foreign energy.  Many environmental activists counter that ending subsidies could move the United States toward a future free of fossil fuels — helping it curtail its emissions of heat-trapping carbon dioxide into the atmosphere. Chances are, it wouldn’t do much of either. In a new report for the Council on Foreign Relations, Gilbert Metcalf, a professor of economics at Tufts University, concluded that eliminating the three major federal subsidies for the production of oil and gas would have a very limited impact on the production and consumption of these fossil fuels. Mr. Metcalf’s analysis is the most sophisticated yet on the impact of government supports, worth roughly $4 billion a year. Extrapolating from the observed reaction of energy companies to fluctuations in the price of oil and gas, he models how a loss of subsidies might curtail drilling and thus affect production, prices and consumer demand.  Cutting oil drilling subsidies might reduce domestic oil production by 5 percent in the year 2030. As a result, he thinks, the worldwide price of oil would inch up by only 1 percent. He assumes it will hardly be affected because other countries would increase production as the flow of American crude slowed. Demand would hardly budge, as the price of gasoline at the pump would rise by at most 2 cents a gallon.

U.S. Drillers Need $60 Oil to Stage Real Comeback, IEA Say - Bloomberg: While shale drilling in the U.S. is on the rise again, prices need to climb nearer to $60 a barrel for U.S. producers to have a “substantial” boost in activity, the International Energy Agency said. Producers remain “cautious on outlook,” and further drilling increases this year may be “limited,” the IEA said in its monthly report. Drillers hired more rigs this year as U.S. oil prices staged a rally that saw futures close at $51.23 a barrel in June, the highest so far this year. There were 381 active rigs as of August 5, the highest number since March 18, according to Baker Hughes Inc. data. That number remains more than 75 percent below the October 2014 peak, the IEA said. Despite the gains in the rig count, the IEA reiterated its view that shale oil production will decline by half a million barrels a day this year with a further drop of 200,000 barrels a day next year. The number of completed wells will drop by half this year compared with last year, it said.

Mexico's "Legendary" Oil Hedging Desk Is Quietly Preparing For The Next Plunge --While oil longs and Saudi Arabia are enjoying this week's latest, substantial short squeeze, prompted if not so much by the latest set of cheerful, if repetitive, IEA "rebalancing" forecasts, the fundamental reality as confirmed not only by a recent Morgan Stanley report which sees oil dropping to the mid-$30s, but also by the just released Baker Hughes oil rig count which reported a spike of 15 rigs in the past week, the most since 2015, suggests that there is more downside pressure in store for oil. Some are already actively hedging for just that. According to Bloomberg, Mexico has started "quietly" buying contracts to lock in 2017 oil prices when futures were near their peak in June, signaling the start of what has in prior years been the "world’s largest sovereign petroleum hedge." The Latin American country has been buying put options earlier than the usual period of late August to late September, according to Bloomberg sources, suggesting that at least according to one prominent trading desk, the oil peak has come sooner than expected this year. Specifically, Mexico is targeting the price of $49 as its breakeven, suggesting it does not expect oil to rise above this level.

What Is Happening With Propane Exports and Ship Cancellations --  U.S. propane production from natural gas processing has doubled over the past five years, but domestic demand has hardly moved the needle. So the only way the propane market has balanced is through exports, and it is no overstatement to say that the ship has really come in for U.S. propane exporters. All those exports have also helped support the U.S. propane market, holding inventories down to about where they were last year, and supporting propane prices at about 43% of crude oil versus 35% this time last August. But it looks like the market may be shifting, possibly pulling some of the export safety net out from under the market. That’s because the economics from exports are looking pretty dismal –– so bad, in fact, that cargos are being cancelled right and left. Today, we examine the market for propane exports, why the market is changing now, and what it means for propane over the next few months. Propane exports have been a frequent topic here in the RBN blogosphere.  Back in 2012 we posted Exports Prescribed For Propane Relief.  In 2013, we covered export volumes beginning to surge in She Don’t Lie, She Don’t Lie, Propane. Exports Take Off! and in 2014 we highlighted propane export volumes as they escalated further in Sail Away – Propane Exports Exceed 400 Mb/D For The First Time.  Then, earlier this year in Spinning Wheel, we talked about the possibility that propane exports may be headed back down in a couple of years as propane’s use in ethylene steam crackers and propane dehydrogenation (PDH) plants ramps up.  We remain convinced that Gulf Coast exports will stay at historically strong levels until petrochemical demand (and growth in East Coast propane exports) take some barrels out of the market, but it is also clear that export volumes have the potential to swing widely between now and then, depending on the price spread – the arbitrage value – between U.S. propane markets and those in Asia and Europe.  That is what is going on right now.

The Pipelines Moving Crude, NGLs to Sarnia, and Moving Products Out --  In the past century and a half, Sarnia, ON has evolved into one of Canada’s leading refinery and petrochemical centers, and a major consumer of Alberta and Bakken crude and Alberta and –– more recently –– Marcellus/Utica natural gas liquids. Getting that oil and those NGLs to southwestern Ontario is the task of a small group of pipelines and a few rail facilities; other pipelines out of Sarnia help to move refined petroleum products to nearby demand centers. Today, we continue our comprehensive review of refinery and petchem-related infrastructure in and around Ontario’s Chemical Valley. As we said in Part 1 of our series, Sarnia was present at the creation of the North American oil industry –– an 1858 well in nearby Oil Springs, ON is said to have been the first on the continent, beating Col. Edwin Drake’s (of course) more famous well in Titusville, PA by a year. Over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads), and Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. Since what Americans hear about Canada sometimes seems to go in one ear and out the other, we’ll remind you that Sarnia is along the St. Clair River near the southern tip of Lake Huron. There are currently three refineries in Sarnia’s Chemical Valley with a combined capacity of about 277 Mb/d: Imperial (121 Mb/d; pink area along upper part of the St. Clair River in Figure 1), Suncor (85 Mb/d; light purple area just downstream from Imperial), and Shell (71 Mb/d; red area downstream from Suncor).

June Atlantic LNG production drops 16% year on year - LNG production at Trinidad-based gas liquefaction complex Atlantic LNG totaled 2.0 million cubic meters in June, down 16% year on year, according to a bulletin released Thursday by Trinidad and Tobago's Energy Ministry. The decline continues the trend of reduced production at the facility for the past 17 months compared with year-ago figures. Point Fortin-based Atlantic LNG has been struggling with ongoing natural gas curtailments by producers in Trinidad, which have impacted supplies since about 2010. The shortfalls stem from disruptions caused by upgrades to major gas infrastructure and a collapse in upstream investment by the largest gas producers in Trinidad.June LNG sales and deliveries from Atlantic were 44.2 million MMBtu, down 20% year on year, the report said. The company's sales and deliveries of NGLs in June totaled 383,382 barrels, down 20% year on year. Atlantic operates and manages four LNG trains in Point Fortin, with each train owned by a holding company comprised of different companies. The shareholders are BP; BG; Shell LNG; Summer Soca LNG Liquefaction; and the National Gas Co. of Trinidad and Tobago, according to the company.

US Gulf Coast distillate exports to Europe reach 1.29 mil mt in Aug to date: cFlow - Some 1.29 million mt of distillates, most of it likely to be diesel, have set sail from the US Gulf Coast for arrival in Europe in August, according to an estimate based on Platts trade flow software cFlow. The bulk of the cargoes are heading towards Northwest Europe, with the UK, France's Atlantic coast and the Amsterdam-Rotterdam-Antwerp hub taking the lion's share, as would be expected. While sources continued to report a closed USGC-Europe arbitrage, cheap freight rates were supporting the shipment of product across the Atlantic. Clean freight rates on this route were stuck at multi-month lows, with rates for Medium Range and Long Range 1 tankers assessed at $9.29/mt and $8.85/mt respectively Monday.In the jet market, volume was also said to be heading to Europe from the US: "There have been some DefStan [Defense Standard aviation fuel] cargoes placed into the EU," one trader said. A number of jet cargoes have been seen arriving, or are due to arrive into Denmark from the US over the past week. The 50,144 dwt Excelsior Bay arrived in Copenhagen from Pascagoula on August 5, while the 54,712 dwt Star Falcon is due to arrive in Copenhagen from the Port of South Louisiana on Thursday. The imported fuel was for domestic use, according to a source. In terms of gasoil flows, the MR Star Merlin is heading to the Mediterranean, with options to head to West Africa, with what is most likely high sulfur gasoil. The vessel loaded at P66's Alliance refinery in Louisiana, an occasional exporter of gasoil to Europe and West Africa. In an unusual movement, the Torm Troilus is heading to Lebanon. While the balance of probability indicates that the material would most likely be gasoil, market sources are expecting Lebanon to switch to 10 ppm ultra low sulfur diesel in September from the previous 350 ppm standard.

As US Crude Exports Soars, Here Are The Biggest Foreign Buyers Of US Oil -- Strange things are happening in a world continues to find itself with "low-priced" oil and an unprecedented gasoline glut, the latest of which is an unexpected boon for US fuel makers as Latin American refineries quietly go bust. As Bloomberg writes, from Brazil’s Petroleo Brasileiro SA to Mexico’s Petroleos Mexicanos, state oil companies have failed to complete nine projects worth at least $36.4 billion that would have supplied 1.2 million barrels of gasoline and diesel daily. U.S. refiners have stepped up to help fill the gap, with exports almost doubling in the past six years, according to the U.S. Energy Information Administration. Falling oil prices, high levels of debt and failure to find partners to help finance the plants are among the reasons cited by Pemex, Costa Rica’s Refinadora Costarricense de Petroleo SA and Colombia’s Ecopetrol SA for postponing their plans. Brazil’s Petrobras has been slowed by the price drop as well as a corruption scandal.  “Refinery investment plans in the region have really fizzled out over the past year or so,” Mara Roberts, a BMI Research analyst based in New York, said in an e-mail. “Latin America is keen to take in growing U.S. supplies.” As a result, US exports to the region have been rising steadily and reached a record 1.88 million barrels a day this year. Latin America now accounts for 42 percent of America’s fuel exports, up from 38 percent a decade ago. U.S. fuel output increased 4.1 percent over two years to a record 19.9 million barrels a day in 2015, EIA data show. US gasoline exporters aren't the only ones benefiting from current conditions. As the EIA writes in its most recent blog post, since the removal of restrictions on exporting U.S. crude oil in December 2015, the number of countries receiving exported U.S. crude has risen sharply. These exports have occurred despite a sustained narrow price premium of international crude oil prices over U.S. domestic crude oil prices, the many costs associated with arranging cargoes for export, and falling U.S. crude production. In the first five months of 2016, U.S. crude oil exports averaged 501,000 barrels per day (b/d), 43,000 b/d (9%) more than the full-year 2015 average. This rate of growth is significantly slower than before the restrictions were lifted, when year-over-year growth from 2012 to 2013 was 100%, and then 162% from 2013 to 2014 (Figure 1). However, after the lifting of restrictions, the number and variety of destinations for U.S. crude oil exports has changed. So far in 2016, crude oil was exported to 16 different nations, six more than 2015 and double the number of destinations in 2014.

How the Marshall Islands Became a Top U.S. Crude Export Destination (Reuters) - Best known for diving, lagoons and the island that gave the world the name for the bikini swimsuit, the Marshall Islands is now gaining attention as a top-five destination for U.S. crude exports despite the lack of a refinery to process the oil. The shipments to the Marshall Islands, a tiny atoll nation in the middle of the Pacific Ocean, are a quirk of U.S. regulations, providing a vivid example of how traders carry out arbitrage opportunities and how fuel is supplied to some of the world's most remote regions. Since the removal of restrictions on exporting U.S. crude in December 2015, the oil has gone to a rising number of countries, with an average monthly volume of over 500,000 barrels per day (bpd), according to figures from the U.S. Energy Information Administration (EIA) published this week. Among the top takers of U.S. crude are the Netherlands, Japan and Italy. But, ahead of France, at number five comes the Marshall Islands. "The Marshall Islands... is the fifth-largest non-Canadian destination for U.S. crude oil exports in 2016, averaging 14,000 barrels per day," the EIA said. They are an unlikely destination for crude exports, with a population of 50,000, located in the middle of the Pacific to the west of Hawaii and to the east of the Federated States of Micronesia.  The EIA says that the U.S. oil is unlikely to remain in the Marshall Islands. "With no refineries, the Marshall Islands are unlikely the final destination, but rather may be the location of ship-to-ship transfers for delivery to destinations in Asia, or a point at which a cargo of crude oil would await a buyer in Asia," the agency said.

Japan's Tepco steps up LPG procurement to meet summer power demand - Japan's Tepco Fuel & Power is stepping up LPG procurement for thermal power generation to meet peak summer power demand over July-August, sources familiar with the matter said this week. Tepco Fuel & Power, a unit of Tokyo Electric Power Company Holdings, bought a few LPG cargoes in July, marking the first procurement of the fuel in fiscal 2016-2017 (April-March), sources said. Traders said the utility was likely to have bought two to three cargoes of LPG for delivery in July, with a propane/butane mix of either 60:40 or 50:50. For August, Tepco Fuel & Power had bought a half cargo of 21,000 mt of propane so far, a trader said. It was unclear if the utility will buy any more cargoes for August.

Japan LNG buyers pay average $5.80/MMBtu for spot cargoes contracted in July - Natural Gas | Platts News Article & Story: Japan LNG buyers paid an average of $5.80/MMBtu for spot cargoes contracted in July, data released Tuesday by the Ministry of Economy, Trade and Industry showed. METI did not publish an average contracted price transacted in June due to a lack of reported trades. The ministry gathers data from utilities and other LNG buyers in the country to publish a simple average of contract prices. The delivery months of the cargoes are not disclosed. Platts JKM averaged $5.63/MMBtu in July, reflecting spot deals concluded for August and September deliveries to Japan and South Korea. METI also said Tuesday that the average price of cargoes delivered into Japan in July was $6/MMBtu, jumping 33.3% from $4.50/MMBtu in June. Kyushu Electric was heard to have bought a cargo in July, via a Japanese trader, from Trafigura above $6/MMBtu in July, Platts reported earlier. The cargo, a reload lifted from Singapore on July 17, was being shipped aboard the Corcovado and arrived at Kyushu Electric's Oita terminal on July 27, according to Platts shiptracking software cFlow. The Platts JKM for July delivery averaged $4.833/MMBtu. The assessment period started on May 16 when the JKM stood at $4.475/MMBtu and ended on June 15 when it was assessed at $5.25/MMBtu.

EIA sees US gas output increase in late 2016, 2017; Q3 estimate lower - Natural gas price increases and growing LNG exports should give a boost to natural gas marketed production in late 2016 and 2017, the US Energy Information Administration said Tuesday, even as it scaled back third-quarter production estimates. EIA's August Short-Term Energy Outlook said natural gas marketed production in May averaged 78.1 Bcf/d, down 2 Bcf/d from a record daily average production set in February, The agency lowered by 0.28 Bcf/d to 79.22 Bcf/d its natural gas marketed production estimate for the US in Q3 2016. Yet it forecast production should pick up in late 2016, and rise 0.6% in 2016 and 2.9% in 2017. In recent weeks, it said slightly tapering production and high use of natural gas for power generation contributed to gas injections falling short of average levels. "Natural gas inventories were drawn down in the last week in July for the first time in 10 years during the June-August period, when gas stocks normally increase," EIA Administrator Adam Sieminski. EIA said working gas inventories were 3.288 Tcf as of July 29, 6 Bcf below the previous week's levels.Nonetheless, with inventories at record levels because of last winter's warm weather, the winter season may still start over with record high gas in storage, EIA said. It forecast inventories at 4.042 Tcf at the end of October.  Gas pipeline exports to Mexico are likely to rise by 0.7 Bcf/d in 2016 and 0.1 Bcf/d in 2017, it said, noting Mexico's power sector demand and flat production has led to growing demand this year.

US EIA chief shares short-term outlook for oil market: Fuel for Thought -- The 100th episode of the weekly S&P Global Platts Capitol Crude podcast, which aims to demystify the complex world of US oil policy, featured Adam Sieminski, head of the US Energy Information Administration. Here are excerpts from the interview, edited for space. Listen to the podcast in full.

Oil Companies Face $110-billion in Debt, Default Rates Are Rising: Moody's - As if oil in the $40s and hyper-aggressive Middle Eastern production wasn't enough to deal with, oil services and drilling companies have been dealt another blow with news that their cumulative debt load is estimated at $110 billion, and that it'll have to be paid off over the next five years. According to a Moody's Investors Service report released this week, $60 billion of the debt is from bonds sold to investors; another $45 billion is from revolving credit lines. Most of the debt is junk-rated: over 70 percent of the high-yield bonds and term loans are rated Caa1 or lower, and over 90 percent are rated below B1. The report states that speculative-grade companies account for 65 percent of all maturities and expirations; estimates for 2018 show the maturity wall growing dramatically to more than $21 billion, almost three times the total debt burden in 2017, and the debt burden will increase in 2021, when nearly $29 billion of issuance and revolvers is scheduled to come due. The credit ratings agency says one-third of the 67 companies on its list could see debt levels climb to 10 times more than raw earnings: "Not surprisingly, these companies are most at risk for debt restructurings and defaults," wrote Morris Borenstein, assistant vice president at Moody's.

Investors Have $100 Billion to Spend on Oil Assets No One Else Wants - Bloomberg: The long wait may finally be over. Since the great crash of oil in mid-2014, more than $100 billion has been raised by buyout firms and distressed-debt funds eager to scoop up energy assets on the cheap. But as the months rolled by, few opportunities cropped up as cash-starved drillers limped along with the help of their bankers. Not any more. What started out as a trickle has now turned into something much more, with Blackstone Group LP, Apollo Global Management LLC and WL Ross & Co. all jumping in this year to buy a grab bag of assets at discounted prices. Precise numbers are hard to come by, but in conversations with investors, bankers and analysts across the industry, there’s little doubt that private equity firms are ramping up their investments in everything from undrilled and developed oil and gas acreage to troubled loans. “We’ve gone very aggressively into the market” after holding back for most of last year, said Shaia Hosseinzadeh, who oversees energy-focused distressed-debt investing at WL Ross, the namesake firm of billionaire dealmaker Wilbur Ross. “You’ll see more deals in the second half.” Deals are picking up for a few key reasons. Oil prices are no longer in a free fall, but at $40 a barrel, they’re still well below the $60 to $80 levels many drillers need to break even. Wall Street has started to turn away the weakest borrowers after extending more than $2 trillion in loans and commitments during the boom. And with the cash crunch causing a surge in bankruptcies this year, many firms are looking to unload assets to stay afloat. Much of the action is unfolding in distressed debt, where buyers have targeted loans and bonds with an eye on seizing ownership in bankruptcy or restructuring. Billionaire Leon Black’s Apollo, WL Ross and EIG Global Energy Partners have snapped up more than half of the $1.6 billion in unsecured debt of Permian Resources, an oil and gas producer started in 2014 by the late Aubrey McClendon, people familiar with the matter have said.  The explorer has leaseholds to 85,000 net acres in the Permian Basin of west Texas, one of the most prolific oil and gas fields in the country. 

UK considers plan to pay households affected by fracking | GulfNews.com: Some tax proceeds from shale gas developments in Britain could be given directly to residents, Prime Minister Theresa May said on Sunday, in a bid to help clear the path for an industry hampered for years by local opposition to fracking. Britain is estimated to have substantial amounts of shale gas trapped in underground rocks yet fracking applications have struggled to find approval from local communities, concerned about noise and environmental impacts. Last year, then finance minister George Osborne said the government would create a shale wealth fund that would receive up to 10 per cent of tax revenue from shale gas developments for investments in communities affected by the projects. May, who took over as prime minister last month after Britain’s June 23 vote to leave the European Union, said she wanted to look at the option of this money being paid directly to residents rather than to local authorities. “The government I lead will be always be driven by the interests of the many, ordinary families for whom life is harder than many people in politics realise,” May said in a statement on Sunday, ahead of the launch of a consultation on the fund.

Theresa May "trying to bribe Britons to accept fracking" -- Theresa May has been accused of trying to bribe homeowners after offering up them up to £20,000 each to back fracking .   The Prime Minister hopes to persuade reluctant families to accept the controversial method to extract shale gas .  Supporters say taping into Britain’s vast reserves would provide a massive jobs boost and slash fuel prices. But critics claim have repeatedly raised safety fears and say the technology is too risky .  Mrs May hopes the cash boost will quell resistance.   But Shadow Energy Secretary Barry Gardiner said: “An incentive to do the wrong thing is properly called a bribe and Theresa May is using this bribe to set neighbour against neighbour.

Massive Oil Rig Washes Ashore in Remote Scotland -  A massive ocean oil rig that was being towed through the Atlantic broke free during severe weather and washed ashore on the remote Isle of Lewis in Scotland.  The Transocean Winner broke free from its tow late Sunday night and washed up on the coast near Carloway, Scotland, according to the Maritime and Coastguard Agency (MCA).  There are no personnel on board, according to the MCA, but there are 280 metric tons (617,294 pounds) of diesel on board.  The Secretary of State’s Representative for Maritime Salvage and Intervention (SOSREP) and the MCA's counter pollution branch have been closely monitoring grounded oil rig. The MCA announced this morning that final preparations were being made to put a small team of salvors on board the oil rig to do an initial assessment. "This initial [reconnaissance] will be checking a number of things, including fuel tanks," SOSREP spokesman Hugh Shaw said in a statement. "Weather permitting, it’s then intended to put a second larger group of salvors on tomorrow to carry out a more detailed inspection." A temporary exclusion zone of 300 meters (about 984 feet) has been implemented in the area around the rig, according to the MCA.

UK coast guards warn sightseers away from oil rig on beach - (AP) — Police are warning people to stay away from an oil rig that was blown onto a remote Scottish beach in a storm. The Transocean Winner drilling rig was being towed when it broke free of its tug and ran aground on the Isle of Lewis off Scotland’s west coast on Monday. Environmental groups have expressed concern, but coast guards say the risk of pollution is low. Salvage crews are working to recover some 280 tons of diesel on board. Local politicians are calling for an emergency towing vessel to be based in Scotland’s Western Isles after reports it took the coast guard 18 hours to reach the rig. Scottish National Party lawmaker Angus MacNeil says he also wants to know “why this oil rig was being towed in severe winds.”

Diesel oil spills from grounded oil rig on Scottish island --  (AP) — A British official says thousands of liters (gallons) of diesel have likely spilled from an oil rig that was blown onto a remote Scottish beach. The Transocean Winner was being towed when it broke free of its tug and ran aground on the Isle of Lewis on Monday. The Maritime and Coastguard Agency says two fuel tanks on the rig have been breached. Hugh Shaw, the government representative for maritime and salvage, said “we’re probably talking about a maximum of 52 (metric) tons of diesel oil as the worst-case scenario.” That’s more than 50,000 liters (13,000 gallons). Shaw told the BBC Thursday that any oil spill was a concern, “but this is extremely low-risk.” He said there was no sign of oil on the ocean surface or coastline.

 BP reveals Great Australian Bight oil drilling sites are within marine reserve --BP has quietly announced the planned location of its controversial drilling in the Great Australian Bight, and the two sites fall within the Commonwealth Marine Reserve. Despite being the subject of a Senate inquiry, and having its application to drill knocked back twice by the regulator NOPSEMA, BP had so far never released the precise location of its exploratory drilling wells in the pristine Great Australian Bight. In a document released by BP entitled “Update on regulatory approvals”, the company included a small map showing the location of the planned wells. The map doesn’t indicate the location of the marine reserves but, when overlaid with the reserve maps, the wells could be seen to fall within them. According to the Department of Environment, that particular area was inscribed in the reserve system for a range of reasons including being a “globally important seasonal calving habitat for the threatened southern right whale” and important foraging areas for sea lions, white sharks and sperm whales. The section of the marine park that BP wants to drill in is listed as a “multiple use zone”, which allows for mining, oil and gas activities. According to analysis by the Wilderness Society, 47% of BP’s exploration leases were outside the marine reserves. A spokeswoman for BP said they believed the oil industry could safely coexist with the marine environment.

 Western Europe's Top Oil Producer Has a Surprise for Markets - For Norway, the collapse in crude prices has a silver lining: output has exceeded expectations every month for the past two years. That’s likely to continue as oil companies boost efficiency and pump at full pace amid dwindling revenue, according to the head of Petoro AS, the state-owned oil company that owns more than a quarter of the petroleum output in Western Europe’s biggest producer. “Improvement efforts and the focus on profitability have led to very high regularity,” Chief Executive Officer Grethe Moen said in a phone interview on Friday from Stavanger, Norway’s oil hub. “There’s no sign this won’t last, at least thus far.” Companies, led by state-controlled Statoil ASA, which operates about 70 percent of the fields, have slashed investments and sought to increase efficiency to combat a rout that has left oil prices 60 percent lower than two years ago. But even as spending on future production dwindles, current output has risen thanks to more efficient operations and past investments that have just started delivering barrels.

Nigeria using power, persuasion to curb oil militant attacks (AP) — Nigeria’s government has resumed paying stipends to former militants even as security forces’ air and ground assaults have reportedly killed scores of fighters disrupting petroleum production in the oil-rich Niger Delta. President Muhammadu Buhari’s government is using power and persuasion in a bid to halt attacks on oil installations that have cut production from 2.2 million to 1.2 million barrels a day. The attacks have slashed the budget of a government dependent on oil for 70 percent of its revenue. The Nigerian Air Force says it has been bombing “legitimate targets, such as observation post, anti-aircraft gun position, boats laden with suspected stolen petroleum products and armed combatants.” Residents say scores of militants have been killed. There was no way to get a death toll independently. The commander of a joint task force, Rear Admiral Joseph Okojie, said the massive military deployment since Sunday is in response to “threats by militants to declare the Niger Delta Republic on August 1, 2016.” Such demands are new in the Niger Delta, where oil militants are threatening to join forces with separatists from the southeast who have renewed their intentions to create a state called Biafra. Nigeria suffered a civil war that killed a million people in the late 1960s after the Igbo people declared an independent Biafra.

Militants: Ex-president is sponsor of Nigeria oil attacks - (AP) — A splinter group of Nigerian oil militants accuses former President Goodluck Jonathan and other politicians in the oil-rich Niger Delta of sponsoring attacks on oil installations that have slashed the West African nation’s petroleum production. Jonathan denied the allegations Monday and, through a spokesman, said the militants want to kill him. On Sunday, the Reformed Niger Delta Avengers published names of 20 alleged sponsors of the Niger Delta Avengers, the group it broke away from, including former and current governors of southern states. Politicians long have been accused of backing the oil militants. Southerners are accused of trying to destabilize the government of President Muhammadu Buhari, a Muslim from the north. The southerners, who are predominantly Christian, have accused politicians backing Buhari of sponsoring the militants as a ploy to militarize their region. Buhari made himself even more unpopular in the south by suspending stipends under a 2009 amnesty program for 30,000 ex-militants who were paid to halt attacks. Buhari’s government last week resumed the payments and said it is negotiating with the Movement for the Emanicipation of the Niger Delta, which negotiated the amnesty. But that group has been denounced as corrupt by the Niger Delta Avengers, a new group responsible for this year’s devastating attacks that have cut oil production by up to 45 percent. It has refused to negotiate without foreign mediation.

Kuwaiti state oil firm says spill strikes onshore oil field (AP) — Kuwait’s state-run oil company says an oil spill has struck an onshore field. The Kuwait Oil Company says in a statement on Tuesday that workers were trying to contain the spill at the Ahmadi field. The company says the spill struck at its BWD-133 drilling rig. The company did not offer any details on how much oil had been spilled or if the spill was ongoing. It said no workers had been injured in the incident. In February, a fire erupted at an oil well in northern Kuwait after an oil spill.  OPEC member Kuwait is a major oil producer. The U.S. Energy Information Administration says Kuwait produces some 2.8 million barrels of crude oil a day and holds the world’s sixth-largest oil reserves.

Oil groups’ optimism shortlived as pressure mounts —When the price of oil rose above $50 a barrel in June, it looked like the worst was over for international oil companies. Few people expected a return to the industry’s $100 a barrel heyday, but steady recovery seemed under way. Two months later, with prices back down to about $45 a barrel, that optimism has been extinguished. The oil majors’ second-quarter results in recent weeks were mostly worse than expected, with sharp drops in profits, rising debts and gloomy outlooks. As well as weak prices of crude oil and natural gas, margins for refined products are also being squeezed, as excess production and high storage rates ripple down  the supply chain. BP said its refining margins in the second quarter were the lowest since 2010. “The glut of crude oil has translated into a glut of refined product,” says Michele Della Vigna, co-head of European equity research at Goldman Sachs. “So the integrated oil majors are getting hit at both ends.” In response, companies are once again reducing spending. Royal Dutch Shell, fresh from its £35bn takeover of BG Group, said capital expenditure this year would be 38 per cent less than the pair jointly invested as standalone companies in 2014. Yet, cost cuts alone are not enough to defend shareholder returns. With the exception of Eni of Italy, all the oil majors have so far maintained their prized dividends — but they have had to increase borrowing to do so.

Why Oil Under $40 Will Bring It All Down Again: That's Where SWFs Resume Liquidating -- After several months of aggressive selling of stocks in late 2015 and early 2016, the culprit for the indiscriminate liquidation and concurrent market swoon was revealed when it emerged that the seller was not only China (which was forced to sell USD-denominated reserves to offset a surge in capital outflows following the Yuan devaluation), but also Sovereign Wealth Funds belonging to oil-exporting countries, who were dumping billions in risk assets to offset the collapse of the price of oil, which in turn exacerbated current account and budget deficits.  Among the prominent sellers was Norway and Saudi Arabia, arguably the biggest casualties of the death of the Petrodollar to date, as well as Abu Dhabi, Kuwait and most other SWFs, listed on the table below. As JPM calculated back in January, the SWF equity selling was inversely proportional to the price of oil: according to the bank, SWF's would liquidate some $75 billion in equities in 2017 assuming oil at $31 per barrel. Needless to say, the lower oil goes, the more selling there would  be.  "This prospective $75bn of equity selling by SWFs in 2016 is not huge but becomes significant after taking into account the potential swing in equity fund flows," JPM continued, in an attempt to discuss the impact this will have on markets. "Last year retail investors bought $375bn of equity funds globally. This year we expect an amount between 0 and $200bn. Subtracting $75bn of selling from SWFs would leave the overall equity flow from Retail+SWF investors barely positive for 2016." No matter the cause, the biggest benefit of this oil surge is that the same SWFs which were actively selling stocks in early late 2015 and early 2016 put their liquidation on hold as oil rose above $40. And in this illiquid, low volume market, the absence of a determined seller is all that it took to push the S&P to all time highs, and as of Friday's close, just shy of 2,200, a level which even sellside brokers such as Goldman believe is effectively in bubble territory and in the 99% percentile of all overvalued metrics.

Of $40 oil and forced SWF selling  - You know who doesn’t like a falling oil price? Sovereign wealth funds for countries dependent on high oil prices and in love with their (endangered) petrodollars.And a risk based on that dislike is a presumption of forced selling and equity market weakness becoming self-fulfilling as/ if oil prices slide. Stable oil prices means SWFs don’t have to suddenly liquidate but the opposite would also seem to be true…The last time JPM’s Flows & Liquidity team looked at this risk they based it on a fall in Brent to an average price of $45 per barrel.They now assume an average oil price of $40 for 2016 and also note that the “YTD average has already fallen to $42.”:In our previous analysis based on a $45 average oil price for 2016, we projected the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$140bn in 2016. This estimate is based on the same sensitivity of the current account balance to the change in oil prices as last year, i.e. between 2014 and 2015. However, the depletion of official assets could be higher than the current account deficit if these countries also experience capital outflows as it happened last year. If we assume $80bn of capital outflow for 2016, the same level as last year, we project a depletion of $150bn in FX reserves and a depletion of $50bn in SWF assets.  If we assume an average oil price of $40 for 2016 instead, using a similar sensitivity analysis and assumptions as described above, we project the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$183bn in 2016. This would imply depletion of $170bn in FX reserves and a depletion of $75bn in SWF assets….A $40 average oil price, and assuming that these reserve managers and SWFs sell in accordance to their average allocation, would imply selling of $118bn of government bonds and $45bn of public equities. If we assume reserve managers and SWFs are mostly done with selling equities and that they are more likely to liquidate fixed-income mandates, this would imply selling of around $120bn-$160bn of government bonds and $10bn-$15bn of corporate bonds. However, should oil prices continue to fall further below $40 on a sustained basis, SWFs would face greater pressure to sell equity mandates, similar to the end of last year and the beginning of this year.

Morgan Stanley Expects Oil To Hit $35 In A Few Weeks: Here's Why -- Morgan Stanley's Adam Longson has been one of the most bearish sellside analysts on oil, and overnight he confirmed he isn't going to change his opinion any time soon, and instead warns that while "a profit taking and short covering bounce in oil late in the week has led some to declare that the troubles are behind us" he believes that "very little has been addressed fundamentally to correct these problems. Greater headwinds lay ahead, especially for crude oil. In fact, we would argue that recent price action and developments may have exacerbated the situation." Putting a number to his call: oil will slide to $35 in the next 1-3 months. The key point in Longson's latest note is a simple, and recurring one: "Fundamental Oil Issues Have Not Been Addressed" and that "Physical market stress due to fundamental headwinds is still ahead."  This is what he says: A profit taking and short covering bounce in oil late in the week (partly on a US gasoline draw driven by lower imports) has led some to declare that the troubles in oil are behind us. However, while the market began to price in some of the headwinds prematurely via flat price, very little has been addressed fundamentally or through physical market indicators to correct the material problems in oil markets. Greater headwinds ahead, especially for crude oil. In fact, we could argue that recent price action and developments may have exacerbated the situation.

• The fall in oil prices has only lifted refinery margins, which should support product oversupply: Refinery margins (p.38-39) are not at a level to cause distress or the large run cuts that will be required, despite lower product cracks. The issue is that lower oil, fuel oil and natural gas prices globally reduce operating costs, while a strong USD has lowered general opex and G&A for Europe and Asia on a relative basis.
• A cut in Saudi OSPs reinforces Asian crude oil demand, which should delay necessary run cuts. Asia and the Middle East were the primary incremental contributors to the oversupply in global gasoline and diesel. Expectations had been for Asia to see economic run cuts, but efforts from oil suppliers to support crude demand and refinery margins reduce that probability. Hence, product markets may need to, and are likely, to deteriorate further before corrective actions are taken.
• Returning supply is a boon to refiners. The crude oil oversupply has shifted more refiners to spot purchases where new distressed cargoes can provide opportunities.
• Refiners are reluctant to capitulate. During earnings season, a number of refiners admitted that run cuts may be needed, but few were willing to make economic run cuts themselves. In fact, the global fall maintenance schedule looks surprisingly light at this point. We expect more maintenance or unplanned outages (e.g. Whiting) ahead.

OPEC bullish on oil demand in H2 2016, says current price slide 'temporary' -  OPEC on Monday sounded an optimistic tone about the oil market, saying that higher demand is expected in the third and fourth quarters. The comments, from Qatar energy minister Mohammed bin Saleh Al-Sada, who serves as OPEC president, are likely to quell any expectations of a production freeze deal in the near future. The recent decline in oil prices "is only temporary," and the result of weaker refinery margins, inventory overhang and the UK's recent vote to leave the EU, Sada said, according to an OPEC news release. With major oil consuming countries seeing their economies improve and winter approaching in the Northern Hemisphere, oil demand will rise in the next two quarters, he continued."This expectation of higher crude oil demand in [the] third and fourth quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil prices would increase during the later part of 2016," OPEC stated. OPEC member countries are scheduled to meet informally on the sidelines of the International Energy Forum in Algeria from September 26-28. The Wall Street Journal on Friday had reported that a production freeze deal could be mooted at that meeting, citing unnamed OPEC delegates, but several analysts are doubtful that such a pact could be agreed.

Oil Rises Despite Supply Glut - Oil rallied Monday as fresh hopes that OPEC members might consider freezing production provided support to the market, despite a continuing glut of crude supply. The Organization of the Petroleum Exporting Countries said Monday that it would hold informal talks at an energy conference in September, renewing beliefs among analysts that the cartel’s members may revisit production freezes this fall. Such a deal could be reached as early as the week of Sept. 26, OPEC delegates told The Wall Street Journal, which could alleviate an oversupply of crude and refined products that has pressured the market in recent months. “The talks are definitely driving the rally right now,” . U.S. crude oil for September delivery settled up $1.22, or 2.9%, to $43.02 a barrel on the New York Mercantile Exchange.  Brent, the global benchmark, rose $1.12, or 2.53%, to $45.39 a barrel on ICE Futures Europe. Chatter about the potential production freeze comes a week after oil entered a bear market, settling more than 20% below its 2016 high. Crude had rallied above $50 a barrel in early June, only to briefly dip below $40 a barrel last Monday as concerns about a glut of oil triggered a market selloff.  Analysts have blamed much of the problem on stubbornly high output. While demand for gasoline in the U.S. has touched record highs, a combination of soaring production by OPEC members in July, Canadian production resuming after temporary outages and signs that U.S. drillers are picking up activity has weighed on oil prices and led analysts to cut their outlook for prices.  While oil climbed in relatively steady trading on Monday, the large global oversupply should keep prices below $45 a barrel.

Oil Spikes On Renewed OPEC Supply Cut Chatter, Just As Hedge Funds Turn Record Short -- Oil prices rose Monday as modestly stronger margins for refiners provided support to the market despite the continuing glut of crude supply. The October contract for global benchmark Brent gained 1.3% to above $45 a barrel, while U.S. counterpart West Texas Intermediate increased 1.4% above $42.50 for September deliveries. Several factors have boosted oil prices over the past three trading days. Among the more trivial ones, Olivier Jakob from Swiss-based Petromatrix was cited by the WSJ noting the improvement in the gasoline crack margin, a technical term for the price difference between crude oil and the figure refiners charge for gasoline, as providing a tailwind for the market. “The gasoline crack [margin] has rebounded and stabilized and this has relieved the pressure on oil prices a little bit,” he said. “That said, he noted that the fundamentals for gasoline hadn’t changed and there was a large global oversupply, which should keep prices below $45 a barrel. However, the key catalyst for today's spike is another convenient report by OPEC, according to which the oil exporting organization will hold informal talks at an energy conference in September, the cartel’s president said Monday, as oil-producing nations worry over a recent downturn in the crude market. OPEC is always discussing ways to stabilize the market, said Qatar’s energy minister, Mohammed bin Saleh al-Sada, who is serving as the 14-nation oil cartel’s president this year.  Of course, oil traders are familiar with OPEC strategy of "leaking" such supply cut reports just as oil is headed for key support levels, aimed largely at headline scanning algos, and so far today the verbal intervention has managed to push oil higher. A similar initiative died back in April during talks in Doha, Qatar, when Saudi Arabia backed out over Iran’s refusal to join in a so-called production freeze until it had reached pre-sanctions levels of oil output. Under the freeze, countries would have agreed to limit their production to certain levels in a bid to raise oil prices by constricting the amount of crude on the market. “OPEC continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market,” Sada said. “Expectation of higher crude oil demand in the third and fourth quarters of 2016, coupled with decrease in availability, is leading the analysts to conclude that the current bear market is only temporary and oil price would increase during later part of 2016,” he added,

Oil Surge Continues As Short Squeeze Accelerates--- Despite a significant build at Cushing (Genscape +300k), tumbling China demand, and Libyan supply, the ever more financialized crude oil market is a oneway street higher of short-squeezing exuberance. As 2015's August explosion plays out again, WTI Crude just broke back to $43 as record shorts suffer... Cushing storage builds... Genscape reports a 310,000 barrel build. Supply is set to rise... Libya has started maintenance work at Es Sider port, the nation’s largest oil export terminal, as part of plans to increase output from Africa’s biggest holder of crude reserves. Exports should resume in a month once official orders are received to reopen the port, Galal Mohamed, head of operations at Waha Oil Co. , said in a phone interview Sunday from Libya’s eastern city of Ras Lanuf. Es Sider, operated by Waha Oil, has been closed since December 2014 when armed groups attacked the port. The state National Oil Corp. has engineers and other workers at the port to evaluate damages and decide when to resume exports, NOC’s Ibrahim Al-Awami said by phone. “We haven’t received official orders to reopen the port and resume exports, but there were intensive meetings with the National Oil Corp. officials last week to discuss this,” Mohamed said. Six of the port’s 19 storage tanks are damaged from fighting over the last two years, he said. And demand is fading... China oil imports dropped to six month lows. China imported 31.07m mt of crude last month, the General Administration of Customs in Beijing says on website. That’s equivalent to 7.35m b/d, lowest since January. But the 'storage-carry' trade remains supportive as despite the drop in contango (flattened curve), the cost of storage has also dropped...

WTI Slides After Unexpected Large Crude Build ---Having rallied from last week's unexpected Cushing draw (seemingly ignorant of the crude build), crude prices faded heading into tonight's API data. With expectations of draws across the board, crude prices tumbled after API reported a surprise build (the 3rd week in a row) of 2.09mm (-1.5mm exp.) - the biggest build in 3 months. Cushing also saw a significant build (while product inventories dropped). API:

• Crude +2.09mm (-1.5mm exp) - biggest in 3 months
• Cushing +1.2mm (-1.3mm exp) - biggest in 3 months
• Gasoline -3.9mm (-1.3mm exp)
• Distillates -1.5mm

This is the 3rd weekly build in a row...

Crude Chaotic As Surprising Builds Battle With Gasoline Draw And Production Cut --Following last night's unexpected build in crude (and Cushing) inventories, DOE data confirmed the surprising build in Crude (+1.05mm - 3rd weekly rise) and Cushing's 1.2mm build is the most in 3 months. Gasoline inventories drewdown less than API reported but Distillates saw an unexpected build. Crude is whipsawing around as the bullish gasoline draw (and production cut) battles with bearishly unexpected builds in Crude, Cushing, and Distillates. DOE

• Crude +1.055mm (-1.5mm exp)
• Cushing +1.16mm (-1.3mm exp) - biggest in 3 months
• Gasoline -2.8mm (-1.3mm exp)
• Distillates +1.15mm

This is the 3rd weekly crude build in a row and Cushing's biggest build in 3 months... but all eyes are on the Gasoline draw (even though it is less than the API print)

Global oil demand to cool, oversupply is ending, agency says (AP) — Global demand for oil will grow less than expected next year due to a weaker world economy, though the oversupply of crude in the market is ending, the International Energy Agency said Thursday. The Paris-based agency, which consults oil-importing nations, lowered its forecast for demand growth next year to 1.2 million barrels a day from 1.3 million barrels a day previously. That would be a slowdown from this year’s growth of 1.4 million barrels a day. However, the agency said in its monthly report that it expects oversupply to have ended in the third quarter of this year, with inventories likely to drop after a long period of increases. That, the IEA said, will “help pave the way to a sustained tightening of the crude oil balance.” The price of oil has fallen in recent weeks, and the international benchmark, Brent, was flat at $44.05 on Thursday. The U.S. benchmark was down 9 cents at $41.62.

Oil up 5 percent as Saudis mull meeting, tighter market forecast | Reuters: Oil prices rose about 5 percent on Thursday after comments from the Saudi oil minister about possible action to stabilize prices triggered a round of buying and the International Energy Agency forecast crude markets would tighten in the second half of 2016. Saudi Energy Minister Khalid al-Falih said OPEC members and nonmembers would discuss the market situation, including any action that may be required to stabilize prices, during an informal meeting on Sept. 26-28 in Algeria. The comments by the minister of the world's top oil exporter triggered fund buying and some short covering, giving a boost to prices, traders and brokers said. Both benchmarks soared more than 5 percent and Brent futures were up $1.89 at $45.94 a barrel by and U.S. crude CLc1 rose $1.76 to $43.47. U.S. refined products futures, including gasoline and distillates jumped after Motiva Enterprises 235,000 barrel per day Convent, Louisiana, refinery was evacuated due to a fire around midday on Thursday. Distillate futures rose to their highest level since July 21 after the news, touching a session high of $1.3934 a gallon. Many traders remain skeptical of the outcome of the meeting, expecting a repeat of the Doha meeting in April when talks fell through after Saudi Arabia backed out, citing Iran's refusal to join in a so-called production freeze.

Oil leaps 5% in best one-day rise since April -- The see-saw in oil prices keeps swinging. Brent crude, the world’s oil benchmark, is enjoying its best day in four months after Saudi Arabia, the world’s oil lynchpin, said it was ready to step in and help stabilise the over-supplied market. A barrel of Brent for October delivery has gained 4.9 per cent at publication time, or $2.17 today, to trade at $46.22 – its highest level since July 27. It is heading for its most impressive one-day rise since the start of April when prices spiked 6.3 per cent. West Texas Intermediate, the US marker, is up 4.87 per cent to $43.74, also climbing to its highest level since late last month. The rally accelerated this afternoon after Khalid Al Falih, Saudi’s energy minister, said the kingdom was ready to work with its non-Opec partners to “help the market rebalance”. His comments from an interview with the official Saudi news agency, which were mistakenly sent to journalists, come after Opec nations said they would be meeting informally at the sidelines of a major commodities conference next month. “Despite the justified consensus that Opec seems dysfunctional, there is room for the cartel to once again change sentiment given the type of outcome that could occur”, said Helima Croft at RBC Capital Markets. The reassurance has helped oil regain its poise after the commodity fell back into bear territory last week. A barrel of Brent had risen to near $52 in July, but fell back below $40 as concerns about bloated gasoline supplies in the US came back to burn investors.

OilPrice Intelligence Report: More Than Just Rumors? Oil Rallies Spectacularly -- Oil prices staged a strong rally on Thursday moving higher by 4.27%. WTI ended the day at $43.67 per barrel while Brent was at $46.04. The rally was due in part to twin optimistic comments from the IEA and the Saudis. The IEA reported that crude production is falling behind demand. At this point that gap is likely to average around 1M barrels per day in Q3, says the IEA. The agency reports "Our balances show essentially no oversupply during the second half of the year." That result is thanks to a combination of sizeable production cuts by non-OPEC producers including US producers, and healthy demand in many parts of the globe. Adding to optimism, in other news, Saudi Arabia energy minister Khalid al-Falih said market forces are already doing their work, but his country is ready to do what it can to further support prices. Venezuelan President Nicolas Maduro is reportedly trying to raise prices to at least $70 a barrel. Maduro announced his plan on TV this week. That plan essentially consists of trying to encourage the Saudis to support prices and rally OPEC producers to hold a new meeting and reach an agreement to freeze production. Bloomberg reports that private equity buyout firms have raised $100B in capital and may finally be ready to put some of that dry powder to work in M&A deals in the energy space. Thus far major buyouts have been few and far between. Carl Icahn who already holds a controlling stake in CVR Energy is reportedly preparing an offer to buy oil refiner Delek Holdings.

 Oil futures surge higher on IEA monthly report, Falih comments - Oil futures rallied Thursday after the International Energy Agency reported global crude demand was outpacing supply and Saudi Arabia's energy minister said his country was prepared to help the market rebalance. NYMEX September crude settled $1.78 higher at $43.49/b. ICE October Brent settled up $1.99 at $46.04/b. NYMEX September ULSD settled 6.65 cents higher at $1.3849/gal. NYMEX September RBOB settled up 6.03 cents at $1.3617/gal. Crude oil inventories should see a "hefty draw" this quarter after a "lengthy stretch of uninterrupted builds," the IEA said Thursday in its latest monthly report.While the IEA's forecast of a tighter crude market helped lift oil futures Thursday, the Paris-based organization cautioned prices will likely face resistance from the large accumulation of crude in storage. "The massive overhang of stocks is also keeping a lid on prices, with both newly produced and stored crude competing for market share in an increasingly volatile refinery margin environment," the IEA said. Moreover, the IEA's revisions to its 2017 outlook for supply and demand compared with last month's report were "clearly bearish," In an interview distributed Thursday, Khalid al-Falih, Saudi Arabia's energy minister, said that the global market was rebalancing, but added that current low oil prices were "unsustainable." OPEC ministers will consider "any possible action that may be required to stabilize the market" when the group meets informally next month, Falih said, according to remarks carried by the Saudi Press Agency.

Crude Spikes To 3-Week Highs After Biggest Surge In Open Interest In 10 Years - WTI is now up 14% from its lows last week, with Sept 2016 trading back above $44.50 at 3-week highs. Oil's rapid OPEC-headline-driven recovery continues...Despite rising inventories (and record production levels in OPEC), the Saudi statement hope remains and prompted the biggest spike in WTI Open Interest since August 2006 yesterday! As Bloomberg notes this is the highest level of aggregate open interest since 2013 with volumes above 1mm for the 7th session in a row. Bloomberg also points out that WTI front month 25-delta skew jumped to iutsmost 'bullish' biased since November... WTI Call vol is highest relative to put vol (demand) since Nov 2015... Of course, that is "probably nothing" but we suspect the last few days sudden spike in prices and aggregate positioning are a little excessive relative to any fundamentals... “The contracts have recovered well but be careful,” PVM Oil Associates director Robin Bieber writes in a note. “The speed and size of the reaction up should make one very cautious at the 34-day MAs. They’ve spoilt plenty of bullish parties before”

US rig count up 17 this week to 481, Texas up 13 (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by 17 this week to 481. A year ago, 884 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 396 rigs sought oil and 83 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Texas gained 13 rigs and Colorado, New Mexico, North Dakota, Ohio and Utah were up one each. California declined by one. Alaska, Arkansas, Kansas, Louisiana, Oklahoma, Pennsylvania, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

 Permian Basin leads big jump in rig count | Fuel Fix: The nation’s oil rig count during the past week saw its biggest jump of the year, and nearly all of the growth came in West Texas’ resilient Permian Basin. The number of rigs actively drilling for oil increased by 15, including 12 just in the Permian, while the number of rigs primarily seeking natural gas grew by two. The total rig count is now at 481 rigs, up from an all-time low of 404 rigs in May, according to data from the Baker Hughes oil field services firm. Of the total tally, 396 of them are primarily drilling for oil. The Permian now accounts for 189 rigs, which equates to 48 percent of all the nation’s oil rigs. The next most active area is Texas’ Eagle Ford shale with just 36 rigs, according to the Baker Hughes data. The Eagle Ford counted more than 100 rigs this time a year ago. Despite this week’s jump, the oil rig count is down 75 percent from its peak of 1,609 in October 2014, before oil prices began plummeting. After dipping below $40 a barrel early last week, the price of crude oil has since rebounded to more than $44 a barrel on Friday. The price of U.S. oil hit a low $26.21 on Feb. 11.

Oil Prices React Stoically On Biggest Rig Count Rise In 2016 - This week’s Baker Hughes figures saw the largest jump in the American natural gas and oil rig count this year. The combined count stood 17 rigs higher than the same count last week, bringing the domestic figure to 481 rigs—a figure that is still 403 below the year-ago rig count. Most of this week’s spike occurred in the oil rig count, which saw a jump of 15. Two new gas rigs went into production as well. The jump came after six weeks of consecutive increases in the U.S. rig count, and could signal a recovering drilling economy despite the continuing pressure on prices.WTI stands at $44.39 at the time of this writing, up 2.07% over yesterday’s close. The data follows last week’s U.S. oil and gas rig count increasing by a single rig, with the oil rig count jumping seven last week, offset by the gas rig count falling by five, and miscellaneous rigs falling by one. Texas was the big winner this week, with 13 extra rigs put into production. Texas is still down 159 rigs over last year, with 230 rigs currently in production. By basin, The Permian Basin added 12 rigs, down 66 from a year ago. Utica, Granite Wash, and Williston also each added rig, while Haynesville and Eagle Ford each lost a rig.

Stranded in Desert, Foreign Labor Is Casualty of Saudi Slowdown - Bloomberg: First they had no pay, and then no work. For a time, there wasn’t even food in the squalid, concrete camps where they had been abandoned to live in the searing heat of the Saudi Arabian desert. Medical supplies dried up two months ago. Owed weeks and weeks of back pay from construction companies squeezed by the kingdom’s economic slowdown, thousands of foreign laborers from South Asia face the grim uncertainty of how long their plight will continue. “They don’t give us any answers about our salaries,” said Mohammed Salahaldeen, a duct fabricator from Bangladesh, As Saudi authorities slash spending and delay payments to contractors to cope with the plunge in oil prices, the austerity is exacerbating the woes of private businesses that have, for decades, relied on government spending for growth. Casualties include the thousands of foreign laborers who helped to keep the economy humming with low-paying jobs in construction. Abandoned laborers, including nearly 16,000 from India and Pakistan alone, according to their governments, haven’t seen a paycheck in about eight months. Under a system of sponsorship known as kafala that leaves many workers at their employers’ mercy, they’re also not being given the exit visas they need to leave the world’s largest oil exporter. In Saudi Arabia, it’s up to employers to arrange such visas, but before doing so they’d have to pay back wages and end-of-service benefits.The conditions in which the workers from Bangladesh, India, Sri Lanka, Pakistan and the Philippines wait are fetid and cramped. They sleep eight to a tiny concrete room and share dirty toilets with feral cats. Temperatures soar to 50 degrees Celsius (122 degrees Farenheit) in the summer, and the electricity powering air conditioners often goes off. Some of the laborers are so destitute that they only own one set of clothes. Mohammed Khan, an Indian nurse from Mumbai at the Saudi Oger camp, is left to treat patients suffering from diabetes, hypertension and high cholesterol without medication. “They can’t go to a hospital because they no longer have insurance,” said Khan, 45. “They have no money.” Workers said Saudi Oger stopped paying their medical insurance policies.

Saudi Economic Woes Leave Indian, Pakistani Workers Stranded - Bloomberg: A total of 7,700 Indians and 8,000 Pakistanis have been stranded, according to tallies provided Tuesday by the foreign ministries in New Delhi and Islamabad. Many were employed by construction companies battered by the downturn in oil prices that began two years ago. As prices plummeted from more than $100 a barrel in 2014 to below $30, the Saudi government cut spending and delayed payments to contractors, who have relied on public contracts for business growth. With Brent still a relatively low $42 a barrel, growth in the Arab world’s largest economy is forecast to slow to 1.5 percent this year, the lowest level since 2009, according to data compiled by Bloomberg. Building projects have fallen off dramatically along with the drop in oil revenue. Construction contracts shrank by about 50 percent in the first quarter from the same period a year earlier, according to data published by Jeddah-based National Commercial Bank. The government didn’t award any contracts during the first quarter in 2016 or the fourth quarter of last year, the bank said.  More than 4,050 workers from Saudi Oger, a Riyadh-based construction and management company, are stranded, according to the Indian Foreign Ministry. The Indian Embassy is providing food to workers in 20 camps in Riyadh, Jeddah and Dammam, the ministry said. India’s government also sent a top diplomat, Vijay Kumar Singh, to Saudi Arabia to assist stranded workers. Pakistani Prime Minister Nawaz Sharif said his government will help the stranded workers “in all possible ways.” Summer temperatures can climb above 50 degrees Celsius in Saudi Arabia, worsening the plight of the workers.

Oil Income Falling, Saudi Arabia Raises Government Fees and Fines —Saudi Arabia, faced with dwindling oil income, has sharply increased government fees such as visa charges as part of a range of measures aimed at raising revenue from non-oil sources. Under the new rules approved by the Saudi government, foreigners will have to pay $800 for a six-month visa, six times the current cost. The government also announced hefty fines for traffic violations that include drifting, a practice that involves intentionally skidding and spinning at high speed—a popular pastime for men in a country that notoriously lacks entertainment options. First-time violators will face fines of 20,000 Saudi riyals ($5,332). It also more than tripled the fees it charges to advertise on billboards. In an era of cheap energy prices, Riyadh is pushing to overhaul its oil-dependent economyby asking its citizens as well as foreigners to do more to help fill state coffers. The visa-fee increases, which will come into force in October, will mostly affect foreigners who regularly travel to the kingdom for work. A two-year, multiple-entry visa, for instance, will typically cost 8,000 riyals. The increase in visa fees alone, however, will do little to help make up for the two years of low oil prices that have strained the country’s finances, resulting in last year’s record budget deficit of around $98 billion. “It’s about the message,” “It underscores the idea that the government is trying to hike fees on different activities, whether it is visas, water or electricity.” The government’s target is ambitious: It wants to more than triple its non-oil revenue from 163.5 billion riyals at present to 530 billion riyals by the end of 2020. Riyadh already cut spending and raised the domestic cost of utilities such as water, fuel and electricity. It also announced plans to reduce the amount of money it spends on public sector wages by 5% through measures that include gradually shrinking the size of the civil service.

Saudi Arabia tells OPEC it pumped record high of 10.673 mil b/d of crude oil in Jul - Oil | Platts News Article & Story: Saudi Arabia, has told OPEC it pumped a record high of 10.673 million b/d of crude oil in July, up by 123,000 b/d from the previous month, the oil producer group's monthly oil market report showed Wednesday. Analysts told S&P Global Platts that production in July had risen as the country's internal use of crude in power stations climbed significantly this summer as temperatures have continued to rise, increasing power demand for air-conditioning. A steady climb in its July crude oil exports was another factor, they added.These figures are in line with the country's market share strategy, which shows no signs of abating. The previous high for OPEC's largest producer was in June last year when it produced 10.564 million b/d, according to data from the Joint Organizations Data Initiative, a transparency initiative linked to the Riyadh-based International Energy Forum, which go back to January 2002. "Last year we saw a fall in exports in Saudi Arabia in July compared to June. But this July, exports are up sharply [compared to the previous month]," said an oil analyst, speaking on condition of anonymity. The July figure submitted directly by Riyadh, is 196,000 b/d higher than OPEC's own secondary source-derived estimate of 10.477 million b/d.

Saudi Oil Output Sets Record Despite Global Glut  -- The fight for market share among the world’s biggest oil producers is still raging, pushing output from OPEC members close to an all-time high in July and suggesting the group isn’t yet seriously considering a meaningful curtailing of production. Output by Saudi Arabia, OPEC’s key member, reached a high last month, as part of a broader ramp-up by the Organization of the Petroleum Exporting Countries, according to OPEC data published Wednesday. Led by the kingdom and Iraq, OPEC members’ July crude production rose by 46,000 barrels a day from June, to 33.11 million barrels. The increasing level of OPEC production, combined with the latest U.S. data, shows that the global oil market remains oversupplied. U.S. crude-oil futures for September delivery fell $1.06, or 2.5%, at $41.71 a barrel on the New York Mercantile Exchange on Wednesday after the Energy Information Administration said that domestic inventories of crude oil and petroleum products rose last week to a record. Oil markets have gyrated in recent days. OPEC, which controls more than a third of the world’s oil supply, on Monday announced it would hold informal talks in Algeria next month, after which the market rallied briefly—but then gave back all those gains. Analysts say that an OPEC deal to freeze output growth might be easier to achieve on paper, since nearly all producers are pumping flat-out already and can’t likely produce more. But such an agreement wouldn’t change the underlying dynamics between supply and demand.

Hike in Saudi Arab Extra Light crude oil supply to weigh on Murban, DFC: traders - Oil | Platts News Article & Story: Saudi Arabia plans to increase production of Arab Extra Light crude in coming weeks, which could translate to weaker spot differentials for similar grades in the Middle East, market participants said Friday. Industry sources had said earlier this month that the production of Arab Extra Light crude was expected to rise by about 200,000 b/d from September, though Saudi Aramco could not immediately be reached for comment. "[Saudi Aramco's] October supply volumes [of Arab Extra Light] to term lifters would be increased... or perhaps some term customers may want to lift additional volumes if the incremental cost is lower than what they would have to pay to grab additional [light sour crude] barrels in the spot market," said a North Asian sour crude trader with knowledge of allocations in Saudi Arabian term crude liftings. The talk of higher Saudi output emerged soon after Saudi Aramco slashed the September official selling price differentials for its crudes bound for Asian buyers early in the month.At the start of the month, Aramco cut the OSP of its Arab Light crude loading in September and bound for Asia by $1.30/b, making it the lowest price since January. The September OSP of Asia-bound Arab Super Light crude was cut by 80 cents/b from August and Extra Light by $1.60/b. Market participants said Aramco's bigger-than-expected OSP cuts and the planned fourth quarter output increase suggested that the major Middle Eastern producer was stepping up efforts to remain price competitive in order to appeal to Asian end-users and fend off competition from Europe's North Sea crude suppliers amid a narrowing Brent-Dubai spread.

Saudi Arabia Needs To Cut Oil Production (Video) -- The bottom line is that the only way the oil market rebalances in the near future is if Saudi Arabia cuts Oil Production. They are realistically the only party that can pull this production cut off right now.

What If Saudi Arabia Collapses? « LobeLog: The Saudis are entering a period of immense uncertainty as the kingdom moves forward with the National Transformation Plan (NTP) and Vision 2030 announced by Deputy Crown Prince Mohammed bin Salman (MBS) in April. Vision 2030 aims to streamline the bloated state bureaucracy, increase private sector investment, and curb youth unemployment in order to end the kingdom’s dependency on oil.  Although many Arab states faced mounting protests and calls for political liberalization during 2011’s Arab Spring, Saudi Arabia maintained relative peace and stability. However, changes to the kingdom’s socio-economic system could lay the groundwork for similar dissent by sparking demands for social and political reforms while undermining Saudi cohesion.To reduce Saudi Arabia’s budget deficit, Vision 2030 calls for a phased reduction of the subsidies offered to Saudi nationals and promises to increase private sector employment. If economic growth and job creation fail to meet expectations, discontent could catalyze demands for liberal political reforms that will require serious input from the kingdom’s clerics. Saudi Oger’s bankruptcy and expat layoffs may be a sign of labor shedding that is required system wide. According to Saudi economist Fadl al-Boainain, “declining corporate profitability has made the foreign workforce a target for managements seeking to cut fixed financial obligations.” In January, a Saudi businessman speculated that by the end of 2016 one million expats may leave the country given the financial squeeze stemming from plunging oil prices.However, successful implementation could also trigger demands for greater reform from a rising capital class that is less economically dependent on the state.

OPEC bullish on oil demand in H2 2016, says current price slide 'temporary' -  OPEC on Monday sounded an optimistic tone about the oil market, saying that higher demand is expected in the third and fourth quarters. The comments, from Qatar energy minister Mohammed bin Saleh Al-Sada, who serves as OPEC president, are likely to quell any expectations of a production freeze deal in the near future. The recent decline in oil prices "is only temporary," and the result of weaker refinery margins, inventory overhang and the UK's recent vote to leave the EU, Sada said, according to an OPEC news release. With major oil consuming countries seeing their economies improve and winter approaching in the Northern Hemisphere, oil demand will rise in the next two quarters, he continued."This expectation of higher crude oil demand in [the] third and fourth quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil prices would increase during the later part of 2016," OPEC stated. OPEC member countries are scheduled to meet informally on the sidelines of the International Energy Forum in Algeria from September 26-28. The Wall Street Journal on Friday had reported that a production freeze deal could be mooted at that meeting, citing unnamed OPEC delegates, but several analysts are doubtful that such a pact could be agreed.

 OPEC oil ministers to meet informally in September (AP) — OPEC has announced that oil ministers of the 14-nation organization will meet in September, well ahead of their previously scheduled November meeting. Monday’s announcement notes that the meeting will be “informal.” Still, it is unusual for the Organization of the Petroleum Exporting Countries to come together at the ministerial level outside of their regularly set gatherings. OPEC headquarters in Vienna says the meeting will be held in Algeria on the sidelines of the 15th International Energy Forum grouping 75 fossil energy producing and consuming countries as well as transit nations for oil and gas. The cost of a barrel of oil has been generally stuck in a range between $40-$50 a barrel for more than a year, less than half of what a barrel fetched three years ago.

Russia Dismisses OPEC Rumors, But Is Ready To Talk | OilPrice.com: Right now Russia sees no grounds for resuming talks to put a freeze on crude production, but is open to join discussions if OPEC members raise the issue, Russia’s Energy Minister Alexander Novak told reporters on Monday. “A basis for this has yet to develop, considering prices are still at more or less normal levels,” Bloomberg quoted Novak as saying. Should prices drop, the need for discussion is most likely to arise, the minister noted. After the crude prices had dropped to 12-year-lows at US$26 in February, all eyes were riveted on the April meeting in Doha for clues whether OPEC would cap production in a bid to lift off oil prices. The Doha talks collapsed with no deal in sight when Saudi Arabia insisted that any deal must include Iran, which of course, Iran never agreed to, just having been relieved of several years of oil sanctions. Last week, Venezuela had informal talks with OPEC officials to discuss ways to boost the oil prices. On Monday, Qatar’s Minister of Energy and Industry and current OPEC President, Mohammed Bin Saleh Al-Sada, said in an official OPEC press release that an informal meeting of OPEC member countries was slated to take place on the sidelines of the 15th International Energy Forum in Algeria between September 26 and 28, 2016, but OPEC’s official statement abstains from referring to any talks on an oil price freeze. Mr Al-Sada commented instead on the recent decline in crude prices, saying the market volatility was “only temporary” and that higher demand in the third and fourth quarters would support oil price increases later in 2016.

Oman Refuses To Attend Algeria Oil Producer Meeting, Leaving OPEC Oil "Plan" In Limbo -- Having briefly dipped under $40, oil quickly rebounded over the past few days after the now traditional rumors of an "imminent" OPEC oil supply cut re-emerged, with the catalyst this time supposedly being the informal meeting set to take place next month in Algeria. Alas, this "plan" to push the price higher appears to have just suffered a terminal setback after Oman announced it would not participate in a meeting of oil producers and consumers in Algeria next month "as it is disappointed by the group's failure to address the issue of low oil prices" the Minister of Oil and Gas Mohammad bin Hamad al-Rumhy said on Wednesday, cited by Reuters. The International Energy Forum, which groups producers and consumers, is due to meet on Sept. 26-28 in Algiers. Qatar said on Monday that OPEC members had agreed to hold talks on the sidelines, which served as a substantial upside catalyst to WTI and Brent. Alas, any credibility OPEC may have left evaporated when Oman, a small non-OPEC oil producer, said that it doesn't "see the point of continuing to be part" of the group, Rumhy told Reuters in an interview in Muscat.

Iraq's Deal With Oil Majors Could Crush OPEC's Output Freeze Plans -  Iraq and oil majors BP, Shell, and Lukoil have agreed to resume investments in oil fields the foreign groups are developing, which is expected to raise the country’s crude output by 250,000-350,000 barrels per day in 2017, Reuters reported on Thursday, quoting Iraqi officials - a move that has the potential to aggravate the supply glut and muddy the waters of the additional OPEC meeting in September, which some were glass-half-fulling might end with a production cap of some sort. The recently reached accords actually push projects that the companies had originally planned for the first half of 2016 to the second half. The projects had been previously put on hold due to the low crude prices. BP, Shell and Lukoil have agreed to spend in the second half this year around half the budgets they had planned for 2015, Reuters said, citing documents it has seen. BP will be spending US$1.8 billion at the Rumaila field, Shell will spend US$742 million, and Lukoil - US$1.08 billion. “Many vital projects that foreign firms were forced to halt due to lower oil prices will be brought online after the recent budget cuts agreements,” Basim Abdul Kareem, the deputy chairman of South Oil Co, told Reuters. Iraq approves every year the investments of foreign companies to develop its oilfields, and repays the companies with the proceeds from exporting crude from existing fields. Since the oil prices crashed, however, the country has seen its coffers depleting, and it is struggling to pay, especially after big spends on fighting ISIS in the north. In early 2016, oil majors started scrapping investments for this year at some of Iraq’s fields in the south. Most of Iraq’s largest oilfields are located in the south.

Israel ordered to pay Iran $1.2 billion - The Swiss Supreme Court in Lausanne has ordered the Israel-controlled Trans-Asiatic Oil Company to pay a debt of $1.2 billion to Iran's national Oil Company. According to Global Arbitration Review, which published the Swiss court’s ruling, Iran’s oil company has been removed from the sanctions regime, so there is no legal obstacle to paying it any money. On June 27, the court directed Trans-Asiatic to pay the Iranians 250,000 Swiss francs (about 1 million shekels, or $260,000) of the monies that have been deposited with the court, and another 200,000 francs in court costs. Trans-Asiatic appealed, and lost, saddling the company with a heavy fine. The lost appeal is the latest skirmish between Israel and Iran over an oil transporting and marketing partnership the two countries formed before the 1979 Islamic Revolution. The partnership had two parts: the Eilat-Ashkelon pipeline, which operated overland to stream Iranian oil from the Red Sea to the Mediterranean, and Trans-Asiatic Oil Ltd (TAO), which was registered in Panama, operated out of Tel Aviv, and ran a fleet of tanker ships and marketing channels to sell Iranian oil to Europe. The partnership, signed in 1968, lasted only 11 years. In 1979, after the Islamic Revolution, Iran cut off all ties with Israel. Despite the diplomatic cold shoulder, Iran still faced off with Israel in three different legal procedures, in an attempt to glean money for the oil it forwarded to Israel on credit before the revolution, for the value of their half of the partnership. The total disputed sum is in the ballpark of $7 billion. Since the Iranian oil company has been formally separated from Iran, global financial sanctions don't apply to it.

Post Coup: Gazprom Still Eager To Complete Turkish Stream -- On June 27, Russian President Vladimir Putin received a letter from President of Turkey Recep Tayyip Erdo?an, expressing Turkey’s willingness to restore ties with Russia (Kremlin.ru, June 27). Immediately, Gazprom spokesperson Sergey Kupriyanov announced his company’s openness to dialogue with Ankara on the construction of the “Turkish Stream” natural gas pipeline (RT, June 27). Turkish Prime Minister Binali Y?ld?r?m also expressed Ankara’s support for the project (Sputnik News, July 15). Russian Deputy Prime Minister Arkady Dvorkovich said that Turkey confirmed its willingness to resume dialogue with Russia on the construction of Turkish Stream (News.az, July 26). Gazprom’s Deputy CEO Alexander Medvedev said that the establishment of a working group on project implementation was agreed and the intergovernmental agreement can be signed when Putin and Erdo?an meet in St. Petersburg later this August (TASS, July 26). The construction of Turkish Stream under the Black Sea to the Turkey-Greece border was announced during Putin’s visit to Turkey in 2014 and endorsed by a Memorandum of Understanding (MoU) between Turkey’s BOTA? and Russian Gazprom (Kremlin.ru, Gazprom.com, December 1, 2014). However, the two sides failed to sign an intergovernmental agreement. No permission was granted for offshore construction in Turkey’s waters—only for engineering and surveying (Oxfordenergy.org, February 2016). Although Gazprom had earlier agreed to a 10.25 percent price discount for BOTA?, that agreement was not fulfilled. Therefore, BOTA? brought a suit against Gazprom at the International Arbitration Court. Russia wanted to link the “price discount” with “pipeline implementation” (as a prerequisite to Turkish Stream), but Turkey wanted to treat both separately (Hurriyet Daily News, September 11, 2015;Independent Turkey, March 20). In September 2015, Gazprom announced it agreed with the Turkish partners that they would only be working on the first line (between Russia and Turkey) of Turkish Stream, reducing the pipeline’s total capacity from 63 billion cubic meters (bcm) per year down to 32 bcm (Novinite, September 7, 2015; Interfax, October 8, 2015). After the November 24 “jet incident” (see EDM, December 3, 2015), Russia’s Energy Minister Alexander Novak announced the suspension of further negotiations over Turkish Stream (RT, December 2, 2015).

Obama Expands the ISIS Bombing Campaign to a 4th Country, the Media Barely Notice --The Obama administration announced on Monday the beginning of US air strikes in Libya against ISIS targets, marking the fourth country the United States is currently bombing with the goal of “degrading and destroying” the terror group. A campaign that began two years ago this Sunday has now, 50,000 bombs and 25,000 dead ISIS fighters later, expanded to a whole new continent.  You’d hardly notice, however, if you followed US media.  The New York Times didn’t even find the news important enough to give it a front-page headline, instead relegating it to a quick blurb at the far-bottom corner of the page, next to a teaser about the G train “having a moment.”  Even many center-left outlets barely touched on the massive mission creep. To give some perspective, Slate, Mother Jones, and Buzzfeed News all ran more stories about Trump’s dust-up with an infant than they did on what was effectively the start of a new war. ABC World News Tonight mentioned the Libyan air strikes for only 20 seconds, 13 minutes into the show, and NBC Nightly News didn’t mention the air strikes at all. The president’s announcement that the United States is bombing a new country has become entirely banal.  This is by design. Obama’s “frog in boiling water” approach to war removes a clear deadline, thus stripping his use of military force of the urgency of, say, Bush’s “48 hours to get out of Baghdad” Gary Cooper approach.  Meanwhile, an anti-ISIS bombing campaign that began as “limited,” “targeted” air strikes in Iraq two years ago expanded to Syria six weeks later, to Afghanistan in January of this year, and to Libya this week. Combat troops and special forces have also crept into play, with US military personnel first appearing in Iraq and Syria in 2014, 2015, or 2016, depending on how one defines “boots” and “ground.”

 Libya, not Syria, is now the frontline in the war against Isis -- On Wednesday, Italy agreed to “positively consider” any US request to use Italian airspace and airbases for bombing missions against Isis in Libya. The move follows a series of US air strikes against Isis militants in the Libyan coastal city of Sirte on Monday. That action – which President Barack Obama declared as in the “vital national interests” of the US – is anticipated to be the first move in a sustained international offensive against Isis outside of Iraq and Syria. The US strikes were conducted after a request from the UN-backed Libyan Government of National Accord (GNA). While the attack is not the first time that US warplanes have bombed Isis in Libya (a training camp in Sabratha was attacked in February), Monday’s move could prove more significant because it signifies a deepening of Western commitment to the Libyan administration – militarily, politically and economically. At a time when the GNA is trying to restore order in the country, there are growing concerns that Isis may be establishing a stronghold in Libya. US intelligence, for instance, estimates indicate the number of Isis fighters in the country has doubled to between 4,000 and 6,000 in the last 12-18 months, with growing evidence that a significant number of these terrorists are travelling from Iraq and Syria where – because of offensive operations from the 66 member coalition forces – Isis fighters are now believed to be at the lowest levels for at least two years.

Pentagon acknowledges US ground forces supporting ISIS fight in Libya | TheHill: The Pentagon acknowledged Wednesday that a "small number" of U.S. forces are going in and out of Libya in support of an expanded air war against the Islamic State in Iraq and Syria. "As with any military operation supporting another force, coordination and synchronization of effort is essential. To that end, a small number of U.S. forces have gone in and out of Libya to exchange information with these local forces in established joint operations centers, and they will continue to do so as we strengthen the fight against [ISIS] and other terrorist organizations," said Deputy Defense press secretary Gordon Trowbridge. Those forces are based in joint operations rooms, away from the forward line, to facilitate coordination among Libyan forces fighting ISIS, he said. The Pentagon announced on Aug. 1 that it had expanded its air war against ISIS into Libya, where its fighters have established a foothold in Sirte. At the time, defense officials said there were no U.S. forces on the ground supporting the air operations, but did not deny there were U.S. forces on the ground there. The acknowledgement came after The Washington Post on Tuesday reported that U.S. special operations were "providing direct, on-the-ground support for the first time to fighters battling" ISIS in Libya.

Obama releases drone strike 'playbook' - President Barack Obama has to personally approve the killing of a U.S. citizen targeted for a lethal drone strike outside combat areas, according to a policy Obama adopted in 2013. The president also is called upon to approve drone strikes against permanent residents of the U.S. and when "there is a lack of consensus" among agency chiefs about whom to target, but in other cases he is simply "apprised" of the targeting decision, the newly-disclosed document shows. The presidential policy guidance on drone strikes, often called the drone "playbook," was disclosed in an edited form Friday night in response to a Freedom of Information Act lawsuit brought by the American Civil Liberties Union. When Obama approved the guidance in May 2013, the White House issued a fact sheet about the policy,  about the policy, but declined to release the document itself—even in a redacted form. However, a series of decisions from a federal appeals court in New York and from lower court judges have made it more difficult for the government to withhold legal and policy documents when many of the details in them have been disclosed elsewhere, such as in speeches or press releases.In February, a federal judge in New York demanded to see the policy guidance and related documents in her chambers as part of the ongoing ACLU suit. A few days later the government advised the court that officials had already been engaged in "lengthy" deliberations about releasing the document and had recently decided to do so.

Are There Any Limits on Obama’s Drone War, Really? -- Marcy Wheeler -- Early in his second term, President Obama set out to create a Rule Book that would provide some semblance of legal oversight over his administration’s drone program, which in the previous four years had become the administration’s preferred method of targeting suspected terrorists in remote regions of Pakistan, Yemen, and elsewhere. Sometimes dubbed the “Disposition Matrix,” news articles about the Rule Book offered tidy flow charts of how a suspected terrorist would go from “suspect” to “dead”—or, less realistically, “captured.”  Obama announced the formalization of the Rule Book—now dubbed the Presidential Policy Guidance (PPG)—in May 2013. It was partly a response to critics who said the administration was essentially conducting extrajudicial killings, with no rubric by which to judge whether it was staying within the bounds of international law. Obama explained that after four years of drone war without such formal rules, he was now “insisting upon clear guidelines, oversight, and accountability that is now codified in Presidential Policy Guidance.”  It took three more years and a lawsuit before, on Friday, the administration finally released a copy of the PPG to the ACLU in response to a Freedom of Information Act request. While some of the policy promises in the document are laudable, the document, in a structural sense, doesn’t seem to add the oversight to the war on terror that Obama promised back in 2013. Indeed, it seems designed not to.  As Obama did in his 2013 speech, the PPG lays out certain standards for dealing with terrorist targets overseas. It applies to capture operations and lethal strikes—presumably including those done without a drone or other airstrike—outside areas of active hostility, like Afghanistan and Iraq. Most of these standards stem from legal requirements; for example, that “direct action will be taken only if there is near certainty that the action can be taken without injuring or killing non-combatants.” (Though even in this instance, there’s nothing unredacted in the PPG that answers all the questions about who gets counted as a non-combatant.) At that level, the PPG simply says: Follow the law.

Hundreds More 'Non-Boots-On-The-Ground' American Troops Are Being Deployed To Iraq --Adding to the ever-growing number of US ground troops in the “no boots on the ground” war in Iraq, Anti-War.com's Jason Ditz notes, Army officials announced yet another significant deployment from the 2nd Brigade Combat Team of the 101st Airborne Division, from which some 400 troops will be sent to Qayara, just south of Mosul. The idea is that the troops will be part of the logistics effort to prop up the Iraqi military in Nineveh Province, with an eye toward them eventually attacking Mosul, though there is no timeline for when such an offensive will begin, and Pentagon officials have gone on record doubting Iraq’s military is anywhere near ready for such an attack. Officials at Fort Campbell say the troops were part of a “Strike Ready Force” which had been pre-trained and prepared to go to Iraq “at a moment’s notice,” suggesting that the continued escalation of the US ground force in Iraq is being planned well ahead of actually announced deployments.

The US is hiring military contractors for operations in Syria -- In an obscure yet publicly available report, the Pentagon has for the first time indicated that it was hiring military contractors for operations in Syria. In an investigation from The Daily Beast, the nearly 300 US troops already present in Syria would be receiving “intelligence analysis services” from Six3 Intelligence Solutions Inc., a privately held defense contractor based out of McLean, Virginia. This $10 million contract would place an unknown number of contractors in various countries, including Syria.  According to The Daily Beast, neither the Pentagon nor Six3 Intelligence Solutions would elaborate further on the type of services or other relevant information on the subject.  Details on Six3 Intelligence Solutions also remain scant; however, Georgetown University professor and former contractor Sean McFate provides some insight.  “This is no ordinary contractor… Six3 Intelligence Solutions is a private intelligence company, and the fact that we outsource a good portion of our intelligence analysis creates a strategic dependency on the private sector to perform vital wartime operations,” McFate explained to The Daily Beast.

Why Is the Pentagon Hiding the Number of Troops in Iraq and Syria? --It has been more than two years and 14,000 coalition bombings since President Barack Obama launched his open-ended war against ISIL under the dubious authority of a 15-year-old law authorizing military attacks. As the mission creeps to Libya, where military officials say there is “no end point” in sight, the Pentagon is refusing to disclose how many U.S. troops are currently deployed to Iraq and Syria. The military does reveal the “force management level,” or full-time troops deployed to Iraq and Syria. According to a June 2016 statement from the White House, “The Force Management Level for U.S. Armed Forces in Iraq currently is 4,087. The Force Management Level for U.S. Armed Forces in Syria is 300.” Yet, journalist Kristina Wong reported Thursday for the Hill that a Central Command spokesman acknowledged “that some troops that temporarily deploy aren’t counted”—and this number could be far higher. According to Wong’s reporting, defense officials are making the conscious choice not to reveal the final tally of U.S. troops in Iraq and Syria. “There’s been a decision made not to release that number,” spokesperson Army Col. Steve Warren told reporters in March. Since Warren made that statement, the Hill’s repeated requests for exact numbers have been rejected. Any final tally of U.S. forces would have to include the droves of U.S. contractors in Iraq and Syria, exact number unknown. The Pentagon revealed in late July that Six3 Intelligence Solutions—which is now owned by CACI International—won a windfall $10 million no-bid contract from the Army for “intelligence services” in Syria. CACI International faced global condemnation for its role in torturing and dehumanizing people held captive at the notorious Abu Ghraib prison in Iraq. According to Wong’s calculations, “the total amount of troops and Defense Department personnel involved in the [ISIL] fight could be anywhere from to 8,252 to 10,152.” This is well above the “FML” estimates officially provided by military officials.

 ISIS Hits Largest Oil Field in Kirkuk, Kills Five | OilPrice.com: Islamic State fighters have killed five people in an attack on the largest oil field in Kirkuk, Bas Hassan, and have attempted to take down a gas compression station nearby as well, where they planted bombs after killing four guards. The fifth victim was an engineer working at Bas Hassan, media report, citing Iraqi and Kurdish sources. However, ISIS itself has so far not claimed responsibility for the attack. Sources from the Kurdish military forces, the Peshmerga, said that the attack on the gas station was neutralized and that three of the four ISIS terrorists involved in the double hit were killed, one of them managing to blow himself up, causing explosions in oil storage tanks at Bas Hassan. The fourth one escaped. There have been suggestions that the attackers belonged to a sleeper cell based in the oil-rich region of Kirkuk in northern Iraq. Bas Hassan is the largest oilfield in Kirkuk and contributes around a third of the oil exports of the Kurdistan Regional Government, which has been locked in an unofficial dispute over the oil-rich province with the central government in Baghdad since the removal of Saddam Hussein. Multi-ethnic as it is, Kirkuk has been hard to win for either Baghdad or Erbil, the center of the Kurdistan government. It seems, however, that a large portion of the population would back a referendum on where it belongs, which could see it become even more closely affiliated with Kurdistan than with Iraq, as Oilprice wrote back in April.

ISIS Releases Photos Of Latest Batch Of Captured US Weapons --Over the weekend, militants linked to Islamic State released photos that purport to show weapons and equipment that belonged to American soldiers and were captured by the group in eastern Afghanistan. The photos, which came to light on Saturday, show an American portable rocket launcher, radio, grenades and other gear not commonly used by Afghan troops, as well as close up views of identification cards for a U.S. Army soldier, Specialist Ryan Larson. In an emailed statement, Brig. Gen. Charles Cleveland, the deputy chief of staff for the U.S.-led mission in Afghanistan, said the soldier had not been captured and is currently with his unit.However, contrary to report that the soldier may have been captured by ISIS, the U.S. military command in Kabul denied any such suggestion, saying he "has been accounted for and remains in a duty status within his unit." American special operations troops have been fighting alongside Afghan forces in a renewed offensive against militants who claim allegiance to Islamic State in Nangarhar Province, which borders Pakistan.  There was less clarity about where the supposedly US weapons came from. The website that published the photos speculated that the equipment and weapons were left behind during that engagement, but Flesvig said American officials are still trying to determine exactly when and how it was lost.

Lopsided Peace Talks Collapse, Saudis Resume Bombing Yemen and U.S. Sells More Weapons -- The Pentagon announced an additional $1.15 billion in weapons sales to Saudi Arabia this week, even as a three-month cease-fire collapsed and the Saudi-led coalition resumed its brutal bombing campaign of the Yemen capital Sana.  The U.S. has already sold more than $20 billion in weapons to Saudi Arabia since the war began in March 2015, defying calls from Human Rights Watch and Amnesty International to cut off support. The Saudi-led coalition is responsible for the majority of the 7,000 deaths in the conflict, which has left more than 21 million people in need of urgent humanitarian assistance. Saudi Arabia has been accused of intentionally targeting homes, factories, schools, markets, and hospitals. On Tuesday, the coalition targeted and destroyed a potato chip factory, killing 14 people (see top photo). The Yemeni press has since reported that coalition has conducted hundreds more airstrikes across the country, killing dozens of people.The Saudi-led coalition started bombing Yemen several months after Houthi rebels overran the capital and forced the U.S.- and Saudi-backed dictator, Abd Rabbuh Mansur Hadi, into exile. Saudi Arabia has demanded the return of their preferred ruler, calling the rebel group a “coup militia.” Tuesday’s bombing comes after months of negotiations failed to reach a peace deal between Saudi Arabia, the Houthis, and Yemen’s exiled government. Both the Saudi regime and exiled Yemeni government were quick to place blame on the Houthi rebels, who rejected a U.N.-brokered peace deal.

US Approves Sale Of 130 Abrams Battle Tanks, 20 Armored Vehicles To Saudi Arabia For $1.2 Billion -- Over the years, Saudi Arabia has emerged as the biggest donor to the Clinton Foundation, having donated between $10 and $25 million.  And just in case there is still any confusion what the quid to that particular "pro quo" is, moments ago we got another answer when Reuters reported that the U.S. State Department has approved the potential sale of more than 130 Abrams battle tanks, 20 armored recovery vehicles and other equipment, worth about $1.15 billion, to Saudi Arabia, the Pentagon said on Tuesday. The approval for land force equipment comes at a time when Saudi Arabia is leading a war in Yemen in support of forces, loyal to the exiled government of President Abd-Rabbu Mansour Hadi, who are trying to oust Iran-allied Houthi forces from the capital, Sanaa. The coalition's air strikes have come under repeated criticism for killing hundreds of civilians. The U.S. Defense Security Cooperation Agency, which oversees foreign arms sales, said that General Dynamics will be the principal contractor for the sale, adding it would contribute to U.S. national security by improving the security of a regional partner. "This sale will increase the Royal Saudi Land Force’s (RSLF) interoperability with U.S. forces and conveys U.S. commitment to Saudi Arabia's security and armed forces modernization," the agency said in a notice to lawmakers posted on its website.

Saudi Losses in Yemen War Exposed by US Tank Deal - The U.S. State Department says Riyadh can buy 153 Abrams tanks, 20 of which will replace ones destroyed in combat. The U.S. State Department and Pentagon Tuesday OKed a $1.2 billion sale of 153 Abrams tanks to Saudi Arabia Tuesday. But that’s not the real news. Turns out: 20 of those tanks, made in America by General Dynamics Land Systems, are “battle damage replacements” for Saudi tanks lost in combat. Even though the formal announcement of the sales does not say where the tanks were fighting,  the Saudi military is believed to have lost some of its 400-plus Abrams tanks in Yemen, where it is fighting Iranian-backed Houthi separatists. This revelation was tucked inside a benign Pentagon announcement of the deal, one that for the most part reads just like dozens of other arms sales approved each year. The announcement does not even mention the conflict in Yemen, yet it gives a glimpse into this wildly underreported war between Arab states, the U.S., and the Houthis. While the secretive Saudi government has not formally disclosed its battles losses from its 16-month involvement with its neighbor’s civil war, videos posted on YouTube purport to show rebels blowing up Abrams tanks with Iranian-made rockets. A year ago, Houthi fighters reportedly destroyed two Saudi Abrams and captured others. In February, Iran’s state-run Fars News Agency reported that five more tanks had been destroyed. The deal approved by the U.S. government this week also includes 20 armored recovery vehicles, which are used to fix broken or damaged tanks on the battlefield.

 Iranian-Russian Pressure on Turkey Over Syrian Crisis - Iran’s Foreign Minister Mohammad Javad Zarif will hold talks with Turkish officials in Ankara on Friday, joining a Russian initiative to change Turkey’s approach to the Syrian civil war. Before travelling to Ankara, Zarif spoke by phone with Russian counterpart Sergei Lavrov “on issues of regional and international significance”, according to Iranian State media. The Russian Foreign Ministry said the discussion included “the issue of external support for [a] Syrian settlement. On Tuesday, as part of a reconciliation following the Turkish downing of a Russian warplane last November, President Recep Tayyip Erdoğan met Vladimir Putin in Moscow. The following day, Turkish Foreign Minister Mevlut Cavusoglu said Foreign Ministry, military, and intelligence officials will travel to Russia on August 16 for discussions about the Syrian conflict. Cavusoglu said the meeting in St Petersburg will be followed by talks between higher-level officials: “We are building a strong mechanism with Russia regarding Syria; we think alike on the ceasefire, humanitarian aid and a political solution.” However, the Turkish diplomacy does not appear to be a capitulation to Russia’s essential support of the Assad regime, but an attempt to distance Moscow from unconditional backing. Reports indicate that Ankara has been providing weaponry and supplies which have helped a rebel offensive near Syria’s largest city Aleppo, breaking a pro-Assad siege and putting pressure on the Syrian military, Iranian units, and Hezbollah fighters.

Former CIA Director And Hillary Supporter: "We Should Kill Russians And Iranians Covertly" -- Last Friday, former deputy and acting director of the CIA, Mike Morell became the latest neocon to join the Hillary bandwagon with a NYT Op-Ed titled "I Ran the C.I.A. Now I'm Endorsing Hillary Clinton" in which he not only praised Hillary but slammed Donald Trump, What Morell, who sought to portray himself as bipartisan, did not say, is that he was an active participant in painting the Benghazi attacks as caused by YouTube video. When Hillary Clinton says 'best information provided by the intelligence community" she is referring to her man in the CIA: Michael Morell was the CIA official who crafted the "talking points" on Benghazi with the Obama White House according to his own testimony in 2014 to Congress. In emails later uncovered by Congress, CIA Director David Petraeus called the resulting talking-point language 'useless.'  What he also forgot to mention is that in 2013, he left the CIA to join a DC consultancy group with strong links to Hillary Clinton. Beacon Global Strategies, Morell's employer, is a ten-person firm whose co-founders include Philippe Reines, a senior counselor to Hillary Clinton when she ran the State Department. Reines is still her spokesman, serving in that capacity in what New York magazine calls 'a second full-time job. “And if she runs again... Reines will be onboard,” the magazine concluded in Ferbruary 2014. Meaning that Morell, as a senior official at Beacon, will also likely be part of the Clinton spin machine.But what he most certainly did not mention is that when it comes to the pinnacle of neocons (for Hillary), none matches Mr. Morell. In fact as the following interview excerpt with Charlie Rose conducted last night reveals, Morell may be considered the latest war criminal who openly conspired to "covertly" kill Russians and Iranians in Syria. Here is the key exchange:

• Morell: We need to make the Iranians pay the price in Syria; we need to make the Russians pay the price.
• Rose: We make them pay the price by killing Russians and killing Iranians?
• Morell: Yes. Covertly. You don't tell the world about it. You don't stand at the Pentagon and say we did this. But you make sure they know it in Moscow and Tehran. I want to go after those things that Assad sees as his personal power base. I want to scare Assad. I want to go after his presidential car. I want to bomb his offices in the middle of the night. I want to destroy his presidential aircraft. I want to destroy his presidential helicopters. I want to make him think we are coming after him.

 US General Asks India for Military Assistance in Afghanistan: — The commander in charge of US forces in Afghanistan has asked India to step up military aid in the Asian country. Gen. John Nicholson's call to action comes as Western sanctions against Russia is leading to a paucity of spares for Russian-made weaponry used by Afghan forces. Speaking to journalists Wednesday after meeting with India's National Security Adviser Ajit Doval, Foreign Secretary Subrahmanyam Jaishankar and Defence Secretary G.Mohan Kumar, the US Army officer said: "Due to sanctions on Russia, it's difficult to acquire supplies of spare parts for Russian military platforms, because much of the money is given to Afghanistan by donors who have sanctions against Russia in place." Nitin Mehta, a defense analyst in India, commented on the US approach: "The call for stepping up military aid to Afghanistan is not a changed response of Washington in diplomatic terms, but only in military terms, arising from the sanctions by the Western world on Russia, thereby [pulling] the plug on supply of military spares." India has transferred four Russian-made Mi-25 attack helicopters to the Afghan Air Force, marking the first transfer of lethal military equipment to Afghanistan. "The Afghans have asked for more of these helicopters. There is an immediate need for more. When these aircraft come in, they immediately get into the fight," Nicholson said. "We are building the Afghan Air Force as a critical component of security. That is built on several airframes. Some are older Russian models, integrating newer ones. We need more aircraft, and we are looking at how we can meet that need."

 Chinese province to extend maturity on $60bn in coal loans -- China’s most coal-dependent province has moved to ease rising pressure on seven of its largest coal miners by extending the maturity on up to Rmb400bn ($60bn) in loans, in a sign of the severity of the bad-debt crisis gripping the country’s depressed coal sector. The move by Shanxi province marks the first time a local regulator has asked banks for leeway on loans for a select group of companies. It is the latest in a series of tactics employed by the country as it tries to pare bad debt, which by some analysts’ estimates has reached epidemic levels. The central government last year launched a Rmb4tn-and-counting programme that pushed banks to swap debt from many local government businesses for longer-maturity bonds. This year, Beijing announced a controversial plan in which banks would trade corporate debt for equity in companies. Corporate debt is a concern across China but the situation is particularly desperate in Shanxi. A four-year slump in coal prices has left miners in the red and private companies unable to repay high-interest-rate shadow-banking loans that date back to a boom in coal prices a decade ago. A collapse in the chain of credit in the shadow-banking sector is reverberating through the province, which accounts for about one-quarter of coal production in China, itself the world’s largest coal industry. The Shanxi branch of the China Banking Regulatory Commission will allow the province’s seven biggest coal companies to restructure short-term debt into medium and long-term loans, the state-run Xinhua news agency reported.

Weak Chinese Trade Data Confirms Global Slowdown, Imports Tumble -- While central banks continue to "print" liquidity, now at a pace of nearly $200 billion per month, they are unable to print trade, perhaps the single best indicator of deteriorating global economic conditions. The latest confirmation came overnight from China, which reported more disappointing trade data for the month of July, as exports and especially imports fell more than expected in July in a rocky start to Q3, suggesting that China's measures have failed to generate a substantial rebound in the economy, and pointing to further and accelerating weakness in global demand, explaining the recent scramble by central banks to unleash even more monetary easing. The July trade data summary :

• Exports: -4.4% yoy in July vs consensus: -3.5%. June: -4.9% yoy.
• Imports: -12.5% yoy in July vs consensus: -7.0%. June: -8.4% yoy.
• Trade balance: US$52.3bn NSA (GS: US$49.1bn, consensus: US$47.3bn). June: US$47.9bn.

Economists polled by Reuters had expected trade to remain weak but show some signs of moderating as factories gear up for orders heading into the peak year-end shopping season. That did not happen as imports fell 12.5 percent from a year earlier, the biggest decline since February and suggesting China's domestic demand may be faltering despite a flurry of measures to stimulate economic growth. "I think (the drop in imports) is mainly from the demand side," said Ma Xiaoping, an economist at HSBC in Beijing, quoted by Reuters. Worse, according to Ma government efforts to cut overcapacity could produce an even bigger hit to demand in the next few quarters. Also notable is the slowdown in Chinese crude oil demand, as China oil imports fell to a 6-month low: China imported 31.07m mt of crude last month, the General Administration of Customs in Beijing says on website. That’s equivalent to 7.35m b/d, lowest since January. On the other side of the ledger , exports fell 4.4 percent on-year, the General Administration of Customs said on Monday, while adding that it expects pressure on shipments likely will start to ease in October. That resulted in a trade surplus of $52.31 billion in July, the biggest since January, versus June's $48.11 billion.  While oil imports may be declining, oil product exports hit 4.57 million metric tons with net oil product exports at record 2.49metric tons, as China continues to flood the world with diesel and gasoline exports.

IMF tells China: Fix your debt problem now  -- China needs to tackle its corporate debt problem before it spirals out of control. That's the message from the International Monetary Fund, which warned China about its debt levels on Friday. "China's medium term outlook is clouding because of high and rising corporate debt," said James Daniel, IMF's mission chief in China. He said the world's second biggest economy must "urgently address the problem."  At $25 trillion, China's debt stands at about 254% of GDP, according to data from the Bank for International Settlements. Even though that's high, it's actually pretty close to some other indebted countries in the world. The U.S., for example, has similar levels of debt as China. What's alarming about China's mountain of debt is the speed at which it's been growing in recent years. It has quadrupled between 2007 and 2014, according to a report by McKinsey. It has also spooked many global institutions and investors. "Investors are right to be worried: dealing with the unsustainable build-up of debt is one of the biggest long-run challenges that policymakers face," said Julian Evans-Pritchard, China economist at Capital Economics.

China Bond Yield Drops to Lowest in a Decade as Economy Falters - - Chinese government bonds extended gains, with the 10-year yield falling to the lowest level since at least 2006, as weaker-than-expected credit expansion and industrial output reignited concerns over economic growth. The yield on sovereign notes due May 2026 fell three basis points to 2.66 percent as of 4:57 p.m. in Shanghai, according to National Interbank Funding Center prices. That’s the lowest for a similar-maturity benchmark yield since Bloomberg started compiling ChinaBond data in 2006. The 20- and 30-year sovereign yields declined to 3.10 percent and 3.25 percent on Thursday, respectively, also the lowest for both since at least 2006.Chinese government bonds extended gains, with the 10-year yield falling to the lowest level since at least 2006, as weaker-than-expected credit expansion and industrial output reignited concerns over economic growth.  China’s broadest measure of new credit increased at the slowest pace in two years in July, adding to signs that a stabilization in economic growth is losing steam, according to data released Friday. Figures earlier in the day showed industrial production and investments weakened as well. Demand for the relative safety of government debt has been driven also by a rising number of company defaults, with a Chinese shipbuilder becoming the latest to renege this week. The People’s Bank of China injected a net 90 billion yuan ($13.5 billion) this week via open-market operations, data compiled by Bloomberg show. The seven-day repurchase rate, a gauge of interbank funding availability, fell for the first time in six days, retreating three basis points to 2.33 percent, weighted average prices from the National Interbank Funding Center show.

Chinese trade drop adds to global economic woes - BBC News: Chinese exports have seen a further decline in July, adding to concerns over the global economic outlook. Exports fell by 4.4% compared to a year earlier, which was a slight improvement over June's 4.8% drop but still worse than analysts had been expecting. Imports were also weaker than estimated, down by 12.5%. As China is a crucial driver of the worldwide economy, the data is seen as a snapshot of the global outlook. The country's exports have fallen for 12 out of the past 13 months. Global uncertainty ranging from low commodity prices to the EU debt crisis and the UK leaving the bloc continues to mute economic activity around the world.  The figures do "not bode well for the state of global demand, given that Chinese exports benefited from a weaker currency," Louis Kuijs of Oxford Economics wrote in a note. "Looking forward, we expect the trade data to remain lacklustre in the coming months, given our outlook of subdued momentum in global trade and China's domestic demand."   In US dollar denominated terms, exports fell to $184.7bn (£141bn) while imports dropped to $132.4bn.

 How China’s Trade Concessions Made It Stronger - Chinese exports to the U.S. exploded after it joined the World Trade Organization in 2001. It’s still a mystery why. In negotiations with the U.S. over WTO membership, China made nearly all the concessions. It agreed to cut tariffs, reduce subsidies, lessen the role of state-owned firms and eliminate barriers investment—in other words, to become more like the U.S. economy. All the U.S. did was end an annual renewal of China’s access to the U.S. market, which China’s allies in Congress won every summer, anyway. “Economically, this agreement is the equivalent of a one-way street,” President Bill Clinton said in 2000. But freer trade with China had outcomes few predicted—especially a surge in imports to the U.S. and a huge U.S. trade deficit. Industries and workers around the U.S. were upended. To understand what happened, look back to the 1990s. China’s opening to the world was progressing, but suspicion of Beijing ran high in Washington.  Congress’s annual review of China’s trading status with the U.S.—what was then called “most favored nation”—became a way to pressure Beijing. By the late 1990s, China wanted to join the WTO. To do so, it had to negotiate a deal with every WTO member. None was more important than the U.S., which in 1999, won concession after concession from China to remake its economy in the Western mold. What China wanted in return was an end to the annual most-favored status review. After lobbying by the Clinton administration, Congress agreed to lift the requirement. With lower Chinese tariffs, U.S. exports to China increased more than five-fold from $16 billion in 2000 to $92 billion in 2010. But U.S. imports from China soared far higher, from $100 billion in 2000 to $365 billion a decade later. The trade deficit ballooned.

China Backlash Over U.S. Missile Shield Puts North Asia on Edge -  South Korean President Park Geun Hye has discovered first hand the feeling of getting the cold shoulder from China. Under the fluent Mandarin speaker’s watch, South Korea had seen improved ties with China, drawn together in part by concern about Japan’s wartime past and the military ambitions of Prime Minister Shinzo Abe. Park was the only leader of a U.S. ally to attend a military parade in China last year for the 70th anniversary of the end of World War II. Now, relations that were hailed by both countries as the best in history have soured, and Park may get a frosty reception in China next month for the Group of 20 summit. The reason: Her agreement to deploy a U.S. missile shield on Korean soil. While South Korea says the Terminal High Altitude Area Defense system made by Lockheed Martin Corp. would be aimed at prickly neighbor North Korea, which has been busy of late test-firing missiles, China has reacted angrily, saying the shield could be applied to it. Russia has also opposed it being stationed in Asia. The tensions, which could crimp Chinese tourism to South Korea and even the appetite for that country’s K-pop music, could also go some way to resetting the geopolitical landscape in North Asia. South Korea may move back toward the U.S., and that in turn could bring South Korea and Japan closer. China, meantime, finds itself potentially in North Korea’s corner.

Japan Protests After Discovering Chinese Military Radar In Disputed Waters, Fleet Of 300 Chinese Vessels -- It's not just the ongoing tension over contested territories in the South China Sea that is causing headaches for China's political opponents. On Sunday, Japan said it issued multiple protests to China over actions in the East China Sea, including what Tokyo described as the installation of radar on a Chinese offshore gas platform. Japan also said that two Chinese vessels entered Japanese territorial waters near the disputed “Senkaku” or “Diaoyu” islands in the East China Sea on Sunday morning in an escalation of tensions between the two nations, and complained that as many as 300 Chinese fishing vessels were spotted in the vicinity of the disputed islands. Japan is concerned that the radar, reportedly like those used on patrol vessels and not on drilling rigs, could be a sign of China’s intentions to use its gas platforms in the East China Sea as military objects, the Japanese media report as cited by Reuters. As a reminder, China and Japan sparred in an aggressive, escalating tit-for-tat over territorial claims involving the Senkaku Island chain in the East China Sea back in 2013. The installation of radar on a gas platform, if confirmed, would recall China’s actions in the South China Sea, where it has added military facilities on artificial islands according to the WSJ. Additionally, in 2013, China established an air-defense zone in the East China Sea, raising tensions with the U.S. and Japan. Vice Foreign Minister Shinsuke Sugiyama complained to China’s Ambassador Cheng Yonghua that the incident had infringed on Japan’s sovereignty. It was Japan’s second protest to the ambassador in three days.

JAPANSANITY...or Why Japan's Yen Will Likely Only Get Stronger As Japan Prints More Money - Japan's 0-64yr/old core population is collapsing...consumer credit is declining...government debt and Bank of Japan asset purchases have and will continue to go stratospheric.  And through it all, Japan has the slowest M2 monetary growth of all major nations resulting in a continual strengthening of the Yen.  The strength of the Yen continues to make Japanese exports more expensive and further slow exports making the "need" for more government debt and BoJ asset purchases more "urgent".  But from here forward it only gets significantly worse and Japan is very likely near a point of terminal economic collapse...the end game is likely a politically driven act of desperation, a hyper-monetization action that will likely destroy the Yen and begin a global chain of collapse.

• Japans 0-64yr/old "core" population peaked in 1989 and has been declining since.  From '65-->'89, the "core" population rose by +16 million.  Since '89, Japan's "core" has declined by 17 million. 
• While Japan's "core" population was growing, Japan's GDP grew rapidly almost entirely without increasing governmental debt.
• Since Japan's core population began shrinking, GDP has grown
• Since Japan's "core" began declining, Japanese debt to GDP has risen from 67% to north of 260%
• The Government plans to remove debt from private and transfer it to government in a permanently monetizing (aka, buying the debt with money from nothing and then disposing of the asset).

Global negative-yielding debt slips to $11.4 trillion: Fitch | Reuters: The global amount of negative-yielding government bonds edged down to $11.4 trillion on Aug. 2 from two weeks ago as Japanese debt yields rose in reaction to more official stimulus announcements, Fitch Ratings said on Wednesday. On July 15, there were about $11.5 trillion in sovereign bonds with negative yields in Japan and Europe, whose central banks adopted negative rate policies and have been purchasing bonds heavily in an effort to stimulate their sluggish economies. Japanese government bonds accounted for more than half the negative-yielding debt with $7.2 trillion, down from $7.5 trillion two weeks earlier and $7.9 trillion on June 27, the rating agency said. "This decrease in negative-yielding debt has been partially offset by a strengthening yen, keeping the Japanese total above $7 trillion," Fitch said in a statement. The yen strengthened after the Bank of Japan disappointed traders by keeping its bond purchases steady on July 29, followed by Japanese Prime Minister Shinzo Abe's cabinet approval of 13.5 trillion yen ($132 billion) in fiscal measures on Aug. 2. From July 15 to Aug. 2, the yen gained nearly 4 percent against the dollar JPY= as disappointing U.S. economic data reduced investors' expectations of a possible U.S. rate increase by year-end, according to Reuters data. In addition to local government bonds, $32 billion in Japanese corporate bonds carried negative yields on Aug. 2, which represented about 5 percent of that country's entire corporate bond sector, it said. In Europe, the sum of negative-yielding sovereign debt edged up to $4.2 trillion from $4.0 trillion on July 15. German government bonds that mature out to 13 years were yielding less than zero, Fitch said.

Household debts keep rising on rate cut, housing trade: (Yonhap) -- South Korea's household debt shows no signs of abating despite efforts to tackle the potential risk factor for the local economy, central bank data showed Wednesday. The balance of household loans extended by local banks amounted to 673.7 trillion won (US$616 billion) as of the end of July, an increase of 6.3 trillion won from a month earlier, according to the Bank of Korea (BOK). Of the aggregate debts, home-backed loans extended by banks rose by 5.8 trillion won to 506.6 trillion won. "Household borrowing expanded due to an increase in the housing trade and a decline in interest rates," the BOK said. It slashed the key rate to a record low of 1.25 percent in June in a bid to help revitalize the economy.The number of home transactions in Seoul rose to 14,000 in July from 12,000 in June. It's unusual, given that summer is traditionally an off season here in the home trade. Major banks in South Korea have tightened the screening of applications for mortgage loans.

Even Reuters Gets It: "Money-Printing Has Pushed Stocks Out Of Kilter With Economic Reality" It appears that the world's central-scammers have finally gone too far. In a shockingly Zero-Hedge-ian statement, Reuters is forced to admit that "spooked by the end of a 30-year bond bull run and bouts of money printing which have pushed stock values out of kilter with economic reality," high-profile investors are turning their backs on financial assets and favoring real assets. Of course, all it took was 7 years of unprecedented monetary policy experimentation to decouple the fantasy of equity markets from the harsh reality of the real economy... But, as Reuters explains, alternative investments such as a Ferrari 335 S Scaglietti, a rare blue diamond or a case of Romanee-Conti Grand Cru wine from Burgundy are going mainstream as investors grapple with ultra-low interest rates and volatile stocks. Rare coins, collectible jewelry and classic cars join fine wine among the top performers in the year to end-March... And fine wine saw its largest positive monthly movement since 2010 in July with the Liv-ex Fine Wine Investables index, which tracks around 200 Bordeaux red wines from 24 leading producers, up by 4.5 percent. It is up 13.8 percent so far this year, compared with 6.9 percent for the S&P 500 and 8.9 percent for the FTSE 100. "As a physical asset, fine wine tends to perform well in periods of uncertainty...and is also not linked to the prices of other assets in most circumstances," said Andrew della Casa, Founding Director of The Wine Investment Fund.

Demographic 'Death Cross' Looms As World "Plague" Of Elderly Population Grows -- The number of countries where the elderly outnumber the young is on the rise...  What began in 1995 in a single country, Italy, will spread globally to economies as diverse as New Zealand and Georgia, by 2030.  As Joseph Chamie - an independent consulting demographer and a former director of the United Nations Population Division - details, by 2030, 56 countries will have more people aged 65 and over than children under 15. As Bloomberg reports, the former UN head demographer compared population projections of kids under the age of 15 to that of people aged 65 and over. It’s not just industrialized nations like Japan and Germany succumbing to the age curse. The turning point will take place in 2020 in the Cuba and South Korea, followed five years later in Thailand and the U.S.  By 2075, the global population is forecast to pass the demographic milestone...The Demographic Death Cross... Chamie refers to this as “the jump from a Toys ‘R’ Us society to an Olds ‘R’ Us one.” While the prospect of longer lives is a good thing, problems arise when a shrinking work force cannot foot the pension bill. Several decades ago, you could have had about 10 workers per retiree, but that could shrink to the point where in Italy,  for example, you had three workers per retiree. While the political choices are unsavory — increase taxes or cut benefits — governments are running out of time to act. You “can't repeal the law of demographics,” Chamie said.

Vietnam Secretly Moves Israeli Rocket Launchers To Disputed Islands To Counter China --While over the last several months, tensions over the South China Sea territorial dispute have mostly focused on the diplomatic war of words between China and the US, Reuters reports that in a move that is likely to substantially "raise tensions with Beijing", Vietnam has secretly fortified several of its islands in the disputed territory with Israeli-made EXTRA mobile rocket launchers 'capable of striking China's runways and military installations across the vital trade route."  The move, which analysts say "is the most significant defensive move Vietnam has made on its holdings in the South China Sea in decades", is designed to counter China's build-up on its seven reclaimed islands in the Spratlys archipelago. Vietnam's military strategists fear the building runways, radars and other military installations on those holdings have left Vietnam's southern and island defenses increasingly vulnerable. Vietnam's Deputy Defence Minister, Senior Lieutenant-General Nguyen Chi Vinh, told Reuters that it has reserved the right to take any such measures. "It is within our legitimate right to self-defense to move any of our weapons to any area at any time within our sovereign territory," he said.

Duterte names officials linked to drugs: – President Rodrigo Duterte early Sunday morning, August 7, named alleged drug protectors and persons involved in illegal drugs among police, judges, local government officials, and the military. Speaking in Camp Panacan in Davao City, Duterte said those whom he mentioned should report to their mother units “within 24 hours”. He also ordered the cancellation of “any and all” firearm licenses issued to those whom he named. “Firearms are ordered cancelled tonight,” he declared. Judges should report to the Supreme Court, the police to the Philippine National Police (PNP) chief, the army to the chief of staff, and local government officials to the Department of the Interior and Local Government (DILG). “Operational authority” over the military and police officials assigned to mayors and other local government officials Duterte named were ordered “removed”. “Go out naked to the world and sow your kalokohan (foolishness),” Duterte said. The police and military officials, retired and otherwise, should report to the office of the PNP chief. “Or else I will order the entire Armed Forces of the Philippines to hunt for you.” Duterte, on August 5, already gave fair warning about the contents of his list of government officials with links to the drug trade. On the same day, two local officials suspected of involvement in drugs – Maguing Mayor Mamaulan Abinal Molok and former Marantao Mayor Mohammad Ali Abinal, husband of the incumbent mayor – surrendered to PNP chief Ronald dela Rosa.

Dozens of Philippine officials surrender after being linked to drugs trade - (Reuters) - Dozens of Philippine government and police officials turned themselves in on Monday, a day after President Rodrigo Duterte linked them to the drugs trade, stepping up a war on narcotics that has killed hundreds since he took office in June. More than 400 suspected drug dealers have been killed by police across the Philippines since Duterte took over, officials say. Broadcaster ABS-CNN put the number at over 800, though this includes executions by anonymous vigilantes. On Monday, 27 mayors and 31 police officers, including a colonel, went to the national police office in the capital, Manila, to clear their names, fearing the president's order to hunt them down if they failed to surrender within 24 hours. Several local officials reported to regional police offices to beat the deadline set by Duterte, who won the elections in May on a single platform of fighting crime and drugs. On Sunday, he identified about 160 officials in a name-and-shame campaign.

 Philippines President Calls US Ambassador "Annoying, Homosexual, Son Of A Bitch" -- It appears there are no limits to what Philippines' President Rodrigo Duterte will do or say. After admiting that his government had killed 400 drug dealers in the last month alone, Duterte’s latest victim is none other than the US’ Ambassador to the Phillipines Philip Goldberg. As reported earlier this week, Duterte met with both Goldberg and John Kerry in late July to discuss the response to Manila winning an international court case against China at the Permanent Court of Arbitration at the Hague. Kerry... is “okay, but I had an argument with their ambassador, that bakla [homosexual]. Son of a bitch, he really annoys me.” There is no record of Goldberg publicly identifying as gay, indicating Duterte meant to use the word purely derisively.” The feud between Goldberg and Duterte stems from the time that the Philippine was still a presidential candidate. During the campaign, Duterte made a joke about a gang rape episode that took place during his time as governor. He said the rape of a young woman in Davao City, where he served as mayor for 22 years, was only a tragedy because he himself did not get to have sex with her first. “Any statements by anyone, anywhere that either degrade women or trivialize issues so serious as rape or murder, are not ones that we condone,” Goldberg said at the time. Then-candidate Duterte responded with a promise he has yet to accomplish: he said he would sever all diplomatic ties with the US and would give the US “a shit” if Goldberg did not “shut your mouth. And to think that the US media accuses Donald Trump of having no verbal block.

Killings of Drug Suspects Rise to 525 in the Philippines - ABC News - The number of suspected drug dealers killed in Philippine President Rodrigo Duterte's crackdown has risen to more than 500 in just over a month, police said Thursday, in an alarming campaign that sparked protests and plans for a Senate investigation. Since July 1, 525 drug suspects have been killed in clashes with police while more than 7,600 suspects have been arrested in more than 5,400 antinarcotics assaults, the national police's Directorate for Investigation and Detective Management said in a report. More than half a million have surrendered to authorities, according to police. Some local news agencies have reported considerably higher death tolls, some as high as nearly 1,000, in counts that included drug suspects killed by unidentified attackers since Duterte emerged as the president-elect following the May 9 elections. . "Human rights have been sacrificed in the conduct of the anti-drug drive, with those holding the gun assuming the roles of both accusers and executioners," left-wing protest leader Vencer Crisostomo said. "It is impossible to ascertain innocence or guilt if the accused are simply shot on the spot." "The Duterte regime's war on drugs is bound to fail if it continues to rely on extrajudicial killings led by a corrupt and abusive police and military hierarchy, Crisostomo said, adding that the illegal drug trade is a symptom of deeper social problems, like rising poverty, joblessness and hunger, "which cannot be wiped out by bullets alone."

 Video Captures Moment Of Horrific Suicide Bombing In Pakistan Hospital Which Kills At Least 70 --A suicide bomber in Pakistan killed at least 70 people and wounded at least 112 on Monday in an attack on mourners gathered at a hospital in Quetta, according to Abdul Rehman Miankhel, a senior official at the government-run Civil Hospital, where the explosion occurred. Monday's attack was the worst in Pakistan since an Easter Day bombing ripped through a Lahore park, killing at least 72 people. Jamaat-ur-Ahrar also claimed responsibility for that atrocity. The bomber struck as a crowd of mostly lawyers and journalists crammed into the emergency department to accompany the body of a prominent lawyer who had been shot and killed in the city earlier in the day, Faridullah, a reporter who was among the wounded, told Reuters. "There are many wounded, so the death toll could rise," said Rehmat Saleh Baloch, the provincial health minister. Jamaat-ur-Ahrar, a faction of the Islamist militant Pakistani Taliban group, claimed responsibility for the attack in an email. Reuters adds that just last week, Jamaat was added to the United States' list of global terrorists, triggering sanctions. It was not immediately clear if the group had carried out the bombing, as it is believed to have claimed responsibility for attacks in the past that it was not involved in. "The Tehreek-e-Taliban Pakistan Jamaat-ur-Ahrar (TTP-JA) takes responsibility for this attack, and pledges to continue carrying out such attacks," said spokesman Ehsanullah Ehsan in the statement. The motive behind the attack was likewise unclear, but several lawyers have been targeted during a recent spate of killings in Quetta, the provincial capital of Baluchistan which has a history of militant and separatist violence.

 Driven to Suicide by an ‘Inhuman and Unnatural’ Pressure to Sell - The New York Times: — Leaving his wife and two young children home on a recent Sunday, a 27-year-old salesman for Abbott Laboratories’ operations in India — in fact, one of the American health care company’s top performers there — rode his motorcycle to a remote railroad track and jumped in front of a train.In his pocket, a note in blue ink, handwritten in a mix of Hindi and English, said, “I’m going to commit suicide because I can’t meet my company’s sales targets and my company is pressuring me.”Ashish Awasthi’s death last month resonated across India and through the halls of the health care giant. More than 250 fellow Abbott drug representatives in India walked off the job for a day, protesting what some called the company’s overly aggressive sales policies. A national union of drug sales workers called for new government rules to rein in sales practices industrywide, saying they compromised patient health.A six-month investigation by The New York Times found that in the push to win customers in India’s chaotic and highly competitive drug market, some Abbott managers instructed employees to pursue sales at virtually any cost — in violation of Indian law, professional medical standards and the company’s own ethics guidelines.Sales jobs with global powerhouses like Abbott are highly prized positions in India. But they can also be extremely demanding, putting employees under inordinate pressure to cut corners, according to interviews with more than a dozen current and former sales representatives and managers and a review of internal Abbott communications provided by two of them.

Venezuela’s Inflation Plunges, Nigeria’s Surges --At present, the countries with the highest annual inflation rates are Nigeria at 78.3 percent, Syria at 76.4 percent, Egypt at 56.2 percent, and Venezuela at 47.8 percent1. This is a dramatic change from a year ago, when Venezuela was holding down the top spot with an annual inflation rate of around 700 percent. The accompanying chart tells the story of Venezuela’s inflation plunge, as well as Nigeria’s surge to the ignominious inflation top spot. It must be stressed that the official inflation rates reported for the “Big Four” are, in some cases, hopelessly out of date (Syria and Venezuela last released official inflation data in December 2015). In any case, all the official estimates are wildly inaccurate. During episodes of elevated inflation, the most accurate method for estimating overall inflation rates is to employ purchasing power parity (PPP) theory. I use PPP to translate changes in black market (read: free market) exchange rates into annual implied inflation rates. This is a straightforward and accurate exercise which is conducted on a regular basis at the Johns Hopkins-Cato Institute Troubled Currencies Project.

Brazil’s Political Drama Grinds On During Olympics - WSJ—The 2016 Olympics kicked off with plenty of foreign dignitaries in attendance at the opening ceremonies, but most of Brazil’s leaders were conspicuously absent from what should have been a triumph for a nation hosting the first-ever Olympics in South America. Brazil’s suspended president, Dilma Rousseff, and her predecessor, Luiz Inácio Lula da Silva, the charismatic former union leader who is credited with landing the Olympics, were nowhere to be seen at the ceremonies. They are too busy fighting for their political lives.Meanwhile, acting President Michel Temer is so unpopular that he wasn’t even formally introduced Friday night to the opening-ceremony crowd at Maracanã Stadium in the hopes that he wouldn’t be heckled. It didn’t work. He was roundly booed when he appeared briefly on the big stadium screens to officially open the Games near the end of a program that lasted roughly four hours. What should be a moment to savor for Brazil’s government is a time of tension and soul searching as an impeachment trial and an epic corruption scandal dominate the country’s politics.The struggle is toughest for Ms. Rousseff, whose impeachment trial continues to grind forward in the capital. Less than two weeks after lighting the Olympic torch here in early May, Brazil’s first female president was forced to step down temporarily to face judgment in the Senate. She is charged with using illegal accounting tricks to mask a budget deficit, which she has repeatedly denied.

If you're at the Rio Olympics, you've probably already been hacked - According to a new report from mobile security firm Skycure, visitors to the former capital of Brazil are being targeted by malicious actors who have set up fake Wi-Fi hotspots designed to steal information from connected devices. These phony wireless networks were spotted by Skycure around the city, but they were most prominent in locations where travelers were most likely to look for a place to connect, like shopping malls, well-known coffee shops, and hotels.  Skycure also suggested that travelers taking the Rio Metro—the underground railway that makes stops throughout the city—may be at risk when connecting to the complimentary Wi-Fi offered by the city in partnership with IT giant Cisco. The vulnerabilities actually begin the second travelers set foot in the city. According to Skycure, the Rio Galeão Airport, the international hub for the Olympics, was found to host many networks that are capable of decrypting Secure Sockets Layer (SSL) traffic—undoing a protocol put in place to keep data protected. "SSL decrypting Wi-Fi networks break encryption to look into the encrypted data," Varun Kohli, vice president of marketing at Skycure, explained to the Daily Dot. He noted that while this is sometimes done intentionally by networks to charge for the data used on the network. Other times, it can be the result of a misconfigured router that decrypts traffic when it isn't meant to.

Bernie Sanders Denounces Brazil’s Impeachment as Undemocratic, Calls for New Elections --Vermont Senator Bernie Sanders yesterday denounced in harsh terms the impeachment of Brazil’s democratically elected president. As the Brazilian Senate heads toward a final vote later this month, Sanders described his position, set forth in a statement posted on his Senate site, as “calling on the United States to take a definitive stand against efforts to remove Brazilian President Dilma Rousseff from office.” He added: “To many Brazilians and observers the controversial impeachment process more closely resembles a coup d’état.” Sanders also condemned the unelected center-right coalition under Michel Temer that has seized power during Rousseff’s suspension and is now trying to install themselves through 2018. “After suspending Brazil’s first female president on dubious grounds, without a mandate to govern,” he said, ” the new interim government abolished the ministry of women, racial equality and human rights” and “replaced a diverse and representative administration with a cabinet made up entirely of white men.” They are now attempting to implement radical policies that could never be democratically ratified: “impose austerity, increase privatization and install a far right-wing social agenda.” Sanders’ statement comes as Brazil’s elites – virtually unified in favor of Dilma’s impeachment – have taken extraordinary (and almost comically futile) measures during the Olympics to hide from the domestic public, and the world, how deeply unpopular Temer is.

Mad(uro) Max? Venezuela's Economic Collapse Is So Bad, People Are Slaughtering And Eating Zoo Animals --If you were hungry enough, would you kill and eat zoo animals?  To most of us such a notion sounds absolutely insane, but this is actually happening in Venezuela right now.  This is a country where people are standing in lines for up to 12 hours hoping that there will be food to buy that day, and where rioting and looting have become commonplace.  So even though the U.S. economy is in dreadful shape at this moment, we should be thankful for what we have, because at least we are not experiencing a full-blown economic collapse yet like Venezuela currently is. Black stallions can be some of the most beautiful horses on the entire planet, but things are so desperate down in Venezuela this summer that everything looks like food to some people at this point.  What happened at the Caricuao Zoo on Sunday is so horrible that I actually debated whether or not to share it with you.  Desperate people do desperate things, and when people get hungry enough they will do things such as this… Venezuela’s worsening food shortages had tragic consequences for a rare show horse last weekend, when a group of intruders broke into the zoo, pulled the black stallion from its cage, then slaughtered it for meat. Prosecutors say the crime occurred in the small hours of Sunday morning at Caracas’ Caricuao Zoo, when “several people” sneaked into the state-run park under the cover of darkness and busted into the stallion’s pen. The horse, the only one of its kind in the zoo, was then led to a more secluded area and butchered on the spot. Only its head and ribs were left behind in a gruesome pile for zookeepers to find after sunrise.Unfortunately, this precious animal was not even the first victim at that particular zoo. A few weeks ago, pigs and sheep were the targets…

Venezuela Seen Staving Off Default Again Even as Crisis Worsens - Bloomberg: Even as Venezuela’s economic collapse deepens, the nation has a good chance of getting through another year without defaulting on its bonds. That’s the conclusion of money managers including Aberdeen Asset Management and Wall Street banks like JPMorgan Chase & Co. The cash-strapped country has been on default watch for the past two years as oil prices remain depressed, its economy implodes and political turmoil worsens amid an effort to recall the president. Yet Venezuela has managed to scrounge up enough money to honor billions in debt payments, and this year appears to be no different. Petroleos de Venezuela SA, the struggling state oil producer, has $4.1 billion of debt payments to make before year-end. “We think they have sufficient resources to pay” $1.4 billion coming due in October, said Anthony Simond, a money manager at London-based Aberdeen Asset Management, which oversees about $10 billion of emerging-market debt. He owns notes due in 2016 and 2017 issued by PDVSA, as the oil company is known. While he acknowledges the $2.7 billion of payments in November will be a “bit trickier,” he said President Nicolas Maduro wants “to avoid a default at any cost.” Oil Minister Eulogio Del Pino, who is also president of PDVSA, has said the company is in advanced talks to refinance debt due in the next 18 months.

Venezuela: Witnessing a Country's Complete Collapse: Alvaro Ybarra Zavala puts it bluntly: “Venezuela has become hell.”The photographer had just returned from one of his latest trips to the South American nation when he talked to TIME, and he was visibly affected by the chaos he had witnessed there. “There’s a complete collapse of society,” he said.Once an example for the continent, Venezuela is now a country in freefall. “It’s hard to find food, there’s no medicine,” said Ybarra Zavala. “If you have to have surgery, you need to bring everything with you: the bandages, the gloves, everything. There are no anesthetics.”Ybarra Zavala was on assignment for TIME last month, chronicling the country’s breakdown. His photographs show daily street protests that are often violently repressed, empty shelves in deserted grocery stores and people lining up, sometimes for entire days, for gas. “No one believes anymore in the army, in the police, in the system,” said Ybarra Zavala. Security has also become an issue. “There’s now a very strong element of luck,” he said. “Access is a real nightmare. Not only do you need to be careful of the government, but also from the colectivos [militant groups] and the local militias. You’re limited on time, you’re limited in access. It’s a continuous fight.”In fact, says the photographer—who’s worked in Iraq, Afghanistan and Colombia—Venezuela is the “hardest place I’ve worked in,” he said.

Bitcoin Volume in Venezuela Surging Amid Hyperinflation: Bitcoin remains one of the most popular commodities in all of Venezuela. The country is plagued by hyperinflation, and consumers have very restricted access to financial assets. Bitcoin provides an excellent opportunity to hedge against further inflation of the Bolivar, as well as invest in the future. The month of July has been a particularly good one for Venezuela. The number of transactions per week continues to increase every week, even though the primary local exchange ran into some problems. Now that everything has been resolved, the interest in cryptocurrency is surging in Venezuela once again. This same trend seems to continue throughout August so far, with over 141.7 million bolivar being exchanged for Bitcoin in the first week. The previous record-high, which was set the week before, added up to 117.116m bolivar. Comparing these values to their US Dollar equivalents, they represent US$141,000 and US$117,000 respectively.  Holding on to the Bolivar In Venezuela is asking for financial trouble these days. The local currency continues to devalue further, and there is no improvement on the horizon just yet. Moreover, residents can’t exchange their bolivars for other currencies, as capital controls are enforced throughout the country. That is unless they want to rely on the black market. All of this is positive news for Bitcoin, as it provides Venezuelans with a way to get rid of their all-but-useless Bolivar and invest in the future. Bitcoin also lets these people hedge against future currency devaluations, as cryptocurrency has a far better chance of retaining its value right now.  So far, three Bitcoin exchanges have established themselves in Venezuela. SurBitcoin is by far the biggest, whereas Yabit and Cryptobuyer are relatively new on the scene. This goes to show the demand for Bitcoin is bigger than ever in the country, and it is a welcome opportunity to escape the country’s worsening recession.

  The safety trap | MIT News: Unless you’ve been following the subject closely, you may not have heard of one of the biggest barriers slowing the revival of global economic growth over the last decade. That would be the “safety trap,” a problem arising from a lack of low-risk investments around the world. To see the problem, recall that after the financial-sector crisis in 2007 and 2008, a large portion of investments people had considered safe — mortgage-backed securities come to mind — were suddenly understood to be risky. And yet, the ensuing flight to safe assets, such as U.S. debt, has come with its own cost. The increased demand for these safer investments keeps interest rates at low levels, to the point where central bankers cannot spur additional economic output by further lowering those rates. This is the “trap” part of the safety trap. In recently published research, MIT economist Ricardo Caballero and two colleagues have described in new detail how the safety trap works. The paper also highlights a subtle policy implication: The lack of safe assets is a consummately international problem, but the resulting safety trap itself can be remedied by policy initiatives from individual countries. “The shortage of safe assets is a global phenomenon,” Caballero notes, in explaining how interest rates become lowered globally. “Movements in safe [yield] rates in one important economy quickly spread into changes in the same direction in the rest of the world.”  But by the same token, Caballero believes, national remedies for the safety trap cross borders as well.

Globalization and its New Discontents - Joseph E. Stiglitz - Fifteen years ago, I wrote a little book, entitled Globalization and its Discontents, describing growing opposition in the developing world to globalizing reforms. It seemed a mystery: people in developing countries had been told that globalization would increase overall wellbeing. So why had so many people become so hostile to it?  Now, globalization’s opponents in the emerging markets and developing countries have been joined by tens of millions in the advanced countries. Opinion polls, including a careful study by Stanley Greenberg and his associates for the Roosevelt Institute, show that trade is among the major sources of discontent for a large share of Americans. Similar views are apparent in Europe.  How can something that our political leaders – and many an economist – said would make everyone better off be so reviled? One answer occasionally heard from the neoliberal economists who advocated for these policies is that people are better off. They just don’t know it. Their discontent is a matter for psychiatrists, not economists. But income data suggest that it is the neoliberals who may benefit from therapy. Large segments of the population in advanced countries have not been doing well: in the US, the bottom 90% has endured income stagnation for a third of a century. Median income for full-time male workers is actually lower in real (inflation-adjusted) terms than it was 42 years ago. At the bottom, real wages are comparable to their level 60 years ago.  The effects of the economic pain and dislocation that many Americans are experiencing are even showing up in health statistics. For example, the economists Anne Case and Angus Deaton, this year’s Nobel laureate, have shown that life expectancy among segments of white Americans is declining.

Putin and Erdogan vow to restore links and economic ties - The Russian and Turkish presidents on Tuesday vowed to restore their friendship, ending an eight month stand-off over the Syrian conflict as economic pressures and the failed coup in Turkey drive the two countries closer together. Vladimir Putin greeted Recep Tayyip Erdogan at a former imperial residence outside St Petersburg overlooking the Gulf of Finland, their first meeting since Turkish forces shot down a Russian military aircraft on the Syrian border in November last year. The “axis of friendship” between Moscow and Ankara had been resurrected, Mr Erdogan said following more than four hours of talks. Relations between the two countries would be closer than before their quarrel over Syria — which brought them to the brink of military conflict — he added. The two nations’ ties “are a lot more robust than ever, and they will help us resist any potential crises”, Mr Erdogan said, addressing Mr Putin as “my dear friend” three times in as many minutes. The Turkish leader’s choice of Russia for his first foreign trip following the failed coup against him last month gave the summit broader geopolitical significance, with some in the west fearing the Nato member could be drawn into the Kremlin’s orbit despite the Syria conflict, where they support opposite sides.Mr Erdogan was incensed by what he saw as a lack of solidarity from his western allies following the attempted putsch and criticism of the ensuing crackdown. In contrast, he welcomed the fact that the Kremlin gave him its unequivocal backing. “The western world must show solidarity with Turkey, which has adopted its democratic values,” Mr Erdogan told France’s Le Monde newspaper in an interview published on Tuesday. “Unfortunately western leaders have preferred to leave Turkish people to themselves.”

Putin-Erdogan Meeting - Breakup, Breakdown: Officials on the Russian and Turkish sides, and their staffs, have already made clear there are four strategic points on the agenda of Russian-Turkish negotiations; one political corollary; and several commercial payoffs. The priority is the commitment from Turkey to stop attempts at regime change in Syria, the Russian Caucasus, and the CIS states, including Armenia and Tajikistan. This means the expulsion of Chechen fighters from their havens in Turkey and areas under Turkish control; closure of the Turkish-Syrian border for ISIS and other jihadis; and an end to Turkish support for the Azeri war against Armenia and for Islamic oppositionists in Tajikistan, Uzbekistan, and Crimea. In return, the Turks want a Russian commitment not to support Kurdish groups to establish territorial autonomies or statelets along Turkey’s borders with Syria and Iraq, nor encourage the Kurds to fight their way back into Turkey to establish an independent Kurdistan. Another Russian priority – the key to the wars which the Kremlin fought against the Ottomans for more than two centuries -- is Turkey’s undertaking not to violate the limits of the treaties governing the straits between the Black Sea and the Mediterranean, and allow a permanent NATO naval deployment of Aegis missile systems, targeted against Russia in the Black Sea.

Erdogan finally turns to Putin probably because he sees Hillary coming -- The chaotic puzzle of Middle East requires complex moves by key players. Yet, the latest move by Erdogan to turn to Putin and try to restore relations between Turkey and Russia, shows rather that the Turkish leader had run out of options concerning international alliances. Although Erdogan managed to prevent the coup against him and proceeded in an exhibition of power inside Turkey through increasing authoritarianism, he probably realized that he couldn't go too far with no allies outside the country. Initially, the Washington hawks needed Erdogan, as well as the Saudis, to do the dirty job, which was to assist Daesh terrorists and other groups in their proxy war against Bashar al-Assad. But the relations between the United States and Turkey probably started to decline dramatically when Washington realized that Erdogan was using jihadists to serve his own agenda, which was to expand Turkey's influence throughout Middle East, as well as, crush the Kurdish resistance, putting an end to any plans for a Kurdish state. The whole game resembles a mob-type exchange between a number of players, rather than relationships between nations. Furthermore, the high degree of uncertainty of the developments in Middle East betrays the multi-polarized power balance in a complex geopolitical terrain. Starting from Washington, it is clear that it has lost quickly the control of various "rebel" groups in Syria and Iraq, especially after a series of terrorist operations inside US and European soil that simulate a new type of non-linear war by the jihadists. As a result, it was forced to compromise with the Russian intervention in Syria, while silently accepted Iran and Hezbollah to clean up the mess in the Middle East. It appears that Washington also failed to deal with Erdogan's "uncontrolled" independence.

Turkey, Russia rapprochement not seen affecting Turkey's NATO role - Germany | Reuters: Germany does not believe that a thaw in relations between Turkey and Russia will affect Turkey's role in the NATO alliance, the German Foreign Ministry said on Monday. The spokeswoman welcomed moves by the two countries to end tensions after Turkey downed a Russian fighter jet near the Syrian border last November, and said better communication was important given their respective roles in ending the civil war in Syria. "We do not believe that the rapprochement between Turkey and Russia will have consequences for the security partnership within NATO," spokeswoman Sawsan Chebli told a regular government news conference. "Turkey is and remains an important partner within NATO." Turkish President Tayyip Erdogan is due to meet Russian President Vladimir Putin in St Petersburg on Tuesday for talks on the Syria conflict, trade, energy and the resumption of Russian charter flights to Turkey. The meeting comes amid growing strains in Ankara's ties with the West after a failed military coup in Turkey in which 230 people were killed. Turkey accuses the West of showing more concern over a post-coup crackdown than over the putsch itself. Markus Ederer, state secretary in the German foreign ministry, told reporters that he told Turkish officials during a visit on Monday that Germany took the attempted coup seriously. But he said he also insisted that Ankara should carry out post-coup investigations in line with European values and the principles of rule of law.

Erdogan Threatens To Abandon US Dollar In Trade With Russia – The unexpectedly sharp antagonism between Turkey and the west accelerated today, and one day after NATO preemptively reminded Turkey that it is still a NATO alliance member and advising Ankara that "Turkey’s NATO membership is not in question", when Turkey had some more choice words for its military allies.Cited by Reuters, Turkey foreign minister Mevlut Cavusoglu told Turkish's NTV television on Thursday that the country "may seek other options outside NATO f or defense industry cooperation, although its first option is always cooperation with its NATO allies." Translation: if Russia (and/or China) gives us a better "defensive" offer, we just may take it. The sharply worded retort came on the same day that Turkey said it will resume airstrikes on Islamic State targets in Syria, and asked Russia to carry out joint operations against its “common enemy.”  Ankara halted strikes after the downing of a Russian plane by Turkish forces last year. In the same interview, Cavusolgu said that Ankara “will again, in an active manner, with its planes take part in operations” against Islamic State targets. Cavusolgu also said that Ankara has called on Moscow to carry out joint operations against the “common enemy” of IS. "Let's fight against the terrorist group together, so that we can clear it out as soon as possible," Cavusolgu said, adding that otherwise IS will continue to expand and spread into other countries.

After Turkey Warns West May "Lose" The Country, NATO "Reminds" Ankara It Is Still An Alliance Member --Less than a day after Turkey's surprising pivot toward Russia, when in his first post-coup trip abroad Turkey president Erdogan flew not to a western, or NATO, ally but instead jaunted over the Russia to fix and cement future ties, including among other a resumption of work on the mothballed Turkish Stream gas pipeline, NATO appears to have gotten rather defensive, and in what some commentators dubbed an "odd move", reminded Turkey that it is still an ally member. From NATO's secretary general: In view of speculative press reports regarding NATO's stance regarding the failed coup in Turkey and Turkey’s NATO membership, let me stress NATO's very clear position. Turkey is a valued Ally, making substantial contributions to NATO's joint efforts.  Turkey takes full part in the Alliance’s consensus-based decisions as we confront the biggest security challenges in a generation. Turkey’s NATO membership is not in question. Our Alliance is committed to collective defence and founded on the principles of democracy, individual liberty, human rights and the rule of law. NATO counts on the continued contributions of Turkey and Turkey can count on the solidarity and support of NATO. The NATO Secretary General  spoke to the Turkish Foreign Minister on the night of the attempted coup and later with President Erdogan, strongly condemning the attempted coup and reiterating full support for Turkey’s democratic institutions. He expressed support for the elected government of Turkey and respect for the courage of the Turkish people. He also conveyed his condolences for those who had lost their lives during the coup attempt.

 Austria threatens to block acceleration of Turkish EU talks | Reuters: Austrian Foreign Minister Sebastian Kurz has threatened to block the expansion of negotiations with Turkey on its accession to the European Union, which could scupper a landmark migration deal between Brussels and Ankara. The Turkish government's crackdown on followers of a U.S.-based cleric whom it blames for last month's failed coup has strained relations with the 28-nation bloc, which depends on Ankara to restrict the westward flow of migrants. Talks on Turkish accession to the EU began in 2005, but only one out of 35 "chapters", or policy areas where Turkey must adopt and implement EU rules, has been concluded. "I have a seat and a vote in the (EU) foreign ministers' council. There the question is whether new negotiation chapters will be opened with Turkey, and I am against it," Kurz said in an interview with Austrian daily Kurier, threatening to block the unanimous agreement required by the council. Turkey has so far lived up to its side of the deal with Brussels to stop illegal migration to Europe via its territory, in return for financial aid, the promise of visa-free travel to much of the bloc and accelerated talks on membership. But visa-free access has been subject to delays due to a dispute over Turkish anti-terrorism legislation, which some in Europe see as too broad, and the post-coup crackdown. Kurz said Turkey had not met the conditions for progress to be made. "The criteria for visa liberalization will not be fulfilled by Turkey. And the requirements for accession talks have not been met," Kurz said.

Out of sight, out of mind? Europe's migrant crisis still simmers | Reuters: A year after hundreds of thousands of refugees snaked their way across southeastern Europe and onto global television screens, the roads through the Balkans are now clear, depriving an arguably worsening tragedy of poignant visibility. Europe's migrant crisis is at the very least numerically worse than it was last year. More people are arriving and more are dying. But the twist is that, compared with last year, a lot of it is out of sight. Take the border between Greece and Macedonia. Summer crops have replaced the city of tents at the border outpost of Idomeni, even if some locals are convinced there is an unseen population hiding in the surrounding forests, waiting for smugglers to assist them on their onward journey. The tiny Greek village was a focal point of the migrant flow north toward Germany and other wealthy countries, with thousands of refugees squatting for months waiting for sealed borders with Macedonia to open Elsewhere in the Balkans, a Reuters photographer, revisiting the people-packed locations where he and his colleagues captured last year's diaspora, found empty roads, unencumbered railway tracks and bucolic countryside. The comparison is stark. To see the pictures, click: reut.rs/2aLGrXM

Migrant Flows to Greek Islands Increase 76%  -- The flow of migrants to the Greek islands from Turkey has increased by 76%, after disputes between Ankara and Europe, following the failed coup attempt. The number of stranded asylum seekers coming from the Turkish shores to the northeast Aegean islands has exceeded 10,000. The number of registered migrants in the country has reached 57,098, according to the refugee crisis management coordinating committee. The number includes 7,638 refugees staying in premises rented by the United Nations High Commissioner for Refugees, another 2,756 stay in unorganized structures and an estimated 2,300 migrants are living outside any official or proper hospitality structure. At the same time, Greek authorities plan to transfer refugees and migrants who are stranded on the Aegean islands to mainland Greece. Many of the migrants on the islands have asylum applications pending review, thereby creating congestion on hospitality camps.

Tsipras debt comments hint at shift in position - Prime Minister Alexis Tsipras on Tuesday broached the contentious issue of the country’s debt in a post on Facebook that prompted widespread criticism from the political opposition as it appeared to hark back to leftist SYRIZA’s position on Greek debt before Tsipras’s administration capitulated and signed Greece’s third bailout.In the post on Facebook, Tsipras called on European leaders to “rise to the occasion” and show “the greatest display of solidarity.”The timing of the message was clearly symbolic, marking the anniversary of the signing of the so-called London Debt Agreement in 1953 which secured West Germany a write-down of more than 50 percent of the debts it accumulated during two world wars.The move by Tsipras also came amid reports that he aims to forge an alliance with the leaders of other countries in Southeastern Europe in a bid to bolster Greece’s bid for a debt restructuring and lower the primary surplus targets set by creditors.Tsipras is expected to explore the prospects for such an alliance at a meeting of European socialist heads of state scheduled to take place in Paris on August 25, particularly with Italian Prime Minister Matteo Renzi and French President Francois Hollande. According to sources, Tsipras aims to arrange a subsequent meeting in Athens, probably on September 9, to explore the prospects for Greek debt relief in more detail.

Tsipras vainly continues to seek alliances – this time in Europe - After he found closed doors in his quest for support for Greece in the other side of the Atlantic , the Greek PM, Alexis Tsipras, is about to try his luck in Europe. Meanwhile, six years have already passed since Greece entered the hellish neoliberal path of brutal austerity that, literally destroyed the economy. From RT : Greek Prime Minister Alexis Tsipras has invited the heads of Southern European countries to discuss a new alliance against the EU's tough austerity policy. A conference is expected to be held in Athens on September 9 attended by France, Italy, Spain, Portugal, Cyprus, and Malta. The talks will continue during Tsipras’ visit to Rome, where he plans to attend a meeting of European Socialists.  The meeting of the Southern countries will focus on the “common” challenges facing the EU, including austerity, fiscal measures and migration. In April, Tsipras and the newly-elected Prime Minister of Portugal, leftist Antonio Costa signed a joint declaration, calling for an end to austerity policies. [...] During his visit to Greece, Economic Affairs Commissioner Pierre Moscovici warned Athens it should concentrate on meeting the budget surplus requirements and stick to reforms to regain credibility and earn further debt relief, rather than opening discussions on softening the policies. Just read the last paragraph above and you will understand how much the Greek PM actually lives in a delusion. Moscovici repeated what every political puppet of the plutocracy repeats from both sides of the Atlantic for six years now, concerning Greece. If you need more proof, just look at the statements of the US Secretary of Treasury, Jack Lew, in his latest visit in Greece: “It is very important that Greece implements the measures agreed for the Privatization Fund as well as the reforms in the markets and services. These will mark a positive cycle for the economy and the Europeans can start the discussion on the Greek debt soon,”.  In other words, despite the absolute destruction, Greece must do more 'reforms' until the 'successful' completion of the brutal neoliberal experiment. This is the biggest concern of the puppets, not the debt relief and, most importantly, not anything that would give a real chance to the Greek economy to recover

Portugal’s public debt in June the highest ever | Macauhub English: Portugal’s public debt stood at 240.1 billion euros or 131.6 percent of gross domestic product at the end of June, the highest indebtedness ever, the Technical Budget Support Unit (UTAO) announced. The UTAO provides technical support to parliament. In its monthly statement on public debt it reported that indebtedness recorded at the end of June was higher than the end-of-year figure forecast by all national and international organisations. The forecasts by the International Monetary Fund, Organisation for Economic Cooperation and Development, European Commission and the Finance Ministry for public debt at the end of 2016 range from 124.8 percent of GDP (Portuguese government) to 128.3 percent of GDP (IMF and OECD). The UTAO indicated that the amount of debt registered in the first half-year may eventually diminish in the second half-year. But that possibility may be compromised by recapitalization of the public bank Caixa Geral de Depósitos and the result of the sale of Novo Banco, which should fall short of the 4.9 billion euros respectively applied. The UTAO also called attention to the upward revision of the budget deficit target for 2016, which is now 2.5 percent of GDP, and to the failed predictions for economic growth and inflation, which will impact the ratio used to calculate debt from the Maastricht Treaty standpoint.

Italy's National Debt Hits Record High, Reaches Some $2.5 Trillion: — Italy's public debt reached a historic high in June, exceeding 2.249 trillion euros ($2.518 trillion), the country's central bank said Friday. According to the Banca d'Italia bulletin, the country's government debt has increased by more than 77 billion euros in the first six months of 2016.  In April, the European Union's statistical agency Eurostat reported that the national debt of Italy in the end of 2015 stood at 132.7 percent of the country's GDP. According to the Italian government data, Italian debt now stands at some 141 percent of GDP, meaning that each of the country's 60.7 million citizens is over $40,000 in debt. In July, the International Monetary Fund (IMF) lowered the 2016-2017 growth forecast for Italy.

JPMorgan will clean up from Italy's banking crisis - Bank bailouts are a big, profitable business. And the collapsing Italian bank Monte dei Paschi di Siena — whose stock is nearly worthless (0.25 euros) and which was "rescued" twice by investors since 2014 and now must get an even larger "rescue" or else — has turned into fee nirvana for investment banks, particularly JPMorgan. Monte dei Paschi was the worst performer in the European Banking Authority's stress test. Under the adverse scenario, its Tier 1 capital ratio plunged into the negative (-2.4%), meaning its capital would be more than wiped out.  Now another rescue deal is in the works, this one far larger than the prior two that have failed so elegantly to solve the bank's problems. It involves a consortium of banks, led by JPMorgan, according to CEO Jamie Dimon, and in a secondary role by the Italian investment bank Mediobanca. Monte dei Paschi seeks to raise 5 billion euros in new capital and sell 9.2 billion euros in bad loans at a deep discount to get them off its books. And the underwriting fees will be extraordinarily juicy.  "Three sources involved in the deal" told Reuters the banks would extract 250 million euros in underwriting fees from the equity portion of the deal (raising 5 billion euros).  And there's more. The deal would also set up a special-purpose vehicle that would purchase Monte dei Paschi's bad loans. Funding the SPV would require a 6-billion-euro syndicated bridge loan. JPMorgan is trying to arrange that bridge loan, for which the investment banks could be paid up to 300 million euros in fees.

Hedge Funds Face New Blow as $83 Billion Pension Cuts Them Out - Danish pension fund PFA says it has found a way to boost returns in a world of ultra-low yields: cut out middle men like hedge fund managers and do it yourself. “Part of our new strategy is to do more investments directly instead of via specialized funds,” said Christian Lage, who helps oversee about $83 billion in pension savings as co-chief investment officer at PFA in Copenhagen. “Fund structures are typically very expensive and as yields have come down, the focus on costs has increased quite remarkably.” Most pension funds and insurers rely on third-party fund managers to handle their investments in alternative assets. With low and negative interest rates weighing on returns, cutting those costs has become more compelling. That’s bad news for hedge funds, which are already under pressure with more than 480 shutting up shop since the start of 2015 as returns slumped, and other money managers. “Asset managers that offer easily replicable strategies at high fees, such as hedge funds, are taking a hit,” said Tomasz Grzelak, a Zurich-based analyst at MainFirst Bank AG. “With ultra-low yields, pension funds are fighting for every basis point of fees.”

Deutsche Bank Unexpectedly Found To Have Massive Capital Gap, Larger Than Its Entire Market Cap - After the ECB concluded its latest annual stress test, which as expected found no problems with Europe's largest banks instead scapegoating Italy's well-known troubled banks in results that were widely discredited by the market, yesterday in an unexpected outcome, German economic research institute ZEW found that Germany's largest bank, Deutsche Bank, had the highest potential capital shortfall, as much as €19 billion in a study of 51 European banks using U.S. Federal Reserve stress test methods. The capital gap is greater than DB's entire market cap.  Using the Fed's approach, and thus a far more credible approach than that proposed by the ECB, the 51 European banks showed a total capital shortfall of 123 billion euros, with the largest gaps at Deutsche Bank, Societe Generale (13 billion euros) and BNP Paribas (10 billion euros). "European banks lack sufficient capital to offset the losses expected in the case of another financial crisis," the ZEW said in a statement on Tuesday, cited by Reuters. ZEW Finance Professor Sascha Steffen worked with New York University Stern School of Business and the University of Lausanne researchers to run stress tests used by the Fed in 2016 and the European Banking Authority (EBA) in 2014 to compare capital needs and leverage. While Societe Generale and BNP have market capitalisations of 26 billion euros and 55 billion euros, respectively, well above the study's theoretical capital gap, Deutsche Bank would find itself in trouble if the ZEW calculation is correct as it has a market capitalisation of less than €17 billion.

 IMF analysts urge ECB to focus on QE rather than negative rates - Economists at the International Monetary Fund are urging the European Central Bank to stop yanking interest rates further into negative territory, warning it will take a toll on the region’s already struggling banks and reduce lending to businesses and households. In a blog post on the IMF website, economists Andy Jobst and Huidan Lin say any additional cuts that would push rates further below zero will encounter diminishing returns and threaten, at this point, to do more harm than good. “Further policy rate cuts could bring into focus the potential trade-off between effective monetary transmission and bank profitability. Lower bank profitability and equity prices could pressure banks with slender capital buffers to reduce lending, especially those with high levels of troubled loans,” the analysts said on the blog. “The prospect of prolonged low policy rates has clouded the earnings outlook for most banks, suggesting that the benefits from a negative interest rate policy might diminish over time,” they said. The warning comes as expectations are rising the central bank will announce fresh stimulus at its September meeting to offset the negative impact on the eurozone from the U.K.’s Brexit vote on June 23. At its July meeting, ECB boss Mario Draghi stopped short of pledging more measures, saying the policy makers will reassess in September when it will have fresh economic forecasts that factor in the impact of the U.K.’s referendum on ending its EU membership.

Central Banks Pushing on Strings Again --This month has seen the antipodean central banks both cut rates, with almost no flow through to mortgages to relieve consumer debt and an appreciation in their respective currencies, in perfect opposition to their stated goals. This is not a new trend – far from it. What’s supposed to happen when the local economy slows is you pull the lever, Kronk, lower interest rates stimulate consumer spending, reducing savings rate as a deluge of money floods the economy, inflation goes up, wages go up, more spending and whoosh, in come the accolades from the captured business media elites. Now levers are pulled left right and centre and nothing seems to happen, further hindered by a lack of communication from both monetary and fiscal authorities into the truth of the matter at hand – that a lack of confidence in the direction of the economy is what is holding back consumer spending, not lower rates. Furthermore, communicating and smoothing the confidence game that is the market is now becoming more of a parasite/host relationship, instead of a divorced, clinical approach in the past. At Forexlive they put it a little less eloquently:  Back in the day a central bank would move rates when they saw fit and certainly didn’t massively advertise the fact. Traders and the population were left to infer expected action from what the economy was doing. If inflation was high then you’d get ready for hikes. If the economy was wobbling, you’d get prepared for cuts. Forward guidance was minimum but everyone knew where they stood on it. It made for some hairy monetary policy decisions but that’s what traders thrived on.  Nowadays no one should be expecting a big downside move on a cut, nor big upside move on a hike, unless it comes out of the blue. Forward guidance brings the move a rate cut would bring forward so when we get the actual rate cut, we’re expecting it. All that’s happened is the move has shifted forward in time.  As far as the currency is concerned, this rate cut has been a waste of time and now they may be forced into intervention to get it lower. We know how that’s worked out for them previously.

Demystifying Monetary Finance - Adair Turner – Eight years after the 2008 crisis governments and central banks – despite a plethora of policies and approaches – have failed to stimulate enough demand to produce sustained and strong growth. In Japan, so-called Abenomics promised 2% inflation by 2015; instead, the Bank of Japan (BOJ) expects it to be close to zero in 2016, with GDP growth below 1%. Eurozone growth halved in the second quarter of 2016 and is dangerously dependent on external export demand. Even the US recovery seems tepid.  Discussions of “helicopter money” – the direct injection of cash into the hands of consumers, or the permanent monetization of government debt – have, as a result, become more widespread. In principle, the case for such monetary finance is clear.   If the government cuts taxes, increases public expenditure, or distributes money directly to households, and if the central bank creates permanent new money to finance this stimulus, citizens’ nominal wealth will increase; and, unlike with debt-financed deficits, they will not face increased future taxes to pay off the debt incurred on their behalf. Some increase in aggregate nominal demand will inevitably occur, with the degree of stimulus broadly proportional to the amount of new money created. But the debate about monetary finance is burdened by deep fears and unnecessary confusions. Some worry that helicopter money is bound to produce hyperinflation; others argue that, in terms of increasing demand and inflation, it would be no more effective than current policies. Both cannot be right.

German bank charge fees for saving amid rising fears over negative rates -  A GERMAN bank has started charging customers to house large savings pots, as the fallout from the European Central Bank's (ECB) negative interest rate policy starts to bite.  Raiffeisenbank in Gmund is implementing a penalty rate of 0.4 per cent on private clients with more than €100,000 (£86,000) in their account from September onwards. Board member Josef Paul said: "We have contacted all the major investors specifically and advised them to start thinking. "If we do not create incentives to make a change, nothing will change." It comes as number of politicians from Angela Merkel's government have criticised the ECB's controversial negative interest rate policy, which are hurting German savers particularly hard and creating discontent.The measures are aimed at getting firms lending, but banks that have to pay 0.4 per cent to park excess deposits with the ECB overnight,a re struggling to cope and passing the cost on to customers. Many banks in Europe have scrapped free current accounts or increased the fees. And the latest move by Raiffeisenbank has heightened fears that more banks will start to charge retail customers to keep cash.

Economists Mystified that Negative Interest Rates Aren’t Leading Consumers to Run Out and Spend  - Yves Smith - Not only has it been remarkable to witness the casual way in which central banks have plunged into negative interest rate terrain, based on questionable models. Now that this experiment isn’t working out so well, the response comes troubling close to, “Well, they work in theory, so we just need to do more or wait longer to see them succeed.” The particularly distressing part, as a new Wall Street Journal article makes clear, is that the purveyors of this snake oil talked themselves into the insane belief that negative interest rates would induce consumers to run out and spend. From the story: Two years ago, the European Central Bank cut interest rates below zero to encourage people to spend more. Policy makers in Europe and Japan have turned to negative rates for the same reason—to stimulate their lackluster economies. Yet the results have left some economists scratching their heads. Instead of opening their wallets, many consumers and businesses are squirreling away more money. When Ms. Hofmann heard the ECB was knocking rates below zero in June 2014, she considered it “madness” and promptly cut her spending, set aside more money and bought gold. “I now need to save more than before to have enough to retire,” says Ms. Hofmann, 54 years old. Recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three non-eurozone countries with negative rates, savings are at their highest since 1995, the year the Organization for Economic Cooperation and Development started collecting data on those countries. Companies in Europe, the Middle East, Africa and Japan also are holding on to more cash. The article then discusses that these consumers all went on a saving binge..because demographics! because central banks did a bad job of PR! Only then does it turn to the idea that the higher savings rates were caused by negative interest rates. How could they have believed otherwise? Do these economists all have such fat pensions that they have no idea what savings are for, or alternatively, they have their wives handle money?

You can lower interest rates but can you raise inflation? - Last week the Bank of England lowered their interest rates. This combined with previous moves by the ECB and the Bank of Japan and the reduced probability that the US Federal Reserve will increase rates soon is a reminder that any normalization of interest rates towards positive territory among advanced economies will have to wait a few more months, or years (or decades?). The message from the Bank of England, which is not far from recent messages by the Bank of Japan or the ECB is that they could cut interest rates again if needed (or be more aggressive with QE purchases). Long-term interest rates across the world decreased even further. The current levels of long-term interest rates have made the yield curve extremely flat. And in several countries (e.g. Switzerland) interest rates at all horizons are falling into negative territory. The fact that long term interest rates is typically seen as the outcome of large purchases of assets by central banks around the world. In fact, many see it as a success of monetary policy actions. But if monetary policy is being successful we expect inflation expectations and growth expectations to increase. Both of these forces should push long-term interest rates higher not lower! Something is fundamentally not working when it comes to monetary policy and it is either the outcome of some forces that the central banks are unable to counteract or the fact that central banks are not getting their actions and communications right. On the communications I will repeat the argument I made earlier: When central banks repeat over and over again that they can lower interest rates even more they are misleading some to believe that lower interest rates (long-term and short-term, real and nominal) are a measure of success of monetary policy. This is not right. Lower nominal interest rates across all maturities cannot be an objective when inflation and growth are seen as too low. Success must mean higher nominal interest rates. And success must mean at some point a steeper yield curve not a flatter one.

Transmitting liquidity shocks across borders - When funding conditions became much more difficult in the recent financial crisis, how did UK banks react?  Did they adjust their domestic and external lending to different degrees?  Did foreign-owned banks behave differently from UK-owned banks, and did it make a difference whether they were a branch or a subsidiary?  Did the other features of their balance sheet make a material difference to their lending behaviour?  Our research suggests that the answer to all of these questions is “yes”. This is an important set of questions because it helps us to establish the extent to which international activities of banks act as a cross-border transmission mechanism for liquidity shocks – and indeed whether they amplify those shocks.  In a recent Bank of England Staff Working Paper (also in the IMF Economic Review), we looked to answer these questions, using a proprietary dataset on individual UK-resident banks’ activities. Given the UK’s importance as an international financial centre, the results of an exercise of this sort limited to UK-resident banks would be of interest in and of themselves.  But our work forms part of a much broader project.  The International Banking Research Network (IBRN), which was established in 2012, brings together central bank researchers from around the world.  Central banks are in a unique position to understand developments in the banking sector, since they often collect individual bank-level data that are typically not available to others – even to other central banks.  But if each central bank research team investigates a common research question and uses similar methods, they are able not only to make cross-country comparisons across different jurisdictions, but also to start to put together a map of how shocks propagate globally.  The first IBRN project (of which our paper was a part) is described in this VoxEU post by Claudia Buch, James Chapman and Linda Goldberg, and the full set of papers was published in a special issue of the IMF Economic Review.

  ECB credit buying hits 15 billion euros in 2 months after weekly jump | Reuters: The European Central Bank increased its company debt purchases last week despite the summer lull, bringing the total bought in two months to 15 billion euros, more than many in the market had expected, data showed on Monday. The ECB bought 1.76 billion euros (£1.49 billion) worth of corporate bonds in the seven days to August 5, up by 29 percent on the previous week, while purchases of sovereign debt, which accounts for a much larger portion of the total, slowed. The ECB started buying bonds issued by euro zone companies - provided that they have at least one investment grade rating and are not banks - on June 8 in a bid to stimulate hiring and investment by lowering borrowing costs for firms. Since then, it has spent 7.5 billion euros a month on that debt, in line with the 5-10 billion euros range that sources had told Reuters the ECB was targeting before the programme started. Several market observers had voiced doubts that the ECB would manage to buy so much given the reluctance of many credit investors to part with their existing holdings at a time when high returns on investment are hard to find. "If they can achieve this rate of purchases in the quiet summer period, it should be very encouraging for the more liquid autumn months,"

EU nations' red lines for Brexit: a first look - The Japan Times: U.K. Prime Minister Theresa May faces a daunting array of demands from European Union nations when the time comes to negotiate Britain’s relationship with the bloc, an analysis of the 27 other members shows. The survey — based on responses from ministries, public comments from government officials and interviews with policymakers — reveals European leaders are laying down their own red lines as May’s team weighs what it wants to seek in the Brexit talks. The result is a complex patchwork of priorities — from fishing to shipping, an insistence on freedom of movement to the sovereignty of Gibraltar — that may run counter to what the U.K. wants to achieve and that it will have to seek to satisfy if May is to meet her commitment of making a success of Britain’s withdrawal from the EU. “Clearly there are going to be different issues raised by all the different sides,” “The EU is ultimately a compromise of national interests, so whatever the U.K. gets in the end will be that.”Worryingly for May and her Brexit minister, David Davis, several countries — including Germany, Portugal and the Czech Republic — insist that the U.K. adhere to rules on free movement of labor in return for access to the single market in goods and services. Many who backed Brexit did so in the belief it would mean fewer immigrants. Just three fellow EU members — Denmark, Austria and Bulgaria — cited a shared concern with Britain over immigration, suggesting that May will find sympathy in short supply. France signaled it is ready to go even further and link freedom of movement to Britain’s ambition of retaining the passporting rights that allow the financial industry to sell services and raise money on the continent.

Brexit Britain will miss cheap EU funds for infrastructure - Financial Times - The economic and financial consequences of Britain’s decision to exit the EU are beginning to unfold. Sterling has plunged; the markets remain jittery; and investment decisions are on hold. All this was predicted, but no attention has been paid to the damaging consequences of the UK’s exclusion from the European Investment Bank if we leave the EU. The EIB, the EU’s “house bank”, is the world’s largest multilateral lending institution, borrowing and lending twice as much as the World Bank. Founded under the Treaty of Rome of 1957, its shareholders are the EU member states and its primary function is to promote the balanced economic development of the EU. It does this by raising funds through bond issues on the world’s capital markets, and lending them long-term and on a non-profit basis for technically and financially viable projects deemed likely to promote economic development. No subsidy or direct call on the taxpayer is involved. The EIB raises its funds on the strength of the rating accorded to it by virtue of the capital provided (mostly subscribed rather than paid-up) by the member states. Most of the EIB’s investment is in the member states and for infrastructure. There are few recent major European infrastructure projects in which the bank has not been involved. Since Britain became a shareholder in 1973 the EIB has invested heavily throughout the UK in such sectors as transport, energy, environment, social capital (education, housing and health), technical innovation and, through UK banks, in small and medium-sized businesses.

Brexit: Two-track trade talks are best for UK --There is general confusion over who is in charge of Britain’s trade negotiations with the EU. The trio of ministers potentially involved are Boris Johnson, the foreign secretary, Liam Fox, international trade secretary and David Davis, Brexit secretary. As the Financial Times recently asked: “What are Mr Johnson, Mr Davis and Dr Fox all supposed to do?” Clarity is needed over both the roles of ministers and the sequencing of tasks if the eventual outcome is to be the best negotiated deal for Britain. Fundamentally, there are two alternative structures for the UK’s post-Brexit trade relations with the rest of the world. The first is for it to remain a member of the EU customs union. This preserves tariff-free trade with other EU members. It also requires Britain to continue to impose the EU’s tariffs on non-EU members such as the US, China, Japan, Australia and so on. The UK would not be able to negotiate separate trade agreements with those countries. Instead, its trade policy would continue to be set by the EU. Negotiation with Brussels will determine the concessions that the UK would need to agree for remaining a member of the customs union. These are likely to include some form of free movement of EU citizens and payments into the EU budget. Those talks should be led by Mr Davis, the Brexit secretary, as they are a central plank of the country’s post-Brexit relationship with the Union. The other track is for Britain to revert to its individual World Trade Organisation membership augmented by whatever bilateral free-trade agreements it might negotiate with like-minded countries not in the EU. Britain’s exports to the Union would be subject to the latter’s tariff regime, which averaged 2.7 per cent in 2011. The effect of higher tariffs would be more than offset by the 9.9 per cent depreciation of sterling against the euro if it persists.

UK industrial production shows fastest growth in 17 years - Second quarter industrial output in Britain grew 2.1 percent compared with the first, according to the UK’s Office of National Statistics. This is the fastest growth rate since 1999. The ONS noted that the UK vote to leave the European Union did not slow down growth. “Any uncertainties in the run-up to the referendum seem to have had little impact on production, with very few respondents to our surveys reporting it as an issue,” ONS chief economist Joe Grice said as quoted by Reuters.  Most of the expansion in the quarter came in April with an increase in output of more than two percent compared to the previous month. By June the month on month increase had slowed to 0.1 percent. “The 2.1 percent quarter-on-quarter rise in production in the second quarter mainly reflected the 2.3 percent month-to-month jump in production in April,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. Meanwhile, ONS data reveals Britain's trade deficit widened to over $16 billion (£12.4 billion) in June, compared to a $15 billion (£11.5 billion) the month before as imports reached a record high of nearly $63 billion (£49 billion). Seeking to drive economic growth after voting to quit the European Union, the UK is attempting to buoy its trade with the rest of the world. However, Britain sold over $16 billion (£12 billion) worth of goods and services to EU countries in June, $650 million (£500 million) more than a month earlier. Following the June 23 vote, the British pound dropped more than 10 percent against other currencies, indicating a further boost to future exports and rising cost of imported products.

Corbyn consolidates grip on Labour with high court and NEC successes - Jeremy Corbyn has consolidated his grip on the Labour party after he won the first round of the latest high court battle over the rules of the leadership contest – and his supporters swept the board in elections to the party’s ruling National Executive Committee. After another day of twists and turns in the fierce battle for the future of the party, some of Corbyn’s critics among Labour MPs were privately saying his position now appeared unassailable. A high court judgment, issued on Monday morning, struck down the six-month cutoff point imposed by the NEC for members to vote in the leadership contest, with Mr Justice Hickinbottom saying it was a breach of contract against the five new members who brought the case. The NEC vowed to continue the fight, issuing a statement saying: “The procedures committee of the NEC has decided that the Labour party will appeal this ruling in order to defend the NEC’s right, as Labour’s governing body, to uphold the rule book, including the use of freeze dates.” But as Corbyn’s backers, including shadow chancellor John McDonnell, condemned the plans for an appeal, it emerged that they will soon have decisive control of the NEC, after party members elected all six candidates on a pro-Corbyn slate. Results of the NEC elections showed that the six members elected to represent constituency Labour parties were Corbyn backers, while his critics, including current member Johanna Baxter, who recently complained about bullying in the party, and the comedian Eddie Izzard lost out.

Negative interest rates, US election and Brexit 'driving demand for gold' - Figures from the World Gold Council show that investment demand soared 127% in the six months to the end of June compared to the same period in 2015, the second highest half year on record.  Appetite for the precious metal was 16% higher than during the financial crisis, and Alistair Hewitt, head of market intelligence at the World Gold Council, told the Press Association: "When a stress event hits, gold typically performs well and investors see its safe haven value. "Negative interest rates are the primary concern for investors, and Brexit and the US election have also played their part in driving demand." Exchange traded funds were the main drivers of investment in gold over the half. The price of gold also continued to climb, rising 25%, its best first half performance since 1980. The Gold Council's latest report comes a week after the Bank of England cut interest rates for the first time in more than seven years, to 0.25% from 0.5%. It said: "Investment was the largest component of gold demand for two consecutive quarters - the first time this has ever happened.  Negative interest rate policies in Japan and Europe, combined with expectations of a slowdown in the cycle of US rate hikes, underpinned investors' gold-positive sentiment.

Brexit economic impact: Britain's bonds, gilts, pensions - Business Insider: Britain's pension industry could find itself in difficulty because its key asset holdings – government bonds – have negative yields. Pension funds, the money that is invested to make returns for workers and are then given out once they retire, are among the largest holders of UK government debt. They invest this way because the funds are more risk adverse and government bonds are seen as safe and steady, unlike asset classes such as equities. So, if government bonds are not producing returns, this means it is increasingly difficult for institutions to give workers agreed pension payouts once they retire. In other words, there is a real chance that some of the country's largest companies will struggle to pay pensions, if Britain's economic situation stays the same as it is now for the next couple of years. Ever since Britain voted to leave the European Union — Brexit — on June 23, Britain's markets have been on a rollercoaster ride. The pound has sunk to 30-year lows, UK government bonds (gilts) traded in negative territory on Wednesday, and Bank of England has cut interest rates to a record low of 0.25%. This is after keeping rates at 0.5% since March 2009. Low interest rates are great for people in debt — it keeps the cost of borrowing cheap.  The rate cut, as well as the BOE's £70 billion asset purchase programme, is part of the central bank's stimulus programme. Low rates are meant to therefore stimulate the economy as it allows people to keep paying their debts, including mortgages, as well as keep them spending.  But for savers, this is terrible. This is because it means you make very little on fixed income investments, such as bonds. The stimulus plan also pushes bond yields lower.

How the House of Lords could delay Brexit - Baroness Patience Wheatcroft made national headlines on Monday by warning that the House of Lords would use its powers to delay a Brexit taking place if the matter was put before parliament.  The Tory peer told the Times newspaper that the unelected house would delay the activation of Article 50 if given the opportunity. "If it comes to a bill," Baroness Wheatcroft said, "I think the Lords might actually delay things. I think there’s a majority in the Lords for remaining."  Article 50 is the piece of EU legislation British government must trigger in order to begin the 2-year process of formally withdrawing from the 28-nation bloc. "It is imperative that we don't press the button on Article 50," she added.  Baroness Wheatcroft's warning will provide yet another headache for Theresa May who is beginning to realise just how difficult delivering a Brexit is going to be. BI has pointed out the many hurdles in the way of Britain leaving the EU following the June 23 referendum.  But how could an unelected chamber which very rarely gets involved in legislative wrestling matches have such a massive influence say in one of Britain's most important events? Below is an explanation.

Early Macro News and Lessons from the Brexit -- Menzie Chinn --What if you promise to withdraw from free trade agreements [1], limit capital mobility [2], and heighten immediately policy uncertainty? What will you get? We have early returns from an unnatural experiment in the UK. The first bit of news is early estimates of monthly GDP, from the NIESR: Our monthly estimates of GDP suggest that output grew by 0.3 per cent in the three months ending in July 2016 after growth of 0.6 per cent in the three months ending in June 2016. The month on month profile suggests output declined in July by 0.2 per cent. This estimate is consistent with our latest quarterly forecast, which forecasts a contraction of 0.2 per cent in the third quarter of this year, as a whole. We estimate that there is an evens chance of a technical recession between the third quarter of 2016 and the final quarter of 2017.  The press release for the 3 August forecast is here. Transforming the monthly GDP data into 3 month percent changes yields Figure 2, which is plotted against the Baker, Bloom and Davis policy uncertainty index for the UK.  In other news, house prices have declined markedly. These are real side developments that were presaged by the collapse in consumer confidence, the flattening of the yield curve, and the persistent depreciation of the pound. (The latter is “real” in the sense that given price stickiness, the real exchange rate has depreciated, resulting in a terms of trade loss to the UK, as pointed out by Simon Wren-Lewis).

Negative rates, helicopter money and the Bank of England - Yesterday Mark Carney said he was against negative interest rates and helicopter money, but in reality he implemented a way of doing a version of both. Let me explain.  When negative interest rates are discussed, we normally think about savers, and the fact that they could avoid being charged to deposit money in a bank by hoarding cash. But borrowers would have no problem with negative rates: borrow £1000, and just pay back £990. The bank they borrowed from would have, unless there were negative rates on savings or they were getting a subsidy to lend.  Helicopter money is normally thought of as the central bank sending a cheque to every citizen. But the key point for economists is not the way the money is distributed, but the fact that it is created by the central bank and given away in return for nothing. (QE involves creating money to buy assets.) Who the money goes to is of course important, but it is not really the defining characteristic of the measure.  We normally think about monetary policy as changing the interest rate. If rates are cut, that benefits borrowers but is bad for savers. But suppose the central bank gave money to private banks, on condition that this money was passed on in the form of lower rates to borrowers. If it did this, but did not change the interest rate, that would be helping borrowers but not hitting savers. The Bank introduced such a scheme yesterday, called the Term Funding Scheme (TFS). What is more, this subsidy for borrowers is financed by creating money. Eric Lonergan argues that the ECB is doing something similar, and if there is any insight in this post I owe it to him (but if there isn’t it is my fault not his!).  So if you think the Bank has ruled out negative rates, you are half wrong. In principle the Bank can expand TFS to make borrowing as cheap as it likes, which could even mean negative interest rates for borrowers. If you think the Bank has ruled out helicopter money, you are half wrong. It is creating money to give away with nothing in return, but just giving the money to one particular group: borrowers.

U.K. 10-year bond yields slide to fresh record low - Interest rates on U.K. government debt dropped to a fresh all-time low on Tuesday, as investors continued to digest the Bank of England's aggressive stimulus package unveiled last week. The yield on 10-year Gilts fell 9 basis points to 0.591%, breaking below 0.60% for the first time ever. U.K. borrowing costs have been falling steadily since the country's Brexit vote in June and on Thursday last week, yields took another dive after the BOE meeting. The central bank cut its interest rate to a record low of 0.25%, restarted its asset purchase program, and announced plans for corporate bond buys and ultracheap funding for banks. The measures have also weighed on the pound, which continued to slide on Tuesday. Sterling bought $1.2999, down from $1.3040 late Monday in New York. Against the euro, the pound dropped to €1.1722 compared with €1.1760 on Monday.

Bank of England easing bonanza may add pressure for more ECB easing: The Bank of England's bigger-than-expected policy-easing move last week adds pressure to the European Central Bank (ECB) to take further stimulating action, economists have said. In the wake of the U.K.'s destabilizing vote to leave the European Union in June, the Bank of England cut interest rates for the first time in over seven years on Thursday. The bank also announced a £70 billion ($78 billion) hike to its quantitative easing program and a new Term Funding Scheme worth up to £100 billion to provide cheap funding to lenders. Eyes will next be on the ECB, whose Governing Council meets on September 8, to see if it too will ease policy to diminish the negative impact from the Brexit vote on the euro zone.  'The Bank of England's policy action last week added to the pressure on the ECB to do more," economists led by Roger Bootle at Capital Economics said in a weekly report on Monday.  "At the moment, the ECB's self-imposed restrictions would prevent a large expansion of its asset-purchase program. But those limitations can be amended, so should not prevent the ECB from announcing an increase in the pace of its asset purchases in September," they added.

How British firms built a pyramid scheme in China that lost millions: As David Byrne ate breakfast at the Tongli Lakeview Hotel outside Shanghai one Sunday in April, an angry customer was waiting for him. Byrne, 52, is a British businessman who sells investment products. The previous day, he had introduced himself to a roomful of potential customers in the hotel as the new London head of a foreign currency trading platform whose website offered very high returns. But Tang Hongde, the man watching as Byrne lingered over his meal, wanted to talk about an earlier venture which the Briton had said he headed. That operation, called EuroFX, had also promised fat returns on foreign exchange. Chinese law enforcement authorities now say it was a pyramid scheme, which used cash from new investors to pay older ones. One Chinese official with direct knowledge of the matter says it could also have been part of a global fraud. So far, Chinese police records in nine provinces show, police have received at least 319 consumer complaints about EuroFX. In total, police have estimated losses of at least 455 million yuan ($70 million) and issued 23 arrest warrants for illegal fundraising by people in China. Police did not respond to requests for more information. Some investors say those complaints are just the tip of the iceberg. A group in Shanghai has collected the details of at least 3,700 victims in China, and others in nine countries from the United States to the Philippines say they were also ensnared by EuroFX. Collectively, they claim to have lost more than $1 billion. Reuters spoke to 35 of them, and their stories reveal a trail of pain. “Many people invested the money they use to buy food,” said one 50-year-old Chinese woman who herself was arrested for encouraging others to invest.