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

Saturday, August 20, 2016

week ending Aug 20

 What caused the Fed’s dovish turn? - -Several commentators (see here, here and here) have noted recently that the Federal Reserve has made a major shift in its attitude towards the future path for US interest rates. When the FOMC increased rates last December, they seemed quite confident that the 0.25 per cent hike was the first in a long line of similar increases each quarter, driven by the need to “normalise” interest rates gradually over time. At that stage, they also seemed fairly sure that they knew what “normal” meant. Now, they seem to have lost that certainty, and have simultaneously shifted their central assessment of the “normal” level for short rates sharply downwards. This has not surprised the markets, which moved in that direction well ahead of the FOMC. But it has strengthened the conviction among investors that the doves are now firmly in control at the Fed. Last week, Ben Bernanke released an important blog, analysing the main reasons for the FOMC’s change of view, and largely giving his seal of approval. Although the former Fed President has of course been inclined towards dovishness ever since 2008, it is significant that he views the shift as being underpinned by deep fundamental forces inside the US economy, not by minor fluctuations in incoming economic data. Mr Bernanke is certainly right that domestic fundamentals have changed, but I think his blog has underplayed another significant reason for the Fed’s shift, which is a dawning realisation that events in foreign economies are far more important in determining the equilibrium level of US rates than has previously been accepted. In fact, this has probably been the main factor in the Fed’s U-turn this year. Until this changes, the Fed will err on the dovish side whenever a key decision is taken.

Gaining confidence, Fed officials eye interest rate hike this year | Reuters: The Federal Reserve is raising expectations for an interest rate rise this year, even as early as next month, after two policymakers on Tuesday said the economic stars now appear to be aligning despite weak U.S. economic growth in the first half of 2016. New York Fed President William Dudley said "it's possible" to raise rates at the Sept. 20-21 policy meeting given evidence of wage gains and a tighter labor market that could boost inflation, while Dennis Lockhart of the Atlanta Fed said a hike next month is in play. The comments, which prompted investors to boost bets on a rate hike, came nine days before the annual meeting of some of the world's top central bankers in Jackson Hole, Wyoming, a venue the Fed often uses to telegraph policy plans. As June's shock UK vote to leave the European Union fades with little lasting effect on markets, the U.S. economy is bouncing back from a meager 1.0 percent growth rate in the first six months of the year. Employment surged in June and July, while on Tuesday data showed solid gains in industrial output and home building in the world's largest economy. "We're edging closer towards the point in time where it will be appropriate I think to raise interest rates further," Dudley, a permanent voter on policy and a close ally of Fed Chair Janet Yellen, said on the Fox Business Network. The central bank raised interest rates from near zero in December last year, its first monetary policy tightening in nearly a decade, but it has since kept its policy rate unchanged amid financial market volatility and stalled economic growth.

FOMC Minutes: "Near-term risks to the domestic outlook had diminished" -- From the Fed: Minutes of the Federal Open Market Committee July 26-27, 2016. Excerpts:  With respect to the economic outlook and its implications for monetary policy, members continued to expect that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace and labor market indicators would strengthen. Members saw developments during the intermeeting period as reducing near-term uncertainty along two dimensions discussed at the June meeting. The first was about the outlook for the labor market. They agreed that the strong rebound in job gains in June--together with a rise in the labor force participation rate and a decline in the number of individuals who were working part time for economic reasons--suggested that, despite the very soft employment report for May, labor market conditions remained solid and slack had continued to diminish. Many members commented on the somewhat slower average pace of improvement in labor market conditions in recent months. Several of these members observed that the recent pace of job gains remained well above that consistent with stable rates of labor utilization. A couple of members indicated that, in light of their judgment that labor market conditions were at or close to the Committee's objectives, some moderation in employment gains was to be expected. In contrast, several other members expressed concern about the likelihood of a further reduction in the pace of job gains, and it was noted that if that slowing turned out to be persistent, the case for increasing the target range for the federal funds rate in the near term would be less compelling.

The Unwinding of QE Has Begun --  Don't look now, but the Fed is quietly unwinding QE. As seen in the figure below, the Fed's share of marketable treasuries has been shrinking: To be clear, this is a passive unwinding of QE. The Fed's treasury holdings have not changed, but the stock of marketable treasuries has grown. Nonetheless, this is still an unwinding according to the portfolio channel of monetary policy. This channel says the Fed's taking of safe treasury assets from the public would force investors to rebalance their portfolios toward riskier assets. This rebalancing, in turn, would reduce risk premiums, lower interest rates, push up asset prices, and help shore up the recovery. Now the portfolio channel should be working in reverse. The public is getting a larger share of treasuries relative to the Fed thanks to the ongoing budget deficits. Moreover, this passive unwinding by the Fed is being reinforced by other central banks according to CNN Money In the first six months of this year, foreign central banks sold a net $192 billion of U.S. Treasury bonds, more than double the pace in the same period last year, when they sold $83 billion.  China, Japan, France, Brazil and Colombia led the pack of countries dumping U.S. debt. It's the largest selloff of U.S. debt since at least 1978, according to Treasury Department data.  So have all these central bank actions caused U.S. treasury yields to take off? Have the Bill Grosses of the world finally vindicated themselves? The answer is no. Treasury yields continue to remain at historic lows despite the unloading of treasuries by central banks. How can that be? Here is CNN again with the answer: Despite all the selling by these countries, private demand for the bonds has sky rocketed. Demand is so high that the U.S. can afford to pay historically low interest rates. The 10-year U.S. Treasury hit a record low of 1.34% earlier this year, before bouncing back to about 1.58%, currently,

Fed's Williams Calls For An Overhaul Of Monetary And Fiscal Policy... But There Is A Problem -- Several months after St. Louis Fed president James Bullard infamously flipped from one of the Fed's most vocal hawks to the dovish equivalent of Kocherlakota, no longer expecting more than 1 rate hike over the next few years, earlier today another legacy dove, today San Fran Fed president John Williams published a letter titled "Monetary Policy in a Low R-star World", in which he recommended an overhaul of policy orthodoxy. Central banks and governments around the world must be able to adapt policy to changing economic circumstances. The time has come to critically reassess prevailing policy frameworks and consider adjustments to handle new challenges, specifically those related to a low natural real rate of interest. While price level or nominal GDP targeting by monetary authorities are options, fiscal and other policies must also take on some of the burden to help sustain economic growth and stability. Specifically, he urged central bankers and governments to come up with new policies to buffer their economies against persistently low interest rates that threaten to make future recessions deeper and more difficult to avoid.Williams’ analysis centers on the idea that neutral interest rates, are not only historically depressed but may be set to decline further. The following chart from Bloomberg shows a widely accepted calculation of r* using the Williams-Laubach methodology, according to which the US natural rate of interest is as of this moment effectively zero. With r-star at zero, monetary policy is virtually helpless to boost growth while keeping inflation low, and as a result he urged governments to prepare to provide a stronger fiscal backstop and central bankers to consider scrapping the practice of targeting low inflation; in order words he is pushing for monetary policy that overheats the economy and leads to inflation that is higher than the Fed's target rate of 2%. Setting higher inflation targets, tying monetary policy directly to economic output, instituting government spending programs that automatically kick in during economic downturns, and boosting investment in education and research are all policies that should be considered. Without such changes, Williams warned, policymakers will find themselves hamstrung. "There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low," Williams said.

Fed’s Williams says inflation target should be increased - With interest rates likely to remain low around the globe, San Francisco Fed President John Williams says the central bank should consider aiming for higher inflation. In an economic letter posted on his regional Fed bank’s website, Williams suggests the Fed consider raising its inflation target now set at a 2% annual rate. The current target “is not well suited” for the new low-interest-rate era because “there is simply not enough room for central banks to cut interest rates in response to an economic downturn,” Williams said.   Historically the Fed has cut real interest rates by five percentage points in a recession, according to experts. In its most recent estimate, the Fed thinks that longer-run interest rates will only rise to 3%, down from its estimate of 4.25% in 2012. So with interest rates not likely to rise by much, the Fed is expected to have to resort to extraordinary measures like additional bond buying or negative rates to stimulate the economy in the face of a renewed downturn. The Fed set a 2% inflation target in 2012. It was designed to give the public a clear idea about the goal of monetary policy and keep inflation expectations steady.But with interest rates stuck so close to zero, there has been increasing discussion of the need for higher inflation among outside monetary policy experts. Former Fed Chairman Ben Bernanke said last year he didn’t see “anything magical” about the 2% target. But Bernanke said the change in the target would face several hurdles, including making sure the public didn’t come to expect soaring inflation.

The Case for Raising the Fed’s Inflation Target - Greg Ip - Six years ago, Olivier Blanchard, then chief economist at the International Monetary Fund, floated the idea that central banks should target 4% inflation instead of 2%. I remember giving a colleague countless reasons why he was wrong. It was I who was wrong. Events since 2010 have led me to conclude those objections no longer apply. The Federal Reserve should give serious consideration to raising its inflation target.  Some people at the Fed are also having a rethink. Last week John Williams, president of the Federal Reserve Bank of San Francisco, made the case for a higher inflation target in a bank newsletter. The subject will almost certainly be in the air when Fed officials and their foreign counterparts meet next week at the annual Jackson Hole symposium. Mr. Blanchard’s paper, written with colleagues Paolo Mauro (who, like Mr. Blanchard, is now at the Peterson Institute for International Economics) and Giovanni Dell’Ariccia, noted the historical case for low inflation rested on the assumption that high inflation created damaging distortions and more frequent recessions. Low inflation or deflation was a trivial risk because central banks could easily drive inflation higher by promising to print more money. But in 2008, central banks around the world cut interest rates to nearly zero and printed copious amounts of money, and only lackluster growth followed. “Higher average inflation, and thus higher nominal interest rates to start with, would have made it possible to cut interest rates more,” the authors wrote, which would have made the recession less deep.

 More Support for a Higher Inflation Target - Carola Binder -- Ever since the FOMC announcement in 2012 that 2% PCE inflation is consistent with the Fed's price stability mandate, economists have questioned whether the 2% target is optimal. In 2013, for example, Laurence Ball made the case for a 4% target. Two new NBER working papers out this week each approach the topic of the optimal inflation target from different angles. Both, I think, can be interpreted as supportive of a somewhat higher target-- or at least of the idea that moderately higher inflation has greater benefits and smaller costs than conventionally believed.  The first is called "Infrequent but Long-Lived Zero-Bound Episodes and the Optimal Rate of Inflation." One benefit of a higher inflation target is to reduce the occurrence of zero lower bound (ZLB) episodes, so understanding the welfare costs of these episodes is important in calculating an optimal inflation target. The authors explain that in standard models with a ZLB, normally-distributed shocks result in short-lived ZLB episodes. This is in contrast with the reality of frequent but long-lived ZLB episodes. They build models that can generate long-lived ZLB episodes and show that welfare costs of ZLB episodes increase steeply with duration; 8 successive quarters at the ZLB is costlier than two separate 4-quarter episodes.The second paper is called "The Elusive Costs of Inflation: Price Dispersion during the U.S. Great Inflation." This paper notes that in standard New Keynesian models with Calvo pricing, one of the main welfare costs of inflation comes from inefficient price dispersion. When inflation is high, prices get further from optimal between price resets. This distorts the allocative role of prices, as relative prices no longer accurately reflect relative costs of production. In a standard New Keynesian model, the implied cost of this reduction in production efficiency is about 10% if you move from 0% inflation to 12% inflation. This is huge-- an order of magnitude greater than the welfare costs of business cycle fluctuations in output. This is why standard models recommend a very low inflation target.

Did It Matter What Types of Assets the Fed Purchased? - St Louis Fed - One of the major intents of the Fed’s large-scale asset purchase programs was to drive longer-term interest rates down, thus encouraging people to spend more. But how did these large-scale asset purchases affect the economy as a whole, and did the composition of assets purchased matter? Amir Kermani, an assistant professor at the University of California-Berkeley, examined this question in his paper “Unconventional Monetary Policy and the Allocation of Credit,” presented at the St. Louis Advances in Research (STLAR) Conference on April 7-8. In the video above, he discussed his work in an interview with St. Louis Fed Vice President and Economist David Andolfatto.

 Key Measures Show Inflation close to 2% in July --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:  According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.7% annualized rate) in July. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was unchanged (-0.5% annualized rate) in July. The CPI less food and energy rose 0.1% (1.1% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for July here. Motor fuel was down 43% annualized in July. This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.6%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy also rose 2.2%. Core PCE is for June and increased 1.6% year-over-year.  On a monthly basis, median CPI was at 2.7% annualized, trimmed-mean CPI was at 1.8% annualized, and core CPI was at 1.1% annualized.  Using these measures, inflation has generally been moving up, and most of these measures are at or above the Fed's target (Core PCE is still below).

 What Drives Forecaster Disagreement about Monetary Policy? - NY Fed - What can disagreement teach us about how private forecasters perceive the conduct of monetary policy? In a previous post, we showed that private forecasters disagree about both the short-term and the long-term evolution of key macroeconomic variables but that the shape of this disagreement differs across variables. In contrast to their views on other macroeconomic variables, private forecasters disagree substantially about the level of the federal funds rate that will prevail in the medium to long term but very little on the rate at shorter horizons. In this post, we explore the possible explanations for what drives forecasts of the federal funds rate, especially in the longer run.  Monetary policy rules are a common way to summarize, with an equation, the policy decisions of central banks. For the United States, a commonly used rule links the current value of the federal funds rate to its past value plus three additional components: (1) the deviation of inflation from the long-run goal; (2) the deviation of current economic output growth from its sustainable level; and (3) the long-run equilibrium policy rate. "Smoother” policy rules tend to put more weight on recent levels of the federal funds rate. Conversely, versions that put more weight on the gaps in output and inflation yield more volatile policy paths.  We can use the concept of a policy rule to discover which dimensions of policy cause the most disagreement among private forecasters. For example, does disagreement about the path of the federal funds rate reflect disagreement about the growth prospects of the United States, inflation, or both? Are the sources of disagreement the same for short-term and long-term forecasts?

July 2016 Leading Economic Index Improves Indicating Moderate Growth Ahead.: The Conference Board Leading Economic Index (LEI) for the U.S improved this month - and the authors state "there may even be some moderate upside growth potential if recent improvements in manufacturing and construction are sustained, and average consumer expectations don't deteriorate further". This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index's value at 0.1 % to 0.4 % (consensus 0.2 %) versus the +0.4 % reported. ECRI's Weekly Leading Index (WLI) is forecasting slow growth over the next six months. Additional comments from the economists at The Conference Board add context to the index's behavior. The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in July to 124.3 (2010 = 100), following a 0.3 percent increase in June, and a 0.2 percent decline in May. "The U.S. LEI picked up again in July, suggesting moderate economic growth should continue through the end of 2016," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "There may even be some moderate upside growth potential if recent improvements in manufacturing and construction are sustained, and average consumer expectations don't deteriorate further." The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.4 percent in July to 113.9 (2010 = 100), following a 0.2 percent increase in June, and a 0.1 percent decline in May.

Nominal Demand Ain't What It Used to Be -- Nominal demand is a shadow of its former self. In the past, it averaged near 5% annual growth but has struggled ever since the crisis. The figures below illustrate this on a per capita basis for aggregate demand and domestic demand growth.  Nominal demand growth ain't what it used to be. To be clear, nominal demand growth is not what we ultimately care about. That would be real economic growth and over the long run it is not determined by nominal demand growth but by real factors. That, however, is not my point here. My point is that somehow policy makers were able to generate near 5% nominal demand growth per person pre-2008 and now seem completely unable to do so. Why? My answer is that inflation targeting, as it is currently practiced, has become the poisoned chalice of macroeconomic policyCentral banks have been so good at creating low inflation since the early 1990s that it is now the expected norm by the body politic. Any deviation from low inflation is simply intolerable. In the US, everyone from the media to politicians to the average person start to freak out if inflation heads north of 2%. This mentality seems even worse in Europe. Inflation-targeting central banks, in other words, have worked themselves into an inflation-targeting straitjacket that has removed the few degrees of freedom they had. It is hard to imagine Yellen and Draghi being able to raise inflation temporarily above 2% in this environment. All they can do is operate in the 1-2% inflation window. Inflation targeting's success has become it own worst enemy. Another way of saying this is that the space for doing macro policy has shrunk to the small window of 1-2% inflation. Not only is monetary policy constrained by this, but so is fiscal policy...  nFor these reasons inflation targeting has become the poisoned chalice of macroeconomic policy. It was a much needed nominal anchor in the 1990s that helped restore monetary stability. Its limitations, however, have become very clear over the past decade and now is preventing the world from having the recovery it needs...

The Fed Has Been Winging It for Eight Years; It’s Time for Congress to Step Up -- Since the Wall Street crash in 2008 crippled the U.S. economy, Congress has played the role of a spectator at a big league baseball game – munching on popcorn and licking its greasy fingers soiled with corporate campaign loot – as the real players on the field, the Federal Reserve, controlled the action. The above chart shows the steady erosion of Capacity Utilization in the U.S. since Congress surrendered its job to the deeply conflicted Fed. The chart comes courtesy of the Federal Reserve Bank of St. Louis, which defines Total Industry Capacity Utilization this way:  “the percentage of resources used by corporations and factories to produce goods in manufacturing, mining, and electric and gas utilities for all facilities located in the United States (excluding those in U.S. territories).”  In November 2007, prior to the onset of the crash, Capacity Utilization stood at 80.9 percent. Last month it clocked in at 75.9 percent. It has been on a sharp decline since November 2014.  The St. Louis Fed says you can also think of capacity utilization as how much capacity is being used from the total available to produce the demand for finished products. Clearly, in a nation where wealth and income is concentrated in the hands of one percent of the population, there will be withering demand for products and an intractable cycle of deteriorating capacity utilization. In other words, the problem is wealth and income inequality, which is being exacerbated rather than helped by allowing the Federal Reserve to remain in charge. The Fed’s enforcement of zero to near-zero interest rates has stripped income from seniors living on fixed income while inflating financial assets – the vast majority of which are held by the super rich. While the Fed claims to have made great strides on the employment front, government data show a serious problem. According to the Bureau of Labor Statistics, in January 2007, 91.5 percent of men aged 25 to 54 were gainfully employed in the U.S. Today, that number stands at 88.4 percent. There has been no material improvement in that number for a solid five years of this so-called “recovery” managed by the Fed.

Fiscal Stimulus Revisited - Bloomberg View -- Budget deficits may be coming out of retirement. With economies all over the world growing too slowly and little scope left for new monetary stimulus, governments are turning their attention back to fiscal policy.This shift in thinking is overdue. In many countries, though not all, fiscal expansion is not just possible but also necessary. A resumption of budget activism, if it happens, won't be riskless, so caution will be needed. A stubborn commitment to fiscal austerity, though, would be riskier still.The immediate response to the 2008 crash included fiscal easing -- sometimes deliberate and sometimes the automatic consequence (higher public spending, lower tax revenues) of slumping activity. In most cases, expansionary budgets lessened the impact of collapsing demand, but they also pushed up public debt. Before long, governments started tightening their budgets to get debt back under control.With demand still lacking, the hope was that monetary expansion would be enough to support recovery. It wasn't. Governments have found that monetary policy is losing its potency. Interest rates are close to zero in many countries, and in some even negative. Huge bond-buying programs -- so-called quantitative easing -- have delivered an additional monetary punch, but again with diminishing effects, and with a growing risk of financial instability as well.So fiscal policy, despite the recent growth of public debt, is back on the agenda. Central banks have been leading the call. In June, Federal Reserve Chair Janet Yellen told the Senate Banking Committee that U.S. fiscal policy had "not played a supportive role." In July, the European Central Bank's chief economist, Peter Praet, said "monetary policy cannot be the only remedy to our current economic challenges."

What Would Clintonomics Bring? Breaking Down Hillary Clinton’s Economic Policy. -- Policy differences aren’t going to decide the presidential election, much to the dismay of think-tank scholars. The overwhelming differences between Donald Trump and Hillary Clinton in character, demeanor, world view, and experience are likely to be far more important. Given Mrs. Clinton’s lead in the polls, however,it’s worth looking at what her campaign positions reveal not only about her substantial differences with Mr. Trump but also for clues to how she might approach economic policy as president.  Mrs. Clinton recognizes the challenges posed by the distressingly slow pace of economic growth but hasn’t clearly articulated a growth strategy–perhaps because the economists she relies on are still looking for a formula. She has offered some ingredients of a growth strategy: a smattering of targeted tax breaks, a big push on education (from pre-K through college) that some experts say should pay off in faster productivity growth, a big increase in federal spending on infrastructure that she says will add jobs soon and faster productivity growth in the future, and a commitment to immigration reform. Economist Mark Zandi, using Moody’s Analytics macro-economic model, found that immigration reform is key to the predictions that Mrs. Clinton’s proposals would boost economic growth. In contrast to Republicans, Mrs. Clinton does not appear to favor broad tax breaks for business to spur private investment; once upon a time, candidates would call for making permanent the tax credit for research and development, but Congress finally did that in 2015. She doesn’t see scaling back regulation as a way to improve economic growth. Dealing with the large and growing federal debt is not her top priority. But then, politicians often say one thing and do another once elected. George H.W. Bush raised taxes after vowing not to. Bill Clinton abandoned a middle-class taxcut. Mrs. Clinton has been careful to match nearly every proposed tax credit and spending increase with an offsetting tax increase (mainly on upper-income households) or spending cut. But she has expressed little interest in addressing the growth in federal debt that lies ahead absent a fiscal course correction.

Barack Obama: From Peace Prize To World's Biggest Arms Dealer In 8 Short Years - On Thursday, the U.S. State Department approved the sale of more military equipment, valued at around $1.15 billion USD, to the oil-rich kingdom of Saudi Arabia. This sounds like a lot of money to most of us, but the most frightening aspect of the sale is that it represents a continuation of an arms-dealing relationship between Washington and the Saudi regime, which has been worth over $50 billion USD in arms sales to date. It is not an understatement to say Obama’s tears over gun violence are disingenuous considering his administration has enacted a policy of systematically arming the entire world with all manner of warcraft. According to the Department of Defense Security Cooperation Agency (DSCA), during his first six years in office, the Obama administration entered into agreements to sell more than $190 billion USD in weaponry worldwide. As the director of the Arms and Security Project at the Center for International Policy, William D. Hartung, states, this figure is higher than any U.S. administration since World War II. Perhaps that is why the Nobel secretary has voiced serious regrets about awarding the Peace Prize to the president. While there are a number of companies who are making an absolute killing from these sales — like Lockheed Martin and Boeing —  the fact remains that the U.S. government actively facilitates this industry in more ways than one. In 2013, the Obama administration loosened controls over military exports so military equipment could be sent to almost any country in the world with little oversight. U.S. companies began to enjoy fewer checks than they had in the past. For example, thanks to the Obama administration, weapons manufacturers can now send military parts to most regions of the world without a license, which makes it easier for companies to extend their market — even to countries that are on the U.N. arms embargo list. This is because, according to Colby Goodman, an arms-control expert with the Open Society Policy Center, once an item is approved for that exemption, there may no longer be any ongoing, country-specific human rights review as had been conducted previously.

‘Shadow Brokers’ Leak Raises Alarming Question: Was the N.S.A. Hacked? - The release on websites this week of what appears to be top-secret computer code that the National Security Agency has used to break into the networks of foreign governments and other espionage targets has caused deep concern inside American intelligence agencies, raising the question of whether America’s own elite operatives have been hacked and their methods revealed. Most outside experts who examined the posts, by a group calling itself the Shadow Brokers, said they contained what appeared to be genuine samples of the code — though somewhat outdated — used in the production of the N.S.A.’s custom-built malware. Most of the code was designed to break through network firewalls and get inside the computer systems of competitors like Russia, China and Iran. That, in turn, allows the N.S.A. to place “implants” in the system, which can lurk unseen for years and be used to monitor network traffic or enable a debilitating computer attack. According to these experts, the coding resembled a series of “products” developed inside the N.S.A.’s highly classified Tailored Access Operations unit, some of which were described in general terms in documents stolen three years ago by Edward J. Snowden, the former N.S.A. contractor now living in Russia. But the code does not appear to have come from Mr. Snowden’s archive, which was mostly composed of PowerPoint files and other documents that described N.S.A. programs. The documents released by Mr. Snowden and his associates contained no actual source code used to break into the networks of foreign powers.

Trump Explains Why He Doesn't Trust US Intelligence Hours Before First Briefing -- Hours before receiving his first security briefing Trump decided to trash the U.S. intelligence community, in an interview with Fox News, while declaring that he "won't use them."  Per an article published by The Hill, when asked whether he trusts U.S. intelligence, Trump responded: “Not so much from the people that have been doing it for our country.  I mean, look what’s happened over the last 10 years. … It’s been catastrophic.  Very easy to use them, but I won't use them, because they’ve made such bad decisions.” Trump plans to attend the security briefing with former Lt. Gen. Michael Flynn, who led the Defense Intelligence Agency earlier in the Obama administration, and New Jersey Governor Chris Christie. Trump's comments come just days after the Joint Task Force found that CENTCOM leaders "distorted, suppressed, or substantially altered analytic products" to paint U.S. efforts to combat ISIS in a more positive light (see our prior post "Shocking Report Finds U.S. Military Consistently "Distorted, Suppressed, Or Substantially Altered" ISIS-Related Intel").

 Liberals rally to sink Obama trade deal | TheHill: Liberals are amping up their opposition to the Trans-Pacific Partnership (TPP) on and off of Capitol Hill, amid escalating concerns that the package will get an 11th hour vote after the November elections. Republican leaders in both chambers have said it's unlikely the mammoth Pacific Rim trade deal will reach the floor this year. But the accord remains a top priority for President Obama in the twilight of his final term, and the critics — leery of pro-TPP members in both parties — aren't taking anything for granted.Liberal TPP opponents this month have launched a new wave of petition campaigns and fundraising drives; a free concert series is touring the country through the summer; and lawmakers on Capitol Hill are vowing to do "everything we possibly can," in the words of Rep. Rosa DeLauro (D-Conn.), to block a vote this year.  “Make no mistake about it, Speaker [Paul] Ryan and the administration are working hand-in-hand to plot a path for the TPP in a lame duck session of Congress," DeLauro, who's among the loudest TPP critics, said this week in an email. "They will do everything possible to try to pass the TPP after the election." Fueling those concerns, Obama on Friday sent notice to Congress that he intends to deliver TPP implementing legislation to Capitol Hill later in the year — a maneuver dictated by the fast-track trade resolution Congress passed in 2015. The move means the administration must wait at least 30 days before sending up the bill, and both Obama and U.S. Trade Representative Michael Froman have made clear they'll work with congressional leaders on the timing.

 Obama’s response to TPP rhetoric: Push harder -  President Barack Obama couldn’t care less about Hillary Clinton’s position on the TPP as the White House moves full steam ahead in an effort to lay the groundwork for obtaining support for the controversial trade deal. Story Continued Below The White House is making an all-out push to win passage of the deal in the lame-duck session of Congress, organizing 30 events over the congressional recess to gin up support for the agreement, considered key to Obama’s strategy to counter China in the Asia-Pacific region. The game plan is to offer support and cover to the small flock of Democrats who supported legislation to fast-track the deal and to remind wavering Republicans that they oppose it at their own peril because of its strong business support. Despite his embrace of Clinton, Obama has been unwilling to abandon a deal that he regards as central to his legacy simply to avoid political fallout for her campaign. Although Clinton came out against the deal in the fall, she supported it while secretary of State, making her vulnerable to attacks — first from Bernie Sanders and now from Donald Trump — that her opposition is politically motivated and therefore, changeable.

The Trump effect? Republicans newly negative on trade -  The two major party presidential candidates may be singing the same tune against free-trade agreements on the campaign trail, but their voters are at odds over whether the deals are a good or bad thing for the country.  A new Pew Research Center study shows that more than two-thirds, or 68 percent, of Donald Trump’s supporters say trade deals have hurt the country, while a majority of Hillary Clinton supporters, or 59 percent, say the opposite. If that proportion of Republicans holding a negative view seems high to you, it is — the party’s view of trade is more negative than it has ever been since Pew started asking about it in 2009. It’s a relatively new trend, too: As recently as May 2015 — one month before Trump announced his candidacy, the survey notes — more than half of Republicans said trade agreements had been a good thing. Democrats’ views, meanwhile, have stayed relatively the same during the same period. The divide was slightly less pronounced when voters were asked about the TPP specifically. Still a majority, or 58 percent, of Trump supporters said the deal would hurt the country, while 55 percent of Clinton's supporters said it would help. You can view the whole report, complete with an analysis of voters’ views on trade broken down by age and level of education, here.

 Hillary Clinton Picks TPP and Fracking Advocate To Set Up Her White House -- Two big issues dogged Hillary Clinton during the Democratic primary: the Trans-Pacific Partnership trade agreement (TPP) and fracking. She had a long history of supporting both. Under fire from Bernie Sanders, she came out against the TPP and took a more critical position on fracking. But critics wondered if this was a sincere conversion or simply campaign rhetoric. Now, in two of the most significant personnel moves she will ever make, she has signaled a lack of sincerity. She chose as her vice presidential running mate Tim Kaine, who voted to authorize fast-track powers for the TPP and praised the agreement just two days before he was chosen. And now she has named former Colorado Democratic Senator and Interior Secretary Ken Salazar to be the chair of her presidential transition team — the group tasked with helping set up the new administration should she win in November. That includes identifying, selecting, and vetting candidates for over 4,000 presidential appointments. As a senator, Salazar was widely considered a reliable friend to the oil, gas, ranching and mining industries. As interior secretary, he opened the Arctic Ocean for oil drilling, and oversaw the botched response to the BP oil spill in the Gulf of Mexico. Since returning to the private sector, he has been an ardent supporter of the TPP, while pushing back against curbs on fracking. The TPP would enhance the ability of corporations to sue to overturn environmental regulations, but Salazar helped a pro-TPP front group, the “Progressive Coalition for American Jobs,” argue the opposite.

Clinton team can't shake TPP - : It looks like another Hillary Clinton acolyte is throwing into question the sincerity of her opposition to the TPP — this time it’s Ken Salazar, a former Colorado senator and Interior secretary, who will lead Clinton’s transition team. Salazar, like Clinton running mate Tim Kaine initially, has views on trade that run counter to hers. Salazar praised the 12-nation Asia-Pacific trade deal late last year for its economic and environmental benefits. He called the pact the "greenest trade deal ever" and said it would help middle-class families get ahead. "The TPP promotes and rewards American firms that export our clean energy ingenuity, creating good jobs at home while shaping a renewable energy future abroad," Salazar co-wrote in a USA Today op-ed in November alongside Bruce Babbitt, another former Interior secretary. The campaign Tuesday announced Salazar's appointment to its transition team, which will work with Clinton to generate a list of potential Cabinet secretaries and lower-level positions. The decision to name Salazar, with his pro-free trade background, raises further questions around Clinton's anti-TPP stance as the former secretary of State has struggled to convince the liberal left that she will continue to oppose the deal if elected. Megan Cassella has the full story here.

Top Marginal Tax Rates and Real Economic Growth, Part 1 -- Mike Kimel - This post looks at the relationship between the top marginal income tax bracket and growth in real GDP per capita (from NIPA table 7.1) in the subsequent year or years. The first graph shows the top marginal income tax rate on a given year along the y axis, and the percent change in real GDP per capita from year that year to the next along the x axis. (Example: tax rate in 1980 v. change in real GDP per capita from 1980 to 1981.) The graph begins at the start of the Eisenhower administration:  Notice the very slight positive correlation between marginal income tax rates in a given year and growth the following year? Perhaps it doesn’t mean that higher marginal tax rates precede faster growth, but it does call into question the idea that lower tax rates are generally responsible for faster economic growth.  Figure 1 above goes back to 1953 because I felt it makes sense to avoid periods in our history where the economy was very, very different such as the Great Depression, WW II, and the immediate post-war recovery. But the first complaint from those who don’t like what the graph implies will be that I am cherry-picking. To deal with that, here’s Figure 1 going back to 1929, the first year for which reliable data is available:   If anything, the correlation between tax rates and growth in the subsequent year seems stronger when we include the entire data set. In other words, we have less reason to believe that lower taxes lead to faster growth rates than when we started.

Why It’s So Hard to Get Rid of Tax ‘Loopholes’ - Real Time Economics - WSJ: The problem with attacking “loopholes” in the tax code is just how popular they are. That’s the challenge facing lawmakers who favor lowering rates and broadening the tax base. It’s easy to talk about closing unjust loopholes—and depending on your definition of justice, there are a few of them out there. But the reality is that many of the biggest breaks are the ones that benefit the upper-middle class: itemized deductions. That’s why President Barack Obama and Democratic presidential candidate Hillary Clinton have proposed limits on high earners’ deductions. Republican presidential candidates Jeb Bush and Mitt Romney talked about deduction caps and Donald Trump is considering one, too. Taxpayers can itemize deductions if their total exceeds the standard deduction—$6,300 for individuals and twice that for married couples. Some itemized deductions, such as the break for tax-preparation fees, are already subject to strict limits, but the big three are largely uncapped: state and local taxes, home-mortgage interest and charitable contributions. Only about 30% of households itemize their deductions, and they tend to be higher-income households who have mortgages, significant state taxes and available cash to donate to charities. To see exactly how much money is at stake and what happens if you repeal the breaks, here’s a tool from the Open Source Policy Center at the free-market-oriented American Enterprise Institute, which draws on ideas from technical contributors.

Trump’s Misguided Embrace of Tax Cuts – NYTimes --In a speech in Detroit on Monday, Donald J. Trump put forward a huge tax cut as the centerpiece of his economic program. He compared his plan to Ronald Reagan’s 1981 tax cut, saying his proposal would be “the biggest tax revolution since the Reagan tax reform, which unleashed years of continued economic growth and job creation.”I know something about the Reagan tax cut. In 1977, while working for Representative Jack Kemp, Republican of New York, I drafted the Kemp-Roth tax bill, which Reagan sent to Congress in early 1981. The law cut statutory tax rates by about 25 percent across the board. It is G.O.P. dogma that the Reagan tax cut set off an economic boom. Every Republican presidential nominee since the 1980s has promised big tax cuts and another economic surge.  But the Reagan tax cut is not the medicine the economy needs. The high tax rates from the World War II era had been only partly cut by John F. Kennedy, and the top income-tax rate was 70 percent. Inflation was pushing workers into higher tax brackets when they received cost-of-living pay raises.According to the Tax Policy Center, the average federal income-tax rate on a family of four with the median income rose from 9.1 percent in 1972 to 11.8 percent in 1981. The marginal tax rate — the tax on the last dollar earned — rose from 19 percent to 24 percent in the same period. By contrast, the average tax rate on the median family in 2014 was just 5.3 percent, and the marginal rate was 15 percent. Inflation is nonexistent, and no one is being pushed into higher tax brackets by it. In short, taxes were too high in 1981 and needed to be cut — including for the rich.  Those economists who claim to be following Reagan’s policies by supporting Mr. Trump’s large tax-cut proposal are guilty of one-size-fits-all economics. There is far more evidence from the last 35 years showing that tax increases do more to stimulate growth than tax cuts.

Vote for the Lying Neoliberal Warmonger: It’s Important -- Often enough, the “never Hillary” stance is blinded by a demonization of Clinton that frankly seems irrational. In fact, it is difficult to imagine that it is often not at least tinted with sexism. From the standpoint of fealty to Wall Street and corporate interests, or for that matter imperialist bloodlust, she’s no worse than Obama, John Kerry, Al Gore, or Bill Clinton. Some of that tendency to demonize her reflects the high emotions generated during the campaign among some of the Sanders faithful, as well as perhaps a reaction to having their outsized dreams dashed. It is understandable that in the high intensity of the campaign activists could be swept up in exuberance about possibilities. But even though winning the nomination and then the presidency was the primary objective all along, from the very beginning it was a longshot because the deck was stacked against the insurgent campaign. That’s what challenging entrenched power means. Making the race as close as it became was an important victory, one that encourages optimism about movement-building possibilities. I fear, however, that some of the exuberance tended to slide into seeing the campaign as a messianic crusade, or to see it as a social movement itself. (That’s the reason I never much cared for the “political revolution” slogan; it too easily left room for the impression that struggling to advance the campaign was tantamount to making a revolution. It wasn’t; it wasn’t even close to generating a revolutionary movement. It did create conditions that, with considerable focus and effort, could facilitate the sustained political organizing and action necessary to influence the terms of national political debate.)

 Is Hillary Clinton more dangerous than Donald Trump? -- Actor Susan Sarandon recently caused a panic when she revealed her potential unwillingness to vote for Democratic presidential frontrunner Hillary Clinton in a general election matchup with likely Republican nominee Donald Trump.Sarandon was echoing an attitude shared by many supporters of Clinton’s Democratic opponent, Bernie Sanders, who say they will not vote for Clinton even if it means Trump becoming president of the United States.In response, the establishment lost its collective mind.New York Times columnist Charles Blow blasted “Bernie or Bust” voters for engaging in “scorched-earth electoral portentousness” mired in “petulance and privilege” and “filled with lust for doom.” The Forward’s JJ Goldberg, in an article headlined “ ‘Bernie or Bust’ is Self-indulgent, Stubborn – and Dangerous,” warned that “[w]hining about [Clinton’s] weaknesses can only depress November turnout and hand Washington to the GOP, lock, stock and barrel.”And Michael Tomasky of The Daily Beast lamented that these anti-Clinton refuseniks are mostly privileged white people with no skin in the game.It has become accepted orthodoxy in establishment circles to view Trump as an authoritarian race-baiter who would present a major threat to the world if elected in November.While this characterization is certainly well founded, it ignores the fact that Clinton is also dangerous to world stability. And unlike Trump, she has the blood on her hands to prove it.  If lesser evilism is the goal, as establishment pundits insist, it remains unclear who the lesser evil is – if the choice is limited to Trump or Clinton.

Michael Moore: "Trump Never Wanted To Be President, I Know This For A Fact" -- Despite proclaiming five reasons why Trump will win just a month ago, Michael Moore has apparently had a change of heart and has posted an op-ed in the Huffington Post today describing, in detail, why he believes Trump is blowing up his own campaign and it's only a matter of time before he exits the race.  In short, Moore points out that he knows "for a fact" that Trump "never actually wanted to be President of the United States."  After all, as Moore points out, being President is "WORK" and you have to live in the "GHETTO" of Washington DC in a small, two-story house...and "a "second floor" is not a penthouse!" Instead, Moore says the whole thing was a stunt to get more money out of NBC for his TV show, "The Apprentice."  Why else, Moore asks, would someone launch a Presidential campaign with no major staff commitments or campaign infrastructure in place unless they had no intention of ever winning. So, on June 16 of last year, he rode down his golden escalator and opened his mouth. With no campaign staff, no 50-state campaign infrastructure — neither of which he needed because, remember, this wasn’t going to be a real campaign. But the plan all blew up when Trump went "off the rails" and NBC responded, not by offering him more money, but by cancelling his shows instead....he went off the rails at his kick-off press conference, calling Mexicans “rapists” and “drug dealers” and pledging to build a wall to keep them all out. Jaws in the room were agape. His comments were so offensive, NBC, far from offering him a bigger paycheck, immediately fired him with this terse statement: “Due to the recent derogatory statements by Donald Trump regarding immigrants, NBCUniversal is ending its business relationship with Mr. Trump.” NBC said it was also canceling the beauty pageants owned by Trump: Miss USA and Miss Universe. BOOM.

Matt Taibbi on the Summer of the Media Shill - Years ago, when I was an exchange student in the Soviet Union, a Russian friend explained how he got his news. "For news about Russia, Radio Liberty," he said. "For news about America, Soviet newspapers." He smiled. "Countries lie about themselves, tell truth about others."  American media consumers are fast approaching the same absurd binary reality. We now have one set of news outlets that gives us the bad news about Democrats, and another set of news outlets bravely dedicated to reporting the whole truth about Republicans. Like the old adage about quarterbacks – if you think you have two good ones, you probably have none – this basically means we have no credible news media left. Apart from a few brave islands of resistance, virtually all the major news organizations are now fully in the tank for one side or the other. The last month or so of Trump-Hillary coverage may have been the worst stretch of pure journo-shilling we've seen since the run-up to the Iraq war. In terms of political media, there’s basically nothing left on the air except Trump-bashing or Hillary-bashing.

Burning Down the House -- Kunstler - It’s that time of the year for the hedge fund boys, with their testosterone flowing, to start burning down their house rentals in the Hamptons. And it’s also the time of year for an ever more stressed financial system to go down in flames. And, of course, it’s a presidential election season. Even for one allergic to conspiracy theories, it’s not farfetched to imagine a coordinated effort by central banks — under government direction — to generate Money-Out-Of-Thin-Air (QE) for the purpose of allowing “liquidity” flows to end up in US equity and bond markets in order to paint a false picture of “recovery” so as to insure the election of Hillary Clinton. I think that is exactly behind the recent money-printing activities by the Japanese and European Central Banks, and the Bank of England. Why would it end up in US markets? For bonds, because the Euro and Japanese bond sovereign yields are in sub-zero territory and the BOE just cut its prime rate lower than the US Federal Reserve’s prime rate; and for stocks, because the value of the other three currencies is sliding down and the dollar has been rising — so, dump your falling currency for the rising dollar and jam it into rising US stocks. It’ll work until it doesn’t. Why do this for Hillary? Because she represents the continuity of all the current rackets being used to prop up belief in the foundering business model of western civilization. If she doesn’t get into the White House there may be no backstopping of the insolvent banks and bankrupt governments and a TILT message will appear in the sky. That TILT message is likely to appear anyway because, remember,  the authorities are only pretending that they can manage events. In fact, all of their “management” strategies and shenanigans only insure the further distortion of the basic operating system, which is already so far out of whack from twenty years of previous management efforts that nothing in banking and markets really works anymore.

Paul Ryan Knowingly Sold Shares Of Doomed Banks After Private Briefing On 2008 Banking Crisis - As noted by public records on September 18th, 2008, Paul Ryan sold stock in US banks on the same day he attended a confidential meeting where high ranking government officials discussed that the sector was heading into negative territory. The banks that were reportedly in heavy financial trouble, such as Citigroup and Wachovia, had stocks sold off by Ryan that day. Ryan then bought shares in Goldman Sachs, the old employer of Henry Paulson who was the Secretary of Treasury at the time. Paulson, along with Federal Reserve chairman Ben Bernanke, were two of the representatives who attended the September 18th meeting, outlined what they saw as the potential downfall of the banking sector. At the time of the selling off of the stocks, it was not considered an illegal sale. Wachovia’s share price went into freewill as expected, plunging 39% on the afternoon of September 26 of that year as investors prepared for what they saw as the pending collapse. Wells Fargo would swoop in and take over with a $15 billion dollar purchase of Wachovia. Citigroup, the second bank reported to be heading into the same troubled waters, also had it’s share price plummet after the September 18th meeting. The troubled asset relief program, also known as TARP, would come to the aid of Citigroup in October of 2008. Goldman Sachs and Wells Fargo have emerged as two of Paul Ryan’s largest financial supporters, subsequently.

Lawmakers Overseeing Wall Street Given Bigger, More Favorable Loans Than Others: Study - It is good to be king, as the old saying goes — and apparently it’s also good to get a seat on a congressional committee that oversees the finance industry. According to a new study, those lawmakers tend to get larger loans and at more favorable interest rates right when they get appointed to those powerful panels. Researchers suggest the evidence is no random coincidence: They say the trend may in fact expose a conduit of influence peddling in which powerful lawmakers are using their position to extract favors — and whereby Wall Street firms may be using stealth perks to increase their legislative power. The analysis from London Business School professors Ahmed Tahoun and Florin Vasvari analyzed how the personal finances of congressional lawmakers changed once they were appointed to the Senate Finance Committee, the Senate Banking Committee or the House Financial Services Committee. It also evaluated how their finances compared with other lawmakers who are not on those panels. In evaluating lawmakers from 2004 to 2011, the researchers found that finance committee members’ personal borrowing tended to jump in the first year they were appointed to the panels — a trend not seen for other lawmakers who were given seats on other powerful committees. Similarly, the data show that upon joining the finance panels, lawmakers tended to be given 32 percent more time — or on average 4 and a half years more — to pay back those new debts than loans they previously had and that other members of Congress have. The study found that lawmakers also “report more favorable debt terms when they join the finance committee, relative to other years and to the terms other congressional members obtain including those on other powerful committees.”

Will Elizabeth Warren Stymie Clinton’s Pro-Big Finance Campaign Promises? --  Yves Smith - A Financial Times reporter who is clearly no Elizabeth Warren fan says that the Massachusetts senator will be able to thwart Hillary Clinton’s Wall Street backers who expect to regulatory breaks if she becomes President. As John Dizard wrote over the weekend: Cynics, including most of the US public, figure that Wall Street will have bought the next Democratic administration. They are wrong. Contrary to what you might expect from historical experience, Wall Street is going to get little, if anything, for its money… But while Mrs Clinton may be president, the sheriff of Wall Street will be Senator Elizabeth Warren. The senator, her progressive allies and her policy wonk followers have a lot to say about the financial sector. And not the sort of sugary reassurances you hear at high-end fundraisers. The key to the progressives’ Wall Street strategy is that it is not centred on a list of legislative proposals, but on databases of prospective appointees to regulatory and administrative positions. The Warren-istas understand that the Republicans are likely to have just around half of the Senate, and are likely to retain control of the House. The bad news, for Ms Warren’s supporters, is that new laws will be hard to pass. The good news is that the existing laws, including Dodd-Frank and the SEC’s governing legislation, already give future appointees all the authority they will need.  Dizard’s assessment of Warren’s clout is based on her having blocked the Administration’s nomination of Lazard mergers & acquisitions banker Antonio Weiss as Treasury undersecretary of domestic finance. Dizard misrepresents the reasons for Warren’s opposition: it wasn’t that she didn’t believe in “Wall Street experience” for roles where that might be germane. It was that Weiss’ qualifications for the post were solely that he’d been a heavyweight Obama fundraiser, and that he was therefor representative of a cronyistic relationship between Big Finance and the Democratic Party

Democrat Party hacked again as ‘Russian hacker’ leaks phone number of each house delegate -- A suspected Russian hacker has leaked the email addresses and cell phone numbers of almost every Democrat in the House of Representatives - along with the message claiming the presidential election is being 'settled behind the scenes.'It's the latest cyber-attack on the Democratic party since WikiLeaks published tens of thousands of hacked emails from inside the DNC and Russian hackers apparently broke into the computers of the Hillary Clinton campaign.Top Democrats have claimed that Russian intelligence is behind the cyber-attacks as part of an attempt to influence the election.Documents released appear to include information from U.S. House Democratic Leader Nancy Pelosi's computer.  On Thursday, Pelosi had said that the recent cyber attack on Democratic politicians was 'broad' and that Russians were clearly behind the breach.   In a post on his blog, a hacker known as 'Guccifer 2.0' posted an Excel spreadsheet that contains contact information for hundreds of Democrats as well as congressional staff members and campaign personnel.Investigators concluded that the hacker, who claims to be Romanian, is part of a Romanian intelligence operation.

"Russian" Hacker Guccifer 2.0 Publishes Complete Personal Information Of 200 Congressional Democrats -- According to so-called experts, the Romanian (as he described himself) hacker Guccifer 2.0 is really a Russian (even though there is still not a shred of evidence to confirm this) who several weeks ago provided a trove of 20,000 emails to Wikileaks, which exposed the corruption at the Democratic National Committee as it rigged the primary election on behalf of Hillary, further revealing just how deeply in bed the DNC and the "independent" media were.  As of this afternoon,  the "Russian" has made it possible for millions of American to contact their Democratic representative instantly, after he released an excel spreadsheet on his blog - obtained from hacking the DNCC - which includes the personal cell phone number, physical and email address as well as full personal information for some 200 congressional Democrats. In addition to the Excel file, the alleged Russian hacker also uploaded documents that include the account names and passwords for an assortment of subscription services used by the DCCC, from Lexis-Nexis to Glenn Beck’s web site (password: nutbag). While "Guccifer 2.0" has claimed to be a foe of "all the illuminati and rich clans which try to rule the governments," cyber investigators are busy trying to convince the American public that he is just serving as the media liaison for the Russian government hacking teams suspected of breaching the Democratic Party's computer systems. If that were indeed the case, this would be the first case ever of a government-sponsored spy (or liaison) using a Wordpress platform to leak highly confidential and sensitive information. In fact, that would make him an idiot since authorities can find within minutes the physical location of any given individual who logs into Wordpress. Which is also why biggest joke here is that the Russian government is behind the hack.

 Democrats Trying to Assess Scope of Leak of Personal Information - WSJ  —Congressional Democrats on Saturday scrambled to assess the scope of an unprecedented leak that revealed the personal cellphone numbers and some email addresses of nearly 200 current and former Democrats in the House of Representatives.  In the note to her colleagues, Mrs. Pelosi said she “was in the air flying from Florida to California when the news broke. Upon landing, I have received scores of mostly obscene and sick calls, voicemails and text messages.”   Other people whose information was leaked as part of the breach also reported receiving dozens of emails and text messages, many of them with a harassing tone.  Mrs. Pelosi said she was changing her phone number and urged her colleagues to do the same.  A hacker or group of hackers called “Guccifer 2.0” posted the spreadsheet, but by Saturday afternoon, all of the personal information, which was allegedly stolen from the Democratic Congressional Campaign Committee in recent weeks or months, had been taken off Guccifer 2.0’s site.  WordPress, the web service that Guccifer 2.0 used to post the information, replaced the data hours after it first appeared online with a post saying that Guccifer 2.0 had violated the service’s policies through a “privacy violation.”  The posting of the personal information of members of Congress has national-security implications, as the spreadsheet included cellphone numbers and email addresses from members of the House Intelligence, Armed Services and Foreign Relations Committees. If a foreign spy network obtained this information, it could attempt to crack into the email accounts or try to monitor phone traffic. The spreadsheet also included many personal email addresses and cellphone numbers for the lawmakers’ chiefs of staff, schedulers, and legislative directors.

FBI To Hand Over Clinton Email Probe Files To Congress -- In what may be some overdue, and much needed transparency, the WSJ reports that the FBI will "hand over" its Clinton email probe files to Congress. As a reminder, Clinton spoke with the FBI during the bureau's investigation of her use of her private email server as secretary of state. The data handover could take place in the next few days, and it could happen as early as Monday, an official told CBS. This comes after several Republicans requested the testimony. Actually, in retrospect, don't hold your breath for any new revelations for one simple reason:there will be no actual testimony. As CNN reported overnight, the FBI does not have a complete transcript of the interview,FBI Director James Comey told Congress in long testimony earlier this summer, as Hillary was not under oath at the time. Which means members of Congress will have be content with the FBI's notes taken during the interview.

State Department To Release All Of Hillary's Deleted Emails, May Wait Until After Presidential Election -- Some good and some bad news for transparency advocates was disclosed moments ago, when the State Department announced it would release all of the deleted work-related emails that the FBI recovered from Hillary Clinton’s private system, it confirmed in a recent court filing, eliminating the possibility that the messages will remain secret. “State has voluntarily agreed to produce non-exempt agency records responsive to plaintiff’s [Freedom of Information Act] request,” the department said in a short filing on Friday. That's the good news. The bad news is that, according to the Hill, "it remains unsettled whether the full set of emails will be out by the presidential election on Nov. 8." In other words, when finally released, the emails will have zero impact on the presidential election.  The State Department has declined to set a timeline for releasing the emails, and a court conference to discuss the matter has been scheduled for Aug. 22. Reince Priebus, the head of the Republican National Committee, has urged the department to release the emails before the elections. Clinton has repeatedly stated that she believes that the 55,000 pages of documents she turned over to the State Department in December 2014 included all of her work-related emails.  In response to a court order, she declared under penalty of perjury that she had “directed that all my emails on in my custody that were or are potentially federal records be provided to the Department of State, and on information and belief, this has been done.”  This acknowledgment by the State Department is also at odds with her official campaign statement suggesting all “work or potentially work-related emails” were provided to the State Department.

 Privacy Scandal Haunts Pokemon Go’s CEO -- Within two weeks of its release last month, Pokemon Go, the augmented reality gaming sensation, surpassed, by one estimate, Twitter, Facebook, and Netflix in its day-to-day popularity on Android phones. Over on Apple devices, the game was downloaded more times in its first week than any app that came before it. The suddenly vast scale of Pokemon Go adoption is matched by the game’s aggressive use of personal information. Unlike, say, Twitter, Facebook, or Netflix, the app requires uninterrupted use of your location and camera — a “trove of sensitive user data,” as one privacy watchdog put it in a concerned letter to federal regulators. All the more alarming, then, that Pokemon Go is run by a man whose team literally drove one of the greatest privacy debacles of the internet era, in which Google vehicles, in the course of photographing neighborhoods for the Street View feature of the company’s online maps, secretly copied digital traffic from home networks, scooping up passwords, email messages, medical records, financial information, and audio and video files. Before Niantic Labs CEO John Hanke was the man behind an unfathomably popular smartphone goldmine, he ran Google’s Geo division, responsible for nearly everything locational at a time when the search company was turning into much more, expanding away from cataloging the web and towards cataloging every city block on the planet.

 The SEC has questions about a company with no revenue, $1,000 in the bank, and a $35 billion market cap - Here's your bizarre business news of the day.  The US Securities and Exchange Commission said on Monday that it has halted the trading of a firm called Neuromama. The company has a market cap of around $35 billion with shares valued at $56.25 a share before the halt.  As Bloomberg News noted, the market cap of the company would make it more valuable on paper than Tesla and Delta Air Lines.  The only issue, according to the SEC, is, well, pretty much everything about the company.  From the SEC announcement: "The Commission temporarily suspended trading in the securities of NERO because of concerns regarding the accuracy and adequacy of information in the marketplace about, among other things, the identity of the persons in control of the company's operations and management, false statements to company shareholders and/or potential investors that the company has an application pending for listing on the NASDAQ Stock Market, and potentially manipulative transactions in the company's stock."  So quick recap: The people running the firm may be impostors, the company is lying about possibly being listed on the Nasdaq, and the stock may have been manipulated.

 SEC and Stock Frauds: Can This Dog Hunt? - Pam Martens ---A dubious search engine company trading over-the-counter on Wall Street, with a felon as a “General Design and Marketing Strategist” who was banned from the industry for previous stock frauds, and with the craziest SEC filings and disclosure documents you’ll ever read in your lifetime, was finally halted from trading yesterday by the SEC – but only after reaching a market value of $35 billion.The SEC said in its announcement of the trading halt of the company, NeuroMama, Ltd., Inc., that it had “concerns” about “the identity of the persons in control of the company’s operations and management, false statements to company shareholders and/or potential investors that the company has an application pending for listing on the NASDAQ Stock Market, and potentially manipulative transactions in the company’s stock.”Yesterday’s SEC statement simply does not do justice to the insanity of what has been going on under its nose while it was engaging in a polite letter writing campaign with the company in a futile attempt to obtain granular operational details. The SEC had plenty of warnings that things were amiss at NeuroMama..

Wall Street’s Death Puts: Here’s What the SEC Didn’t Tell You -  Pam Martens - On Monday, the Securities and Exchange Commission released the details of an enforcement action it plans to bring before one of its own Administrative Law Judges against Donald (Jay) Lathen, Eden Arc Capital Management, LLC and a related hedge fund, Eden Arc Capital Advisors, LLC. Lathen is charged with using terminally ill patients in nursing homes, who were expected to die within six months, to reap profits from issuers of bonds or Certificates of Deposits (CDs) that had a death put feature (also known as a Survivor Option or SO). Naturally, the issuers of the bonds and CDs expected buyers to constitute a random pool of investors, not a ginned up pool created by a hedge fund of people slated to die within six months. To induce the terminally ill patients (who, let’s face it, are not always thinking clearly and may potentially be on judgment-impairing pain killers) to loan out their name, social security number, date of birth, etc. to set up joint accounts with right of survivorship, Lathen paid the patients $10,000. Lathen listed himself as the other joint owner on the accounts, even though the money actually belonged to investors in his hedge fund. (That was one of the issues the SEC nailed him on; violating the custody rule for hedge fund money.) According to the SEC, no hedge fund money was pilfered. This story has been covered widely over the past two days in the business press. What has not been covered (because the SEC did not utter a peep about it in their statement or their enforcement action) is the role of, and the names of, the brokerage firms that allowed this flagrantly improper conduct to occur under the noses of their compliance departments and licensed branch managers who have to approve new account openings. This scheme has been going on since 2011 according to the SEC, with Lathen setting up 60 of these accounts and buying 2,350 investments, sometimes on margin, to the tune of $100 million.

SEC Shamed: Whistleblower Refuses Multimillion Dollar Award Due to Ex-Deutsche Bank Attorneys at SEC Protecting Deutsche Execs (and Themselves) Yves Smith - Whistleblower Eric Ben-Artzi, fired from Deutsche Bank for refusing to go along with the bank’s efforts to under-report the risks of a massive derivatives trading strategy, one that eventually blew up the Canadian commercial paper market, was the lead story at the Financial Times today. Ben-Artzi refused to take his share of a $16.5 million SEC whistleblower settlement, the third largest since this new program started. The reason? Per a letter that Ben-Artzi sent to the Financial Times (reproduced in full at the end of this post with his permission), he objected to the agency’s failure to punish anyone at the bank.  As he put it, “…after suffering at the hands of the Deutsche executives I will not join them simply because I cannot beat them.” For background on the trade itself, see here for the details (note we wrote this post after Matt Levine at Bloomberg issued a typical “nothing to see here” dismissal. Even the normally-complacent SEC begged to differ). An overview from a 2013 post: [...] As Ben-Artzi explained, and as we’ve discussed numerous times over the years, the revolving door between Deutsche Bank and the SEC is so extensive that it’s hard to see it as an accident. We’ve argued repeatedly that the failure of the SEC to pursue abuses in the CDO market in anything more than a cursory manner was due to the fact that the head of enforcement, Robert Khuzami, had been the General Counsel for the Americas for Deutsche Bank from 2004 to 2009. Deutsche Bank salesman Gregg Lippmann was patient zero of CDO abuses. CDOs constructed for the purpose of generating cheap subprime shorts were the mechanism that turned what would have been a savings and loan level domestic banking crisis into a global financial cataclysm. The failure of the press and regulators to pursue the central role of this strategy in the financial conflagration means that how and why we had a global financial crisis is still almost universally misunderstood. But any serious investigation of CDOs would have implicated Deutsche Bank and thus Khuzami.

Why A Deutsche Bank Whistleblower Turned Down A $8.25 Million Award: In His Own Words --At the height of the financial crisis, when risk assets were imploding and counterparties were in danger of overnight collapse, Deutsche Bank avoided failure and nationalization by fabricating the value of its $130 billion derivative portfolio of "leveraged super senior" trades. There was just one problem: when it was building up its portfolio, Deutsche never accounted for the possibility of the financial world nearly collapsing. Which is why as the illiquid portfolio was careening, instead marking it to market - an act that would have resulted in the bank's insolvency - DB's risk managers misstated the value of the positions by anywhere from $1.5bn to $3.3bn. Several years later, in 2012, the SEC found out about this, and in 2015 slapped a $55 million fine on Deutsche Bank for this criminal fabrication (nobody went to jail).  The reason why the SEC learned about DB's massive mismarked derivative exposure, is because two former employee whistleblowers, Matthew Simpson and Eric Ben-Artzi, told it: the duo alleged that if Deutsche had accounted properly for its positions, its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bailout to survive. The highest estimate for the unaccounted loss was $12bn. Which explains why Deutsche Bank was desperate to manipulated the numbers.  Only, something unexpected happened: as the FT writes, one of the whistleblowers who helped expose the false accounting at Deutsche Bank turned down a multimillion-dollar award from the Securities and Exchange Commission in protest against the agency’s failure to punish executives at the bank. Eric Ben-Artzi, the former Deutsche risk officer, told the SEC he is declining his share of a $16.5 million payout — the third largest in the whistleblower program’s history — which represents 30% of the $55 million Deutsche Bank fine.For all those wondering why someone would turn down a $8.25 million whistleblower award,here is the explanation, straight from the source. I turned down a whistleblower award, writes former Deutsche Bank employee Eric Ben-Artzi I just got word from the Securities and Exchange Commission that I am to receive half of a $16.5m whistleblower award. But I refuse to take my share. My award, which comes from a fund allocated by Congress, amounts to 15 per cent of the $55m fine the SEC imposed on Deutsche Bank in May 2015 after I informed regulators that my colleagues at the bank had been inflating the value of its massive portfolio of credit derivatives. I was a risk officer at the bank, and one of the three whistleblowers who in 2010-11 reported the improper accounting internally and to regulators around the globe. The SEC attorney who oversaw the investigation told the New York Times: “It’s the only enforcement action where we allege that a major financial institution failed to properly value a significant portion of its portfolio of complex securities.” But Deutsche did not commit this wrongdoing. Deutsche was the victim. To be precise, the bank’s shareholders and its rank­-and­-file employees who are now losing their jobs in droves are the primary victims. Meanwhile, top executives retired with multimillion­-dollar bonuses based on the misrepresentation of the bank’s balance sheet. It is therefore especially disappointing that in 2015, after a lengthy investigation helped by multiple whistleblowers, the SEC imposed a fine on Deutsche’s shareholders instead of the managers responsible.

CFTC charges Deutsche Bank with swap-reporting abuses The Commodity Futures Trading Commission has added to Deutsche Bank’s regulatory woes in the US, charging it with a string of swap-reporting abuses, repeated failures of supervision and a violation of a previous order. In a civil complaint filed to the US District Court in Manhattan, the CFTC said the Frankfurt-based bank was unable to report any swap data for multiple asset classes for five days after a systems outage in April. That glitch exposed a lack of adequate business continuity plans, the regulator said, adding that Deutsche’s efforts to restore services exacerbated old problems and created new ones. Some of these problems still persist, affecting market data available to the public, and compromising the CFTC’s ability to gauge systemic risk throughout swaps markets, the regulator added. The action on Thursday came after the CFTC fined Deutsche $2.5m last September for various shortfalls, including failing to report swaps and neglected to correct errors in its reporting. In a statement, Aitan Goelman, director of enforcement, said Deutsche’s “inability” to comply with its responsibilities warranted the intervention of a court-appointed monitor. Deutsche on Thursday said it understood the CFTC’s concerns and had agreed on steps to resolve the matter. “We continue to work on enhancing our reporting systems, and we are committed to meeting all regulatory requirements,” the bank said.

Suing a Debt Collector? Now They Can Buy Your Lawsuit - Can a debt collector accused of crossing the line avoid liability by buying a consumer’s legal claim out from under her? A federal judge in Las Vegas said yes.  In March 2015, Patricia Arellano of Las Vegas received a notice from Clark County Collection Service (CCCS), a private debt collector seeking $370 in overdue medical bills. Arellano didn’t respond. CCCS went to court and obtained a default judgment against her. The bill grew to about $800, with costs and fees. Next, Arellano sued CCCS under the federal Fair Debt Collection Practices Act. She alleged that the company had been misleading about how much time she had to fight the collection effort. She also alleged that CCCS's name illegally implied that it was affiliated with the government of Clark County, Nev., when in fact it is not. Then came the really weird twist. Seeking to enforce its judgment, CCCS obtained a “writ of execution” under which the sheriff of Clark County was obliged to sell off Arellano’s property. But not just her physical property—the writ also covered her pending legal claim against CCCS. In an auction held last November on the steps of the Clark County courthouse, Arellano’s claim against CCCS under the Fair Debt Collection Practices Act was sold for $250. The buyer? None other than CCCS. A few months later, CCCS asked a federal judge to dismiss the fair-debt collection claim on the theory that CCCS didn’t want to sue itself. Arellano opposed the motion. U.S. District Judge Jennifer Dorsey noted that the case “presented an interesting situation” and then ruled for CCCS, effectively killing Arellano’s lawsuit. The hearing took 11 minutes.

Who to Watch as Regulators Size Up Online Lending - American Banker - (slide show) This year federal and state regulators have started to pay closer attention to the rapidly evolving online-lending sector — particularly online small-business lending. What follows is a look at eight key players in the debate over how to regulate this emerging industry.

And Then There Were 3? Three Trials Over Financial Firm Audits Loom for Big Four Firm PwC - Jerri-lynn Scofield - One so-called unintended consequence of the financial crisis and the inadequate Dodd-Frank reforms has been to consolidate or maintain the status quo within different types of financial players, rather than encourage competition. So, for example, the U.S. banking sector is more concentrated now than before– too-big-to-fail institutions are even bigger, and many smaller regional players have been forced to merge.  For the biggest accounting firms, concentration began even earlier, during George W. Bush’s administration, when the big five became the big four. The decision to pursue a criminal charge against Arthur Andersen for Enron-related activities caused the accounting firm’s bankruptcy. This ultimately led former Obama Attorney General Eric Holder to follow his previously enunciated “Holder doctrine”, under which the DoJ opted to seek civil settlements and monetary penalties for corporate transgressions rather than individual or corporate criminal claims. The ostensible reason was to avoid triggering a major corporate bankruptcy, which would inflict significant collateral damage, on employees and otherwise. Further, in the case of a too-big-to-fail banks, it was argued, dire systemic consequences might follow.   Now, big four auditing firm PricewaterhouseCoopers (PwC) faces potential exposure to three significant legal actions for allegedly negligent audits.  And depending on the outcome of this ongoing litigation, the big four might become the big three. Statutes of limitations considerations dictate that, these will probably be among the last lawsuits brought as a consequence of actions arising from the financial crisis.

 Demand for Yield Driving Money Managers Mortgage Bond Purchases: To money managers at Goldman Sachs Group Inc. and Prudential Financial Inc., the laggards of the debt universe look pretty good right now. The asset-management arms of both firms are buying bonds backed by consumer and corporate debt like mortgages and student loans, which they view as offering high yields for the risk investors are taking. The performance of asset-backed securities is not directly tied to U.S. corporate profits, which have been weakening, and more linked to consumers and other areas of the economy that remain relatively strong. The bonds "are sitting out there as unloved assets," said Mike Swell, a global portfolio manager at Goldman Sachs Asset Management in New York, which oversees more than $1 trillion. "There is going to be this demand for yield and we think assets that are less exposed to economic growth are likely to perform relatively well over the course of the next year or so." For now, the securities are lagging, in part because they still have the taint of being connected to the financial crisis. Asset- and commercial mortgage-backed bonds have returned just 3.8% this year, according to Bank of America Merrill Lynch index data, behind the 8.9 %gains in investment-grade corporate securities, the 14% jump in junk-rated company debt, and even the 5.2 percent increase in Treasuries and agencies. Many investors are also reluctant to consider the bonds because of their complexity, and their low liquidity. Just $1.4 billion of asset-backed securities like credit card and auto loan bonds traded daily in July on average, compared with nearly $30 billion of corporate debt, according to data from the Securities Industry and Financial Markets Association.

North American Life Insurers "Accidentally" Pile Up Massive Distressed Debt Holdings - Accommodative monetary policy by the Fed has crushed bond income for insurers.  According to Bloomberg, 2015 investment income at North American insurers dropped below 2011 levels. Unsurprisingly, in their stretch for yield, insurers added to energy bond positions in 2015 to offset the funding gap.  Now, the collapse of oil prices has apparently left North American life insurers in a bit of a pickle with distressed debt holdings having doubled in a matter of 6 months as IG energy bonds turned to junk. North American life insurers have accidentally doubled their distressed-debt holdings in just six months. In the future, they are poised to build on that mound by design. Companies including Prudential Financial Inc. and MetLife Inc. held $1.32 billion of bonds that were in default, or close to it, at the end of the second quarter, their highest level since the middle of 2011, according to Bloomberg Intelligence data. They did not intend to buy distressed debt: In many cases they bought investment-grade bonds from energy drillers and retailers that ended up heading south. Insurance companies’ trouble with these bonds underscores how even conservative investors have been hurt by plunging oil prices. Per a portfolio manager at Prudential, energy bonds appeared cheap back in 2014 due their conservative debt-to-asset ratios.  Well, that's probably true if you just assume that prevailing market prices for commodities are right and ignore long-term supply/demand fundamentals.

Hedge Funds Get More Pushback on Terms as Enthusiasm for Strategy Wanes - Yves Smith - Negative real interest rates ought to be a boom time for hedge funds and other “reaching for yield” investment strategies, as was the case in the early 2000s. Yet while investors are pouring money into private equity and infrastructure funds, hedge funds are the wallflowers of this investment cycle. As we’ve pointed out often, the basic premise of hedge funds, that they delivered “alpha” or manager outperformance, was already in doubt in 2006. Moreover, it was also far from a secret that if what investors were really getting was a return profile that was not highly correlated with other types of investment, investors could achieve that at far lower cost than the 2% per annum and 20% upside fees that hedge funds typically charged. In the post crisis era, the shortcomings of hedge funds became even more apparent. Not only were returns underwhelming, but worse, they also became more and more correlated with the stock market. Late 2015 and 2016 has seen a wave of redemptions, with even famous names like Paul Tudor Jones taking hits.  The Financial Times gives an update of the new normal in Hedgistan. The latest development is that investor are increasingly seeking that hedge funds meet certain hurdle rates before the profit share, typically 20%, kicks in. From the Financial Times:Hedge funds are agreeing to so-called hurdle rates to assuage the sting of underperformance. Some have “hard hurdles,” meaning they must generate typically between 4 and 10 per cent before they are paid, while others must generate a certain percentage above Libor or cash. “This is here to stay, and in fact it’s going to become more the norm to have these more creative relationships on the fee side,” said Kelsey Deshler, a portfolio manager at Credit Suisse Asset Management.Long-only equity funds Viking, Maverick and Tybourne employ benchmark hurdles so that investors do not feel they are paying fees simply for tracking the market. The increasing popularity of hurdle rates reflects a shift in power away from managers, who can command high fees in times of strong performance, to investors, as they pull money out during periods of underperformance...

US hedge fund giant warns of 'biggest bond bubble in history': The boss of a giant US hedge fund manager has warned his investors he now regards the global bond market as “broken” and expects price falls when they come to be “surprising, sudden, intense, and large”. Paul Singer, manager of the $28bn (£21bn) Elliott Management Corporation fund, said investors were now facing "the biggest bond bubble in world history". Prices of both government and corporate debt have been driven to new records as low interest rates and central bank responses, such as quantitative easing, have been deployed. Low rates push returns on cash lower and cause the price of income-generating assets to rise. Quantitative easing, which has involved central banks buying bonds, has added significantly to demand. As prices rise, yields have fallen. Yields on benchmark UK 10-year Gilts fell to 0.5pc this week, a new low. The market rates on some government debt are negative, meaning buyers are paying to invest. In a letter to his investors, reported by CNBC, Mr Singer said the situation now “is in many ways the most peculiar period we have faced in 39 years". He expressed amazement that investors would be willing buy bonds at current prices.   He said: “Everyone is in the dark… Experience doesn't count for much, and extreme confidence may be fatal." He added: "The ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense and large."

US Corporate Debt Has Doubled To $6 Trillion Since The Crisis: This Is Who Bought It - Yesterday, in the FOMC notes, the Federal Reserve made a stark admission: “several expressed concern that an extended period of low interest rates risked intensifying incentives for investorsto reach for yield and could lead to the misallocation of capital and mispricing of risk, with possible adverse consequences for financial stability.” To this, Bank of America chief credit strategist Hans Mikkelsen had an amusing retort:"We agree. However, because we are still in the reach for yield phase we remain bullish on HG corporate bond spreads." In other words, it's a bubble and everyone - even the Fed - knows it, just as a recent survey also by BofA revealed, but keep on buying because, well, TINA.But who is buying, and how much? Answering the latter first, Mikkelsen notes that the HG US corporate bond market has more than doubled in size since the financial crisis. Indeed, as the chart below shows, since the financial crisis the amount of Investment Grade debt has surged from over $2 trillion to just under $6 trillion. As for the more important question, namely "who bought all this debt", the answer is surprising: mostly domestic retail and foreign investors. Here is BofA:"that expansion was bought by just two investors – mutual funds/ETF and foreigners (Figure 2).

Desperate investors turn to US junk bond market -- Despite the global economy still swimming in debt, investors are suffering an acute and worsening yield shortage. At the current rate of yield evaporation, bonds with positive returns might eventually go the way of the dodo. More than $13tn of bonds now trade with yields below zero, and the average yield of the Barclays Multiverse bond index is close to just 1.4 per cent, as central bank bond-buying and negative interest rates have stoked a frenetic grab for any fixed income left in the world. Indeed, the face value of the bonds in the Multiverse index is $45.7tn, but the market value is much higher at $51.1tn because the actions of central banks have caused prices of bonds to rise to unprecedented levels. The yield drought has pushed many investors towards dividend-paying stocks, leading some to quip that investors are now buying bonds for capital appreciation, and stocks for yield. But where else can they go? For investors sceptical of emerging markets, the US junk bond market is the obvious answer. Despite accounting for just 4 per cent of the Barclays Multiverse index, US corporate debt rated below “investment grade” now makes up almost a fifth of the world’s remaining bond yield. Eurozone government bonds account for 17 per cent of the Multiverse gauge, but only 2 per cent of its evaporating yield. Japanese government bonds account for zero of the index’s yield. No wonder then that US junk bonds have enjoyed a tremendous rally, with a gain of 14 per cent this year for investors who kept their cool during January and February’s carnage. Investors who bought at the bottom made a return of more than 20 per cent. Even after the 2016 rally, they still yield more than 6.4 per cent on average. Of course, junk bonds are risky. Another nine defaults in July lifted the trailing default rate to a six-year high of 4.5 per cent. S&P predicts that the rate will hit 5.3 per cent by March, and recently highlighted that the debt burden of low-rated US companies has never been higher.

With Corporate Defaults Surpassing Last Year's Total, Even Citi Can't Believe What Is Going On -- Just over a month ago, the total number of global defaults hit 100 according to S&P calculations, rising by 50% from the number of bankruptcies at this time last year and the highest level since the financial crisis. By total debt notional, some $154 billion had defaulted as of the mid point of the year, and extrapolating the trendline revealed something even more troubling: 2016 has a chance of being the year with the most defaults in history, surpassing even the 2009 financial crisis record. One month later, we learn that another 13 companies have filed for bankruptcy protection, bringing the grand total to 113, matching the number of companies which defaulted globally in all of 2015. According to Diane Vazza, head of S&P Global Fixed Income Research, “the default tally now equals the total number of defaults recorded in the entire year of 2015 and is 57% higher than the count at this oint in 2015. The last time the global tally was higher at this point in the year was in 2009 when it reached 208 during the financial crisis.” Meanwhile, the confusion between the soaring default rates and risk asset prices has stumped commentators such as Matt Krantz who points out that the latest default forecast, based on S&P's most likely scenario, is in stark contrast to the bullishness expressed in the stock market. The Standard & Poor's 500 has jumped more than 8% this year and is nudging up against record highs. While defaults are likely to rise, investors continue to be bullish on bonds as well as stocks. The difference between the yield on bonds with the lowest credit ratings and those with higher ratings fell to 5.6%. That's down from a 8.15% in mid-February.  Finally, here are some parting words from Citi's own head of credit, Matt King, who is likewise stunned: With macro this dominant, credit no longer seems bothered by defaults. S&P pointed out this week that YTD defaults have now equalled last year’s full-year total, and are running at their highest pace since 2009. Once upon a time, that would have been associated with spread widening. But not this year. Unfortunately that gulf in world view runs so deep that we doubt anything anyone says will change it – even as central banks are increasingly admitting that their models aren’t working.

Even The Wall Street Journal Thinks The Market's A Scam - The Wall Street Journal this morning echoed many of the questions we've raised over the past several years about the sanctity of global markets.  How are equity markets signaling economic strength while bond markets trade at the tightest levels ever?  Why do gold prices soar while inflation remains "stubbornly" low?  The answer, of course, lies in the Central Banking grand experiment that has distorted almost every corner of global markets.  Per the WSJ: What exactly is the market trying to say about the state of the global economy? Do the recent record highs in U.S. stock markets signal growing confidence in the recovery, or do soaring government borrowing prices and flattening yield curves as borrowing costs tumble at even long maturities signal market fears that the global recovery is a distant dream? How does one reconcile this year’s 30% rise in the price of gold—usually considered a hedge against inflation—with long-term swap rates suggesting inflation will remain low for years? And how does one explain the strength of European markets as many banking shares are trading at more distressed levels than at the height of the global financial crisis? One answer to these disparities is that the markets have become so distorted by central bank activity that they are no longer transmitting very useful information about the economy at all.  As we've discussed on several occasions, low interest rates have created a number of distorted incentive structures that render typical market signals useless.  Perpetually declining interest rates have forced pensions to indiscriminately buy the long end of the the government bond curve in a desperate attempt to match asset duration with their liabilities (see our post "Pension Duration Dilemma - Why Pension Funds Are Driving The Biggest Bond Bubble In History").  Meanwhile equity markets continue to soar to all-time highs, despite lackluster or declining earnings (see "The S&P Is Now Set To Report Its Second Consecutive Annual Earnings Drop Since The Financial Crisis"), on the premise that low-single-digit earnings yields are somehow adequate compensation for equity assumption they base on the low yields of the completely manipulated long-end of the curve.  The circularity of the many arguments is truly mind numbing.

Dirk Bezemer and Michael Hudson: Finance is Not the Economy - naked capitalism Yves here. Get a cup of coffee. This is clearheaded, meaty treatment of a pervasive distortion in economic and popular discourse. By Dirk Bezemer, a professor of economics at the University of Groningen, and Michael Hudson, a distinguished research professor of economics at the University of Missouri, Kansas City.  Abstract: Conflation of real capital with finance capital is at the heart of current misunderstandings of economic crisis and recession. We ground this distinction in the classical analysis of rent and the difference between productive and unproductive credit. We then apply it to current conditions, in which household credit — especially mortgage credit — is the premier form of unproductive credit. This is supported by an institutional analysis of postwar U.S. development and a review of quantitative empirical research across many countries. Finally, we discuss contemporary consequences of the financial sector’s malformation and overdevelopment.

Big banks unprepared for accounting shake-up - Nearly half of big banks around the world are unprepared for an international accounting standard due to take force in less than two years, even as they expect provisions for bad loans to soar as a result of the new rules. A poll of 91 banks across the globe — excluding US banks that are governed by their own rules — has found that 46 per cent of those surveyed do not believe they have enough resources to deliver changes by the 2018 implementation date, with a significant minority going on to say there were not enough skilled candidates in the market to hire. With less than 18 months to go before the change, nearly two-thirds of banks are unsure how the rules might impact their balance sheets, according to Deloitte, which undertook the global survey. The rules force banks to have a provision on their balance sheets for expected losses in the future rather than actual losses already suffered. Those banks that have made the calculations reckon the rules will result in a surge of at least 25 per cent in total impairment provisions across all asset classes. Banks are also forecasting that the rules, dubbed IFRS 9, will cause their capital ratios to deteriorate: they are expecting core tier one capital — one of the most keenly watched metrics of the health of a bank’s balance sheet — to decrease on average by half a per cent as a result of moving to the new standard, according to Deloitte. Uncertainty is not limited to the banking industry: 99 per cent of respondents said their local financial regulator had yet to say how they might incorporate IFRS 9 numbers into regulatory capital requirements.

Blockchain Is Supposed to Work in the Background | Bank Think - The blockchain has caught the fancy of banking executives, who see the system as a way to overhaul antiquated IT infrastructure. To be sure, the technology underlying much of finance is outdated by today's standards. With startups from Silicon Valley at the gate, banks are rightly looking to differentiate themselves and win customers through better technology. Blockchain provides the best technology available today for many applications, especially in the back office. Blockchain technology has several appealing features for the financial industry. Different parties can easily create a consensus on the current state of events, without having to transfer proprietary data back and forth among firms to be validated by each party. Add in smart contracts, and a lot (not all) of simple rules can easily get automated in the process. It is no wonder that many banks are creating internal working groups and consortiums to experiment with how the blockchain might fit into different markets. However, looking at blockchain as an application that solves some immediate business need may turn out to be a mistake in the long-run evolution of this technology. It is more plausible that the technology will evolve in a way that makes the blockchain a protocol layer, on which individual applications are then built. Such a system would be preferable in a global marketplace where no financial institution has to play in a system built by a competitor. It would also be preferred by regulators, because it standardizes applications and smart contracts, thus making it easier to monitor systemic risks. The blockchain does one thing really well: help different parties come to an irreversible consensus. That should be the protocol layer. Various applications can then be built on top of that foundation. For example, it is entirely possible to build an application that provides reversible transactions on a blockchain. Or create an automated piece of code (a smart contract) that "pays a dividend" if certain conditions are met. Given the base protocol blockchain layer, the industry can standardize and innovate on two aspects: defining financial instruments and defining processes around them. With blockchain as a protocol, the industry can come to a consensus – based on defined rules – on what constitutes financial instruments, from simple stocks and bonds to more complex swap options and collateralized debt obligations. The market will know an instrument when it sees one on the blockchain.

Does Blockchain Tech Solve Security Problems or Cause New Ones? - American Banker -  Blockchain technology is often suggested as an answer to the financial world's security problems. Banks on the Swift network are being hacked? Put those international wire-transfer instructions on a blockchain. Card-not-present fraud is up? Well then, merchants should just let people pay with bitcoin. Problem solved. But is it? As recent events have shown, blockchain technology is vulnerable to security problems, too. In August hackers stole $72 million worth of bitcoin from accounts at the Hong Kong cryptocurrency exchange Bitfinex. In June $55 million worth of ether was stolen through a smart contract created by the DAO and executed on the Ethereum network. It all raises questions about the extent to which blockchain can cure security ills.There is some validity to the idea that blockchain technology will solve security problems in banking, experts say. The blockchain is a distributed file system where participants keep copies of the file and agree on changes by consensus. The file is composed of blocks, and each block includes a cryptographic signature of the previous block, creating an immutable record. The network verifies the integrity of the transactions. "Nobody's been able to hack into the bitcoin blockchain and steal bitcoins," said Richard Johnson, vice president of Greenwich Associates. "In that sense, the blockchain itself is very secure. It has very strong cryptography securing it." In a report released Wednesday, Johnson pointed out that for assets digitized on the blockchain, cryptography is used to identify and secure ownership of the asset. "Nobody can steal or copy the digital asset unless they have the secret code or private key that unlocks the cryptographic protection on the asset," the report said.

Here's What the Bitcoin Naysayers Get Wrong --Naysayers love to nay. And the bitcoin skeptics — of which there are many — are at it again. In late June, Citi Research released a report that asked, "Could the Bitcoin Blockchain Disrupt Payments?" The researchers' short answer — unsurprisingly — was: no. That short answer, however, was shortsighted. Even more troubling is that Citigroup is not alone in its critique of the cryptocurrency. We have a little secret for all of those who once again have predicted bitcoin's imminent demise: They're wrong. Instead of simply shouting that point over and over again, let's carefully examine some of the faulty arguments cryptocurrency naysayers, when they are naying, seem to be saying in unison.

  • The U.S. and Western Europe are well served by existing financial systems. Here, we mostly agree. Existing centralized payment systems can work for those within the established system. But what of the 2.5 billion people excluded from the established system? For the disenfranchised living in places banks cannot or will not serve, bitcoin can change lives.
  • Bitcoin can't reach parts of the world that lack internet services. A working paper from the United Nations Research Institute for Social Development is just the latest in a lengthy string of commentary from naysayers articulating the loudest and longest-running argument against bitcoin: limited connectivity.
  • The "last mile" cost makes bitcoin a last resort. The naysayers, including Jamie Dimon, argue that bitcoin will never be a major competitor to the U.S. dollar.  Among the reasons often cited, particularly by money transfer operators, is that bitcoin doesn't solve certain cost challenges associated with remittances. While bitcoin can streamline the value transfers, it does not affect what is known as the "last mile" costs of making the conversion into local currency.
  • Bitcoin's two "incurable" diseases.The number of bitcoin obituaries is almost endless. One of the chief causes of death are bitcoin companies' lack of resiliency in such a volatile market. Bitcoin has only been around since 2009 so it's neither time-tested nor stable. Bill Gates has flagged resiliency/volatility as a bitcoin pitfall. But what the naysayers and obit writers overlook is that youth bears no relation to resiliency, just as age does not suggest security. Don't believe us? One word: Brexit.

Foot-Dragging on Volcker Rule Gives Banks’ Critics Ammunition - NYTimes - Goldman Sachs, JPMorgan Chase, Morgan Stanley and other banks want the Federal Reserve to give them until 2022 to offload investments banned by the Volcker Rule. They have already had six years to do so, during which time the stock market has doubled. Asking for such a long delay may lead to unwanted consequences. The request may have its merits. Many of the holdings are harder to get rid of than run-of-the-mill stocks and bonds. They also may be subject to contractual obligations that limit how and when they can be sold. And there is a chance that next summer’s deadline might force banks to accept discounted prices. That is a concern for shareholders, however, not regulators. The $7 billion of affected investments at Goldman and the $3.2 billion at Morgan Stanley would hurt earnings if sold at a loss, but should not put a strain on capital. The broader issue is that banks have had plenty of time to get their houses in order. The Volcker Rule was part of the 2010 Dodd-Frank legislation aimed at reducing risks banks pose to the financial system. Although it did not take effect for another few years, most institutions quickly closed other affected units, such as proprietary trading. Further delays will come off as banks again trying to avoid rules and oversight. They already have the likes of Senators Elizabeth Warren and Bernie Sanders pushing for breakups and both political parties talking about reinstating the Depression-era Glass-Steagall law that separated commercial and investment banking. By dragging their feet on the Volcker Rule, bankers may give those initiatives momentum.

 33,000 Americans Have Deposited $1.8 Billion In Savings With Goldman Sachs --- One year ago, the FDIC-backed hedge fund and central banker incubator known as Goldman Sachs prompted some head scratching when it announced that it would become an actual bank following its purchase of GE Capital Bank's online deposit platform, allowing ordinary retail depositors to park their cash with the bank. The reason for the confusion was simple: with a $900 billion balance sheet, Goldman did not need the extra funds. Just as confusing, Goldman was paying one of the highest interest rates in the country: at 1.05%, this is more than virtually any other comparable bank or financial institution was willing to give depositors every year they parked their savings with the bank. Superficially, it would suggest Goldman urgently needed the funds which, at least as of this moment, could not be further from the truth.

 Goldman seeks to force ex-employee in Fed leak case to arbitrate - Business Insider: (Reuters) - Goldman Sachs Group Inc filed a lawsuit on Thursday seeking to force a former managing director to arbitrate his claim for legal fees stemming from probes into his alleged use of confidential Federal Reserve documents. The lawsuit was filed in New York state Supreme Court in Manhattan against Joseph Jiampietro, an ex-Goldman employee whom the Federal Reserve Board this month brought an enforcement case against. Goldman's lawsuit came after Jiampietro in July sued the bank in Delaware Chancery Court seeking to force it to cover at least $350,000 in legal expenses stemming from probes by the Federal Reserve and the Financial Industry Regulatory Authority in 2015. Adam Ford, a lawyer for Jiampietro, in a statement called Thursday's lawsuit "a classic example of inappropriate forum shopping" by Goldman Sachs to delay advancing his client's defense fees.

Financial Crash will be Put On Little People: Ellen Brown -- Public banking expert Ellen Brown thinks big banks will be saved from a coming calamity at the expense of the little people. Brown explains, “I think the big banks won’t go down. They are protected by the bail-ins, which we haven’t yet seen in the U.S., but we’ve seen them in Europe starting in Italy. They did them starting last year. There were four small banks that got bailed-in . . . they took deposit accounts where they got some interest, and they were called bond holders. So, they took the bond holders’ money. They were really just ordinary depositors that thought they were making a little interest. There was one man who committed suicide because he lost his whole 100,000 euros. He pinned a sign to his chest and blamed it on his bank. The effect of the bail-ins in Italy was, rather than stabilize the banks, it destabilized the banks. Depositors in Italy were pulling their money out. It seems to me that the way things are playing out, the banks will be kept in place by governments because of this fear of the collapse of this derivatives scheme. Who will be hurt? It will be the little people. So, we will see a crash, but it will be a crash on us. We will lose our deposits or we will have to do a bail-in. The big banks, under the current law, are pretty much safe.”  Countries are up to their necks in debt that cannot not be paid, and the derivatives propping the debt up are hundreds of trillions of dollars.   Brown contends, “The concern is this $500 trillion of derivatives just on sovereign debt.  There is $100 trillion in sovereign debt globally, which is a huge bill, and then you have all these derivatives betting against it with credit default swaps that would pay off in the event of a default.  So, they can’t let any of these governments go bankrupt.  They can’t write down the debt, and they can’t write off the debt as they should.  These are impossible debts in Europe, particularly like in Greece.  They are impossible debts to pay, but the central banks, for example in the EU, will not let any of these countries go bankrupt because the fear is it would trigger a cascade of defaults among the derivatives players, which would bring everything down.”

Wall Street abandoning Wall Street because it's expensive - Business Insider: Wall Street has long been the center of the American financial universe. Home to the New York Stock Exchange, the New York Federal Reserve, and many important financial institutions, Lower Manhattan has historically held enormous sway over the financial industry. That, however, is changing. Growth in financial services jobs has stagnated in the New York City area, and it may be for a simple reason: cost. New York Federal Reserve Bank President William Dudley remarked at a press briefing, attended by Business Insider, that the number of Wall Street jobs actually in New York City has stagnated since the global financial crisis. In Dudley's opinion, there are three main reasons for this:

  1. The sector had too many people in the first place. "One hypothesis is that the sector itself was overheated," Dudley said. "In the run-up to the financial crisis, there was a lot of financial activity that was just not sustainable ... some of that just sort of went away."
  2. Regulation has made it harder for companies to generate returns needed to increase hiring. "Another competing hypothesis is that there has been an increase in regulation and supervision, and this is making it more difficult for financial firms to make profits," Dudley said. "If you look at the profitability of the financial institutions ... their return on equity is lower than it was before the financial crisis. This probably has some implications for job creation."
  3. New York City is just too darn expensive. "Another factor is pressure on profits that leads to more focus on costs," Dudley said. "It raises the question if New York City the best place for locating certain back-office operations, and people have been moving back-office operations to lower cost places, and that's probably a factor as well."

"Fortress" Balance Sheets? FDIC Slams Biggest US Banks, Says Capital Reserves "Inadequate" - On Friday morning, a gentleman named Thomas Hoenig wrote some rather unflattering comments about the US banking system in a little known publication called the Wall Street Journal. In his remarks, Hoenig stated that “while the largest U.S. banks have increased capital since the [2008] crisis, their capital is still lower than the industry average and inadequate for bank resiliency.” Think about what means. A bank’s “capital” is essentially its rainy day reserve fund. If there’s a giant mess in the financial system and asset prices collapse (as they did in 2008), a bank with plentiful capital will be able to withstand the crisis. Banks with inadequate capital will fail. Hoenig is suggesting that many of the largest banks in the US fall in the latter category. More importantly, Hoenig slammed the ridiculous accounting methods that banks use to report their financial condition, something he said “too easily allows banks to conceal risk.” So Hoenig is telling us that banks have insufficient capital to be resilient in a crisis and can too easily hide their risks. Crazy. So who exactly is this whack job Thomas Hoenig? What sort of social deviant would possibly question the sanctity and soundness of the US banking system? Hoenig is the vice chairman of the FDIC, as well as former president of the Kansas City Federal Reserve Bank.

Macy's Store Closings to Hit $3.64B of CMBS -- Macy's decision to shutter another 100 of its department stores could impair some $3.64 billion of securitized commercial mortgages, according to Morningstar Credit Ratings. These loans are tied to 28 locations that the ratings agency considers to be at the highest risk of closure. The iconic chain has yet to announce which stores its will be shuttering in an attempt to boost productivity. In January, the retailer announced it was closing 36 of its estimated 770 locations and laying off 4,500 workers. Last week it boosted that figure by 100 stores. All of the closings will be completed by early 2017. There are a total of $7.13 billion in securitized mortgages on properties with direct exposure to Macy's as a tenant, according to Morningstar. An even larger sum, $28.49 billion of loans, are collateralized by regional malls that include Macy's as an anchor or as a spillover "shadow anchor" tenant in a neighboring property. Morningstar looked at sales per square foot to determine the most likely candidates for closure. The stores it identified have figures ranging from $76 to $166 per square foot, below Macy's average sales figure of $169 per square foot in 2014 — the latest figure available. While single-store closures would not directly impact a securitization, they could produce problems for individual loans backed by regional malls with Macy's as a tenant. And these individual loans may be used as collateral for more than one transaction. "Losing a Macy's may not be an immediate death knell for a loan, as cash flow could absorb the vacancy," Morningstar stated in a report published Wednesday. "However, if a mall is hit by two or more anchor closures, that's typically the beginning of a downward spiral."

No, Digital Mortgages Will Not Replace Loan Officers: Cultural shifts toward shortening the cycle of commerce have created new paradigms that challenge every industry to be faster, smarter and more customer-driven. The mortgage industry is no different, but, of course, our industry is more complex and nuanced than ever before. The complexities of the mortgage process from origination to fulfillment cannot be completely addressed through digital technologies — which makes the mortgage loan officer indispensable. As the industry does a full court press toward the automated aggregation of documents from start to finish, it's loan officers who must keep the ball in play. They are translators and hand-holders for what is undoubtedly the most complex financial transaction consumers will ever have. The emotional component of the mortgage transaction cannot be underestimated: "It's a home, it's not a loan," should be every lender's mantra. Interestingly enough, the importance of the LO in today's digitally driven world was underscored in TD Bank's most recent Mortgage Services Index data. . In the survey, recent home buyers suggested that borrowers recognize the need for guidance and education when obtaining a loan. The results also showed nearly one-third of respondents reported needing the most help during initial stages of the loan process; and slightly fewer felt they needed guidance throughout the entire loan process. One-quarter said education and guidance was most vital during loan selection, and 17% said they needed more help during closing.

Everybody Has a Plan for Fannie and Freddie But Nothing Gets Done - Fannie Mae and its cousin, Freddie Mac, are once again headed for trouble. In fact, there’s almost no way around it. On Jan. 1, 2018, the two government-sponsored enterprises will officially run out of capital under the current terms of their bailout. After that, any losses would be shouldered by taxpayers. Granted, few people are predicting a disaster like the one in 2008, when the GSEs had to be thrown a $187.5 billion federal lifeline. But eight years later, people still don’t agree on what to do with these wards of the state. In Washington and on Wall Street, the fight over Fannie and Freddie drags on. “Everyone agreed that this was a broken business model that made no sense,’’ said Douglas Holtz-Eakin, president of the American Action Forum, a center-right advocacy group in Washington. “Now, inertia is driving the way.’’ The stakes are high. Earlier this month, the Federal Housing Finance Agency, which oversees the GSEs, said Fannie and Freddie might need a $126 billion rescue if the economy were to stumble hard again. In recent years the Treasury has collected more than enough money from the GSEs, in the form of dividends, to cover a bill of that size.But to the GSEs’ critics, the real issue is that policy makers have yet to come up with a long-term plan. Republicans want to kill the quasi-governmental companies. Democrats have floated the idea of merging them. Hedge fund managers like Richard Perry have gone to court to claw back dividends swept up by the Treasury.

CFPB Happy to Remind You Compliance Is Everyone's Responsibility - Lenders have been struggling for some time with convincing business partners and employees that the Consumer Financial Protection Bureau's reach can and will extend to them. The latest case is an illustration for any doubters that the CFPB is entirely serious in its intentions to bring the full weight of its powers against individuals and businesses alike. Hence, compliance is a legitimate concern for all — not just for business owners. Over the course of the last 12 months, the Consumer Financial Protection Bureau has repeatedly demonstrated its willingness to target enforcement against individuals — including loan officers. In most cases, the enforcement against individuals is connected to an enforcement action against a company. Officers and owners of companies have frequently been targeted when their actions directly contributed to, or permitted the continuance of, violations. Further, loan officers who were alleged to have been involved in a scheme to receive marketing benefits in exchange for title referrals received fines and industry suspensions. However, recently, the CFPB issued a consent decree against only a loan officer, who allegedly engaged in a mortgage fee shifting scheme where in exchange for the referral of business, the escrow agent shifted fees at the loan officer's request to assist him in increasing his volume of business. The CFPB required the payment of an $85,000 fine and suspended the loan officer from employment in the industry for one year. Unlike many of the prior consent decrees in which individual enforcement was coupled with actions against an entity, in this case the consent decree was targeted only against the loan officer. This does not mean the CFPB would not enforce a violation against an entity in a similar situation in the future. Business owners, companies and individuals need to remain vigilant about compliance.

New CFPB Rule Gives Servicers Just Enough Rope to Hang Themselves: Servicers got what they asked for when the Consumer Financial Protection Bureau limited the specificity of certain requirements in its final servicing rule. Now they may regret it. The more than 900-page regulation, released earlier this month, favors consumer advocates' views of the bureau's role as a consumer protection agency, while also taking industry feedback into consideration in requiring servicers to take many additional steps to try to prevent foreclosures. "On the one hand, the industry would like flexibility on how they have to do things. But on the other hand, the lack of specificity in terms of what would be considered compliant or noncompliant — or in conflict with other rules or statutes — means you often find companies caught between a rock and a hard place," said Quyen Truong, a partner at Stroock & Stroock & Lavan LLP in Washington, D.C. and a former assistant director and deputy general counsel of the CFPB. For example, the rule contains new requirements related to borrowers in bankruptcy and force-placed insurance. In addition, it recognizes the rights of successors in interest, such as relatives who inherit property after the original borrower passes, giving them the same rights as original borrowers to foreclosure and other consumer mortgage protections once their status as successors has been established. But while the rule requires servicers to have ways to establish the status of successors, legal experts' initial take on the rules is that it stops short of mandating a particular process. This is significant because some consumer and mortgage groups have had different views on how this should and can be done, with the industry citing concerns about conflicts with privacy law, among other things.

Doubts Raised About Qualifications of CFPB's Supervision Head - The Consumer Financial Protection Bureau's choice for its new head of supervision and enforcement — the No. 3 slot at the agency — is raising eyebrows because of his political background and relative inexperience compared with similar positions at other regulators. Chris D'Angelo last month became the agency's associate director for supervision, enforcement and fair lending, beating out several experienced attorneys, including women and minorities, for the post. D'Angelo, 37, was formerly the agency's chief of staff, a position he took three years ago after joining the bureau in 2011 as an enforcement attorney. He now heads the agency's largest department, overseeing roughly 700 lawyers and staff employees. In an interview, D'Angelo said his focus is on continuity. "We will continue to hold companies accountable when they break the law and harm consumers," he said. "I want to communicate the expectation of continuity…and a push for companies to invest in compliance management systems to prevent harm in the market." Yet some question whether D'Angelo has the right experience for the job. "It's an unusual move to go from being chief of staff to head of enforcement, especially for somebody who doesn't have a deep background in that area," said Todd Zywicki, a law professor at George Mason University and a CFPB critic. "This really is an important role and it's one that at most [regulatory] agencies is held by an experienced lawyer or someone with decades of supervisory experience." Many credit D'Angelo's quick rise to his close ties to CFPB Director Richard Cordray, for whom he spent two years working as a senior adviser. "Chris's advantage is that Rich trusts him more than anyone else at the CFPB,"

 Tom Miller Pens Love Letter to Settlements with Financial Fraudsters  - David Dayen - You could spread around a lot of blame for the current state of our two-tiered system of justice and lack of accountability, particularly as it relates to the financial sector. But if you wanted to find the most pathetic figure involved in that whole rigamarole, all roads lead to Iowa Attorney General Tom Miller.  As a refresher for non-obsessives, Miller was the somewhat highly regarded law enforcer put in charge of the 50-state Attorney General investigation after revelations around the end of 2010 that mortgage servicing companies, mortgage-backed trustees and their law firms were issuing false documents in foreclosure cases on a mass scale to cover up busted chains of title on securitized loans. (I, er, wrote a book on this.) Within days of being announced as the lead investigator, we learned that Miller received $261,000 from banking interests for his re-election campaign – 88 times more than he ever took in the previous decade – and that he personally asked bank lawyers for contributions. Miller then famously told community groups in Iowa that “we will put people in jail” for foreclosure fraud, only days later his office backtracked and said they weren’t referring to foreclosure fraud but some separate mortgage fraud investigation in Iowa (which he didn’t put people in jail for either), and then days after that he called the case “inherently civil,” and days after that he appeared at the Senate Banking Committee and admitted he had two settlement negotiations with Bank of America within the first month of the vaunted investigation. I could go on, but why bother? Whatever his outlook going into the investigation, Miller folded within first contact with the system, and became Washington’s lackey for a settlement that didn’t even rise to the level of a slap on the wrist. So it was no surprise to dig up a public comment he made a couple weeks ago to the Department of Education, praising civil settlements for corporate crimes rather than holding individuals and corporations accountable for their wrongdoing. This paean to settlements couldn’t come from a better source.

  Detroit group says water shutoffs add to foreclosures: A Detroit-based group of activists and university professors said the city’s policy of shutting off water to those who don’t pay water bills is driving residents from their homes and exacerbating the city’s foreclosure crisis. The group’s research, released as a published report Thursday, provides maps of Detroit showing concentrations of “thousands of families being deprived of water and simultaneously having their homes taken," according to a news release. The group, called We the People of Detroit Community Research Collective, also said the policy of enforcing water shutoffs is having a disproportionate effect on African Americans.  Members of the group — which includes professors and former professors at Wayne State University, the University of Michigan and the University of Detroit Mercy — said they spent 18 months to generate the report called “Mapping the Water Crisis: The Dismantling of African American Neighborhoods in Detroit.” "This is just Phase I. We're partnering with Michigan State University to do some water testing (for lead and other contaminants) in Detroit, and we're gathering from the community their anecdotal stories about their water shutoffs — how they're trying to live without water, or how they're having to conserve water at a debilitating level,"

Zillow: Negative Equity Rate declined in Q2 2016 --  From Zillow: Q2 2016 Negative Equity Report: Why Cities and Suburbs are only Sometimes Impacted Similarly  According to the Q2 Zillow Negative Equity Report, the overall U.S. negative equity rate as of the end of Q2 2016 – the share of homeowners that were underwater, owing more to their lenders than their home was worth – was 12.1 percent. That’s down from 12.7 percent in the first quarter and 14.4 percent at the same time a year ago (figure 1). When examining the negative equity rate in urban and suburban areas, we found that 13.7 percent of homeowners in urban areas and 11.2 percent of homeowners in suburban communities were underwater at the end of Q2. The following graph from Zillow shows a time series for negative equity. From Zillow:  Despite steady improvement in the overall negative equity rate, pockets with relatively high shares of underwater homeowners remain, especially in the Midwest. Of the 35 largest metro areas covered by Zillow, the overall negative equity rate in Q2 was highest in Las Vegas (19.5 percent), Chicago (19 percent) and Baltimore (16.7 percent). Five of the 10 largest metros with the highest rates of negative equity are in the middle of the country (Chicago, Cleveland, Indianapolis, Kansas City, St. Louis). Meanwhile, the West Coast is home to the largest three metros with the lowest levels of negative equity (San Jose, San Francisco and Portland).

More than 10% of Homeowners Still Underwater: Zillow: The share of homeowners who owe more than their house is worth remains above 10% nationwide, according to data from Zillow's second quarter Negative Equity Report. Zillow said Thursday that 12.1% of homeowners with a mortgage are underwater, which is down from 12.7% in the previous quarter and from 14.4% a year ago. While on a national basis there is little difference in negative equity rats between cities versus suburbs, the variation is more pronounced based on the region a location is in. In Cleveland and Detroit there were differences of 13.6 and 10.8 percentage points respectively in negative equity rates for those in the suburbs versus those in urban areas, where the rate held steady across both types of areas in Seattle. Nationwide, In urban areas, 13.7% of homeowners were found to be underwater on their mortgage, as compared with just 11.2% of those in the suburbs. "At its worst, negative equity touched all kinds of homeowners in all kinds of markets," Zillow chief economist Svenja Gudell said in a news release. "The type of community a given home was in – urban or suburban – mattered little. Fast-forward a few years, and the relative vibrancy of a given community and how it has performed over the past few years, and not necessarily its location in the city or suburbs, matters a great deal."

 MBA: "Mortgage Applications Decrease in Latest Weekly Survey" From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 4.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 12, 2016.  ... The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier to the lowest level since February 2016, but remained 10 percent higher than the same week last year. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.64 percent from 3.65 percent, with points decreasing to 0.31 from 0.34 (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 "10 percent higher than the same week last year".

Mortgage Rates Dipped Slightly Ahead of Fed Minutes Release: Mortgage rates edged downward this week as the market anticipated Wednesday's release of the minutes from the Federal Open Market Committee's July meeting, Freddie Mac reported. The average rate for a 30-year fixed-rate mortgage dropped two basis points from last week to 3.43%, Freddie Mac said Thursday based on the results of its Primary Mortgage Market Survey. A year ago, the rate averaged 3.93%. Similarly, the average rate for a 15-year FRM dropped a single basis point to 2.74% on a weekly basis and 41 basis points year-over-year. The average rate for the 5-year Treasury-indexed hybrid adjustable-rate mortgage however rose two basis points to 2.76%. Still, that figure is down from the average rate of 2.94% last year. "Ahead of the release of the FOMC minutes for July, 10-year Treasury yields were little changed from the prior week," Freddie Mac chief economist Sean Becketti said in a news release. "For eight consecutive weeks mortgage rates have ranged between 3.41 and 3.48 percent. Inflation is not adding any upward pressure on interest rates as the Bureau of Labor Statistics reported that the Consumer Price Index was unchanged in July."

 FNC: Residential Property Values increased 4.8% year-over-year in June -- FNC released their June 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 1.1% from May to June (Composite 100 index, not seasonally adjusted).  The 10 city MSA increased 1.3% (NSA), the 20-MSA RPI increased 1.2%, and the 30-MSA RPI increased 1.1% in June. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales). Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The index is still down 10.7% from the peak in 2006 (not inflation adjusted).

 Three "Red Flags" That The US Housing Slowdown Is Accelerating --One month ago, we showed three prominent "red flags" that the US housing market was starting to roll over. Among these were a report by real-estate advisory RealtyTrac, which cited by Bloomberg, said that "almost nine years after the housing-market bust helped trigger the most recent recession,RealtyTrac senior vice president Daren Blomquist sees the industry waving a red flag." He was referring to house flipping by third party investors at auction which was back with a vengeance, and what's worse, the share of foreclosures snapped up by inexperienced mom-and-pop buyers at auction had hit a record 31% in June. As he said, "this a redux of the same fervent speculation that pushed the housing bubble." The second warning came as a result of the latest sharp decline in spending on furniture and home goods stores, which according to Bank of America credit and debit card spending data, showed that the yoy drop had reached the lowest since the recession period. As BofA said then, "this shows that consumers have delayed spending on housing-related items, which could be a sign of weakness for the housing market." The third red flag was revealed in the then-latest Credit Suisse survey of real estate agents: "Our Buyer Traffic Index took a sizeable step back in June, slipping to 41 from 52 in May, indicating traffic levels decidedly below agents’ expectations.... Prospective buyers also continue to be deterred by a persistent shortage of affordable inventory across markets, with agents frequently highlighting buyer pushback to rising home prices. On the other hand, agents repeatedly mentioned that low mortgage rates were crucial to supporting demand."

 Housing Starts increased to 1.211 Million Annual Rate in July  From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,211,000. This is 2.1 percent above the revised June estimate of 1,186,000 and is 5.6 percent above the July 2015 rate of 1,147,000. Single-family housing starts in July were at a rate of 770,000; this is 0.5 percent above the revised June figure of 766,000. The July rate for units in buildings with five units or more was 433,000.  Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,152,000. This is 0.1 percent below the revised June rate of 1,153,000, but is 0.9 percent above the July 2015 estimate of 1,142,000.  Single-family authorizations in July were at a rate of 711,000; this is 3.7 percent below the revised June figure of 738,000. Authorizations of units in buildings with five units or more were at a rate of 411,000 in July.  The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in July compared to June. Multi-family starts are up 13% year-over-year. Single-family starts (blue) increased in July, and are up 1.3% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in July were above expectations, however combined starts for May and June were revised down.

Housing Starts Jump On Spike In Rental Units As Permits Decline --While the single-family housing stagnation continues, multi-family, or rental, housing starts and permits jumped in the month of July according to the latest Census data. In the latest month, housing starts rose by 2.1% from June, and were higher by 5.6% from a year ago, rising to 1.211MM, above the 1.180MM expected, driven by a 33K jump in rental unit starts, which rose to 433K, while single-family units remained largely unchanged at 770K, up 0.5% from last month's 766K. As the chart below shows, single-family start have barely budged in the past year even as rental units appear to once again be growing at a solid pace. On an annual basis, the rate of change continues to hug the flatline, and after last month's modest decling, starts rose by 5.6% in the latest month. Meanwhile, the more importantl building permits data series, fell modestly to 1.152MM in July from 1.160MM in June, on top of the 1.153MM expected. While these series are notoriously volatile, if indeed multi-family housing is picking up it could provide a modest ray of hope for America's renters who continue to suffer under record high asking rents, in part due to a lack of supply. Then again, it depends who ends up being the ultimate owner of these buildings, and if the units end up controlled by Wall Street it is likely that there will be no respite from record high rates any time soon as the "cartelling" of supply is set to continue for the indefinite future.

July 2016 Residential Building Permit Growth Rate Continues to Decelerate -- Be careful in analyzing this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry variations from month to month so the rolling averages are the best way to view this series - and the data remains in the range we have seen over the last 3 years (although permits is at the low end of the range).

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a -6.1 % this month.
  • Construction completions are lower than permits this month for the 19th month in a row (when permits exceed completions - this sector should be expanding).
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is -6.1 % (permits) and +1.6 % (construction completions):
  • Building permits growth accelerated 8.6 % month-over-month, and is down 6.1 % year-over-year.
  • Single family building permits declined 7.4 % year-over-year.
  • Construction completions decelerated 12.3 % month-over-month, up 1.6 % year-over-year.

Comments on July Housing Starts -- The housing starts report this morning was above consensus, however there were downward revisions to the prior two months. Still a solid report. This first graph shows the month to month comparison between 2015 (blue) and 2016 (red). . Year-to-date starts are up 6.7% compared to the same period in 2015. My guess was starts would increase 4% to 8% in 2016, and that still looks about right. Multi-family starts are down 0.6% year-to-date, and single-family starts are up 10.6% year-to-date. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will probably catch up to starts soon (completions lag starts by about 12 months). I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

NAHB: Builder Confidence increases to 60 in August --The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 60 in August, up from 58 in July. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Rises Two Points in August Builder confidence in the market for newly constructed single-family homes in August rose two points to 60 from a downwardly revised reading of 58 in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).“New construction and new home sales are on the rise in most areas of the country, and this is helping to boost builder sentiment,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. Two of the three HMI components posted gains in August. The component gauging current sales conditions rose two points to 65, while the index charting sales expectations in the next six months increased one point to 67. The component measuring buyer traffic fell one point to 44.  Looking at the three-month moving averages for regional HMI scores, the South registered a two-point uptick to 63, the Northeast rose two points to 41 while the West was unchanged at 69. The Midwest dropped two points to 55.

AIA: Architecture Billings Index "moderates slightly, remains positive" in July -- Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Architecture Billings Index moderates slightly, remains positive The Architecture Billings Index (ABI) was positive in July for the sixth consecutive month, and tenth out of the last twelve months as demand across all project types continued to increase. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the July ABI score was 51.5, down from the mark of 52.6 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.5, down from a reading of 58.6 the previous month. “The uncertainty surrounding the presidential election is causing some funding decisions regarding larger construction projects to be delayed or put on hold for the time being,”“It’s likely that these concerns will persist up until the election, and therefore we would expect higher levels of volatility in the design and construction sector in the months ahead.”
• Regional averages: South (56.9), Midwest (50.1), Northeast (49.3), West (49.2)
• Sector index breakdown: multi-family residential (55.2), institutional (50.7), mixed practice (50.5), commercial / industrial (50.3)
Note that multi-family has picked up again, so we might see another pickup in multi-family starts.

Hotels: Occupancy Rate on Track to be 2nd Best Year --From STR: US hotel results for week ending 6 AugustThe U.S. hotel industry reported mixed results in the three key performance metrics during the week of 31 July through 6 August 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy decreased 1.6% to 75.6%. However, average daily rate was up 2.7% to US$127.69, and revenue per available room increased 1.1% to US$96.59. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

US Consumer Price Index unchanged in July, matching expectations --The Labor Department said on Tuesday that the flat reading in its Consumer Price Index was the weakest since February and followed two straight monthly increases of 0.2 percent. In the 12 months through July, the CPI rose 0.8 percent after increasing 1.0 percent in June.  Economists had forecast the CPI would be unchanged last month and rise 0.9 percent from a year ago.  The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent in July. It had risen by 0.2 percent in the previous three consecutive months. The year-on-year core CPI increased 2.2 percent after rising 2.3 percent in June. The Fed has a 2 percent inflation target and tracks an inflation measure which has been stuck at 1.6 percent since March. Coming in the wake of last week's weak retail sales report for July, the tame inflation reading could see financial markets dialing back their rate hike expectations for 2016.  Late on Monday, financial markets were placing a 46.7 percent probability of a rate increase at the Fed's December policy meeting, according to CME Group's FedWatch program. A September rate hike has been virtually priced out.In July, gasoline prices fell 4.7 percent, the first drop since February, reflecting renewed declines in crude oil prices. Gasoline rose 3.3 percent in June. Food prices were unchanged, but the cost of food consumed at home fell 0.2 percent. Within the core CPI basket, housing and medical costs continued to rise. Owners' equivalent rent of primary residence jumped 0.3 percent after increasing by the same margin in June.

U.S. Consumer Prices Unchanged in July as Fuel Costs Ease - The U.S. cost of living was little changed in July, a sign subdued inflationary pressures will give Federal Reserve policy makers reason to keep interest rates low. It was the first time in five months the consumer-price index failed to advance and followed a 0.2 percent gain in June, Labor Department figures showed Tuesday in Washington. Excluding food and energy, prices rose 0.1 percent, less than projected.Inflation continues to tread below the Fed’s goal as U.S. companies remain challenged by frugal consumers and competition from cheaper goods made overseas. With price pressures elusive, central bankers will be less willing to raise borrowing costs. “Inflation is very likely to remain tame at best,”. “Other than housing and medical care, vast sectors of the economy are still seeing negative price pressures. It softens the outlook for a Fed hike.” . The reading on the consumer-price index matched the median forecast in a Bloomberg survey of 82 economists. Estimates ranged from a decline of 0.1 percent to a gain of 0.2 percent. Prices increased 0.8 percent in the 12 months ended in July, after rising 1 percent in the year through June. The increase in the core CPI measure, which excludes volatile food and fuel costs, was the smallest since March and fell short of the 0.2 percent gain projected in the Bloomberg survey. The gauge was up 2.2 percent from July 2015, following a 2.3 percent advance in the year ended June.

No Monthly Inflation Says July CPI – Robert Oak - The Consumer Price Index had no change for July.  Food inflation was a big fat zero and energy costs dropped another -1.6% for the month.  Inflation with food and energy price changes removed increased 0.1% with shelter and medical costs once again driving the increase.  From a year ago overall CPI has risen 0.8%.  Without energy and food considered, prices have increased 2.2% for the year.   CPI measures inflation, or price increases.  Yearly overall inflation is shown in the below graph.  Core inflation, or CPI with all food and energy items removed from the index, has increased 2.2% for the last year.  For the past decade the annualized inflation rate has been 1.9%.  In contrast to overall inflation, this is the figure the Federal Reserve considers when considering raising interest rates. Core CPI's monthly percentage change is graphed below.  This month core inflation increased 0.1%.  Within core inflation, shelter increased 0.2%, with monthly rental costs increasing 0.3% and home ownership increased 0.3%.  Motels and hotels dropped -2.7% for the month.  Used cars and trucks dropped -1.0%.  Car insurance increased 0.4% for the month and had risen for nine months in a row.  New vehicles increased 0.2%, the first rise in costs since February. The energy index is down -10.9% from a year ago.   The BLS separates out all energy costs and puts them together into one index.  For the year, gasoline has declined --19.9%, while fuel oil has dropped -17.8%.  Graphed below is the overall CPI energy index. Graphed below is the CPI gasoline index and for the month of July, gasoline prices dropped -4.7%.  Core inflation's components include shelter, transportation, medical care and anything that is not food or energy.  The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels.   Shelter increased 0.2% and is up 3.3% for the year, yet rent is outpacing homeownership costs.  Rent of a primary residence just keeps soaring and this month by 0.3% and is up 3.8% for the year.  Graphed below is the rent price index. Food prices had no change for the month.  Food and beverages have now increased just 0.2% from a year ago, which is the smallest annual increase since March 2010.  Groceries, (called food at home by the BLS), slid another -0.2% for the month, and are down -1.6% for the year.  This is the 7th decline in 9 months for groceries.  Meats, eggs & fish lead the decrease with a -0.6% monthly drop and an annual -5.6% decline.  Dairy dropped -0.4% for the month and is down -3.1% for the year.  Herds were culled last year as the drought's impact took it's toll.   Eating out, or food away from home increased 0.2% for the month and is up 2.8% for the year.  Graphed below are grocery prices, otherwise known as the food at home index.

July 2016 CPI: Year-over-Year Inflation Rate Now Slightly Lower: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 0.8 % - lower than last month's 1.0 %. The year-over-year core inflation (excludes energy and food) rate decreased 0.1% to 2.2 %, and remains slightly above the target set by the Federal Reserve.As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. The major influence on the CPI was energy prices. The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.8 percent before seasonal adjustment. The energy index declined in July and the food index was unchanged. The index for all items less food and energy rose, but posted its smallest increase since March. As a result, the all items index was unchanged after rising in each of the 4 previous months. The energy index fell 1.6 percent after rising in each of the last four months. The decline was due to a sharp decrease in the gasoline index; other energy indexes were mixed. The food at home index declined 0.2 percent as four of the six major grocery store food group indexes decreased, while the index for food away from home rose 0.2 percent. The index for all items less food and energy increased 0.1 percent in July after rising 0.2 percent in June. The shelter index rose 0.2 percent, its smallest increase since March, and the indexes for medical care, new vehicles, and motor vehicle insurance also rose. In contrast, the indexes for airline fares, used cars and trucks, communication, and recreation were among those that declined in July. The all items index rose 0.8 percent for the 12 months ending July, a smaller increase than the 1.0 percent rise for the 12 months ending June. Similarly, the index for all items less food and energy rose 2.2 percent for the 12 months ending July, a smaller increase than the 2.3 percent rise for the 12 months ending June.

Core CPI Remains Above Fed Mandated 2% For 9th Straight Month --- Core CPI (ex food and energy) rose 2.2% YoY (below the 2.3% expectations) but remains above The Fed's 2%-mandate for the 9th straight month. The modest disappointments across the board in CPI data were led by a drop in energy-related prices (down 1.6%) with food prices unchanged. The headline CPI data was unchanged month-over-month, the weakest price change since Feb 2016. While not the inflation that The Fed cares about, Core CPI remains above 2% for the 9th straight month...  Energy-related weakness in CPI...

  • CPI for energy commodities fell 4.4% m/m last month.
  • CPI for fuel oil and other fuels rose 0.1% m/m last month.
  • CPI for fuel oil fell 1.3% m/m last month.
  • CPI for propane, kerosene, and firewood rose 1.4% m/m last month.
  • CPI for motor fuel fell 4.6% m/m last month.
  • CPI for gasoline (all types) fell 4.7% m/m last month.
  • CPI for gasoline, unleaded regular, fell 5% m/m last month.
  • CPI for gasoline, unleaded midgrade, fell 4.3% m/m last month.
  • CPI for gasoline, unleaded premium, fell 2.6% m/m last month.

July 2016 Inflation -- Inflation continues to moderate.  Shelter inflation continues above 3% and core CPI excluding shelter continues to move around 1.5%, leaving total core inflation at just above 2%.Over the past 5 months, however, while shelter inflation has remained above 3%, core CPI excluding shelter has increased by only about 0.3%.  That's about 0.73% annualized.  I am sort of in wait-and-see mode.  It seems like it is just a matter of time before the Federal Reserve sees some mixture of measures that entices them into rate increases that create a downturn.  I suspect it will be a relatively weak downturn without much of a leading decline in homebuilding, since that industry is already so weakened. I don't see a lot of speculative opportunities in that context.  I think there is an unusual correlation between homebuilders and interest rates, where rising rates will correlate with housing growth.  This is because rates aren't the constraining factor in housing expansion.  So, there might be some hedged positions that have positive risk/reward balance, combining high income positions that will decline in a rising rate environment with positions in high beta homebuilders.  Something like a long exposure to NLY together with long exposure to some homebuilders.

A Debt Collector Came After Me for $36 of Girl Scout Cookies - No one enjoys answering an unexpected knock on the door at 7 a.m., let alone from someone you don't know. Now imagine the stranger is there to tell you you're being sued over a debt that isn't yours. That's a rough way to start the day. For Rich Snapp, that was the morning of Sept. 16, 2015. It was a bad Wednesday, but it was just the beginning of a bizarre and frustrating ordeal that lasted more than seven months and involved a persistent debt collector, the local police department, a (possibly) fictional thief who goes by "Pistol Pete" and the Girl Scouts of Utah. Snapp was a victim of fraud: Someone used his old checkbook to buy $36 of Girl Scout cookies, the check bounced and the Girl Scouts of Utah hired a debt collector to pursue the person who appeared to have written the bad check. In fact, they went after Snapp for $455.89, including the original $36, plus interest, attorney fees damages and other fees a collector can charge under Utah law. "I'm annoyed, mostly because, obviously, I didn't do anything wrong to begin with," "This weighed on my conscience, if I was going to have to do more or if I was going to get into trouble."The situation bothered Snapp on many levels. The early morning court summons, unpleasant phone calls with the debt collector, having to prove he was a victim of fraud, the months of waiting for a resolution — he felt he was wronged, but a investigation didn't find any instances of wrongdoing on the part of the debt collector. What we found is something many people who have had similar issues know to be true: Even when a debt collector does everything by the book, it's often still a horrible experience for the consumer.

 Still Struggling to Make Sense of the 2016 U.S. Trade Data - U.S. nominal goods exports, excluding petrol, fell by around 6 percent in the first half of 2016, relative to the first half of 2016 (source). U.S. nominal goods imports, excluding petrol, fell by just under 3 percent in the first half of 2016, relative to the first half of 2015. (Nominal petrol imports were down a lot in the first half of 2016, as the price of imported oil averaged $32-a-barrel in the first six months of 2016 relative to about $50-a-barrel in the first six months of 2015) Some of the fall in goods trade stems from price changes. The fall in actual volumes shipped around the world is smaller. Real goods exports are down between 2.5 and 3 percent year-over-year. This makes sense. The dollar is strong, and that has an impact. And it maps, roughly, to the port data. Real goods imports, excluding petrol, though are also flat. Technically they are down around 0.25 percent year-over-year. And that is much harder to explain. U.S. demand growth is slow; total demand increased by about 1.5 percent year-over-year. But that should still generate some increase in import volumes. Historically, about 20 percent of the increase in demand shows up in imports—so one might expect a 30 basis point of GDP increase in real imports and growth in non-petrol imports volume of 2-3 percent, rather than nothing. In the first half of 2015 for example domestic demand rose by about 3.5 percent and real imports rose by about 6 percent (70 basis points of GDP, annualized).

 July 2016 Import Sea Container Count Trends Are Mixed But Pointing To A Flat Economy: Depending on how you want to spin this data, any opinion could be truthful. But if one concentrates only on year-over-year growth - there is literally no growth in this sector which has a good correlation to the USA economy. The rolling averages are still being affected by the port strikes last year, and the year-to-date comparisions continue to slow versus last year. This will be the last month that the rolling averages are affected by the port strike earlier last year. This data set is based on the Ports of LA and Long Beach which account for much (approximately 40%) of the container movement into and out of the United States - and these two ports report their data significantly earlier than other USA ports. Most of the manufactured goods move between countries in sea containers (except larger rolling items such as automobiles). This pulse point is an early indicator of the health of the economy. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month:  As the data is very noisy - the best way to look at this data normally is the 3 month rolling averages. There is a direct linkage between imports and USA economic activity - and the change in growth in imports foretells real change in economic growth. Export growth is an indicator of competitiveness and global economic growth.

LA area Port Traffic Mostly Unchanged in July - Now that the expansion to the Panama Canal has been completed, some of the traffic that used the ports of Los Angeles and Long Beach will eventually go through the canal. This could impact TEUs on the West Coast in the future.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).   To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.  On a rolling 12 month basis, inbound traffic was unchanged compared to the rolling 12 months ending in June. Outbound traffic was down 0.2% compared to 12 months ending in June. The downturn in exports over the last year was probably due to the slowdown in China and the stronger dollar. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). In general exports are moving sideways and imports are gradually increasing.

Why Critics Of Free Trade Are Talking China, Not NAFTA  - When Donald Trump delivered his big economic speech in Detroit earlier this month, free trade — and the harm it has allegedly done to U.S. workers — was at the center of his agenda. And one country in particular drew his ire: China.  “China is responsible for nearly half of our entire trade deficit,” Trump said. “They break the rules in every way imaginable.” Trump’s tone is harsh, but he’s hardly the only one challenging free trade in general, and China in particular, on the campaign trail this year. In her own economics speech just days after Trump’s, Hillary Clinton promised to “stand up to China and anyone else who tries to take advantage of American workers and companies.” Bernie Sanders, during his failed bid for the Democratic nomination, said trade with China has “cost us millions of jobs.” And it isn’t just presidential candidates: Republican Ohio Sen. Rob Portman, for example, has made the trade deficit with China one of the central issues of his re-election campaign. The focus on China is particularly striking because for more than 20 years it has been Mexico, not China, that has been the focus of protectionists’ ire. But now the politics of trade are shifting, reflecting in part the growing belief among many economists that trade with China could have larger consequences than they previously acknowledged.

Nearly all imports, even consumer goods, are inputs for US firms and factories -  In a post earlier in the month on Cafe Hayek (“Almost All Imports Are Inputs“), Don Boudreaux made some excellent points about international trade. He started by quoting Dartmouth economist Doug Irwin: Over half of all US imports are either intermediate components or raw materials. These imports are sold as inputs to domestic businesses rather than as goods consumed directly by households. The chart above confirms Irwin’s statement by showing the shares of US imports of goods classified by “end-use category.” In 2015, imports of capital goods (machinery, equipment, aircraft, semiconductors, engines, tractors, etc.) and industrial equipment (lumber, chemicals, aluminum and copper, iron and steel, cotton and wool, plastics, fuels, etc.) together accounted for 53% of total imports last year. It’s an important point that more than half of what enters the US as imports are orders from US companies (e.g. manufacturers) for equipment, supplies, raw materials, commodities, and other imports that serve as direct inputs into the production process that takes places in American factories and businesses that employ millions of American workers. And the lower the price of inputs for US businesses (whether sourced internationally or domestically), the more competitive those companies are, the more of their products they can sell (both international and domestically), the greater market share they can achieve, and the more US workers they can hire. In contrast, the higher the prices of imported inputs (e.g. through higher tariffs), the less competitive US companies will be, and the fewer workers they will hire. Keep that in mind the next time you hear Trump’s nitwitery about creating more American jobs by making imported inputs more expensive with his proposals to impose double-digit tariffs on goods from Mexico and China.

Industrial Production Rose 0.7% in July - WSJ  - The U.S. industrial sector boosted output in July as manufacturing production posted its largest advance in a year, one more sign the sector is stabilizing heading into the second half of the year. Manufacturing and mining, battered for the last 18 months by a strong dollar and weak commodity prices, may have their worst days behind them as those two headwinds fade. The dollar has weakened since the end of last year. Oil prices firmed in August after a slip in July, and are up from lows reached earlier this year.  Industrial production, a measure of everything made by factories, mines and utilities, rose a seasonally adjusted 0.7% in July, its largest advance since November 2014, the Federal Reserve said Tuesday. June’s industrial output was revised down to an increase of 0.4%, from a previous estimate of up 0.6%.  Back-to-back increases in June and July “add to the story that we’re getting, that manufacturing is getting back on its feet,” supported by strong domestic auto demand and the fading strength of the U.S. dollar.  "The worst is behind us,” he said. Still, less-than-robust growth and demand in export markets like China, Canada and Europe mean caution is advised. Industrial output has been choppy in the first half of the year as the strong dollar hit exporters and low commodity prices squeezed the mining sector. But consistent domestic demand had supported manufacturers targeting U.S. consumers, especially auto makers.  July’s rise was broad-based, with increases in manufacturing, mining and utilities.  Manufacturing output rose 0.5% in July. The increase was driven by jumps of more than 1% in the production of motor vehicles and parts and wood products.

Fed: Industrial Production increased 0.7% in July - From the Fed: Industrial production and Capacity Utilization Industrial production rose 0.7 percent in July after moving up 0.4 percent in June. The advance in July was the largest for the index since November 2014. Manufacturing output increased 0.5 percent in July for its largest gain since July 2015. The index for utilities rose 2.1 percent as a result of warmer-than-usual weather in July boosting demand for air conditioning. The output of mining moved up 0.7 percent; the index has increased modestly, on net, over the past three months after having fallen about 17 percent between December 2014 and April 2016. At 104.9 percent of its 2012 average, total industrial production in July was 0.5 percent lower than its year-earlier level. Capacity utilization for the industrial sector increased 0.5 percentage point in July to 75.9 percent, a rate that is 4.1 percentage points below its long-run (1972–2015) average.This graph shows Capacity Utilization. This series is up 9.2 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 75.9% is 4.1% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007. Note: y-axis doesn't start at zero to better show the change. The second graph shows industrial production since 1967. Industrial production increased 0.7% in July to 104.1. This is 20.0% above the recession low, and is at the pre-recession peak. This was above expectations of a 0.3% increase.

US Industrial Production Slumps To Longest Non-Recessionary Contraction Is History -- For the 11th month in a row, US Industrial Production fell YoY (down 0.53%) in July - the longest non-recessionary period of contraction in US history. Month-over-month, IP rose 0.7% (beating an 0.3% expected rise) - the best since Nov 2014 - but June was revised notably lower. Overall, all confirming the plunge in productivity seen last week. The decline since its peak in Nov 2014 (ironically the month after The Fed's QE3 ended) is the biggest drop since September 2008. While the YoY losing streak continues... MoM IP rose by most since Nov 2014... Thanks to a surge in AC usage by the look of it... Industrial production rose 0.7 percent in July after moving up 0.4 percent in June. The advance in July was the largest for the index since November 2014. Manufacturing output increased 0.5 percent in July for its largest gain since July 2015. The index for utilities rose 2.1 percent as a result of warmer-than-usual weather in July boosting demand for air conditioning. The output of mining moved up 0.7 percent; the index has increased modestly, on net, over the past three months after having fallen about 17 percent between December 2014 and April 2016. Of course, it's lucky that we are a services economy and that eyeballs matter more than effort...

July 2016 Industrial Production Remains In Contraction Year-over-Year But Good Improvement Month-over-Month: The headlines say seasonally adjusted Industrial Production (IP) improved. " ... The advance in July was the largest for the index since November 2014. Manufacturing output increased 0.5 percent in July for its largest gain since July 2015. The index for utilities rose 2.1 percent as a result of warmer-than-usual weather in July boosting demand for air conditioning ..."

  • Headline seasonally adjusted Industrial Production (IP) increased 0.7 % month-over-month and down 0.5 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth decelerated 0.1 % month-over-month, and is down 0.5 % year-over-year.
  • The unadjusted year-over-year rate of growth accelerated 0.1 % from last month using a three month rolling average, and is down 0.8 % year-over-year.

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.5 % this month (up 0.2 % year-over-year), mining up 0.7 % (down 10.2 % year-over-year), and utilities were up 2.1 % (up 3.5 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %. Unadjusted Industrial Production year-over-year growth for the past 2 years has been near or below zero - it is currently in contraction but trending up.

 Empire State Manufacturing Declines in August - dshort - This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -4.2 (-4.21 to two decimals) shows a significant decrease from last month's 0.55, and signals declining activity. The forecast was for a reading of -2.50. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report. Business activity in New York State declined slightly this month, according to firms responding to the August 2016 Empire State Manufacturing Survey. The headline general business conditions index fell five points to -4.2. The new orders index remained near zero, a sign that orders were little changed, while the shipments index climbed eight points to 9.0, indicating that shipments rose. Labor market indicators pointed to little change in employment levels and hours worked. The prices paid index edged down to 15.5, suggesting that input price increases remained moderate, and at 2.1, the prices received index reflected a minute increase in selling prices. Forward-looking indicators suggested that firms expected conditions to improve over the next six months, although the level of optimism diminished for a second consecutive month. [source] Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

NY Fed: August "General business conditions index fell five points to -4.2" -- From the NY Fed: Empire State Manufacturing Survey Business activity in New York State declined slightly this month, according to firms responding to the August 2016 Empire State Manufacturing Survey. The headline general business conditions index fell five points to -4.2. ...The employment index climbed three points to -1.0, indicating that employment levels were little changed, and the average workweek index rose to 2.1, pointing to a slight increase in hours worked. ...Indexes for the six-month outlook revealed that respondents remained optimistic about future conditions, though to a lesser extent than in July. The index for future business conditions fell for a second consecutive month, dropping six points to 23.7. This was below the consensus forecast of 2.5, and suggests manufacturing contracted in the NY region in August.

Empire State Manufacturing Index Dips 5 Points to -4.2 - The Empire State Manufacturing index dipped five points and is back in the red at -4.2 after a brief stint in positive territory.  The Econoday Consensus Estimate was for a reading of +2.50 but once again economists were on the optimistic side. Highlights: The New York region’s manufacturing sector remains flat based on the Empire State index which came in slightly below zero at minus 4.21 in August vs plus 0.55 in July. New orders are especially flat, at plus 1.04 vs July’s minus 1.82, with unfilled orders extending a long run of negative readings at minus 9.28. There is, however, strength in shipments, at 9.01, but it won’t last long given the weakness in orders. Employment is also flat, at minus 1.03. Prices are steady with input pressures moderate and easing and selling prices fractionally higher. A special negative in the report is a 5.50 point decline in the 6-month outlook to 23.74 which is the least optimism this sample has shown since February. Hit by weak global demand and weak demand for capital goods, the factory sector has yet to get in gear this year and this report, the first for August, doesn’t point to any improvement.

Empire Fed Tumbles Back Into Contraction As Hope Slumps To 6-Month Lows -- After 2 brief dead-cat-bounce months of hope, The Empire Fed business survey has tumbled back into contraction (-4.21 missing expectations of +2.0). The index is now at 3 month lows despite rises in the number of employees, average workweek, shipments, and new orders but 'hope' tumbles to its lowest since Feb 2016. Indexes for the six-month outlook revealed that respondents remained optimistic about future conditions, though to a lesser extent than in July. The index for future business conditions fell for a second consecutive month, dropping six points to 23.7. Indexes for future new orders and shipments also edged lower. Indexes for future employment and the average workweek were below zero, suggesting that firms expected employment and hours worked to decline in the months ahead. The capital expenditures index fell to 4.1, and the technology spending index retreated to 5.2

Philly Fed Manufacturing Survey showed Weak Growth in August  -- From the Philly Fed: August 2016 Manufacturing Business Outlook Survey Firms responding to the Manufacturing Business Outlook Survey suggest that growth was positive but tenuous this month. The diffusion index for current general activity moved from a negative reading to a marginally positive reading, while the indicators for new orders and employment suggested continued general weakness in business conditions.... The index for current manufacturing activity in the region rose 5 points to only 2.0 in August ... The survey’s indicators of employment weakened considerably. The employment index fell 18 points to -20.0, which is its largest negative reading for the current year.  ..The survey’s index of future manufacturing activity rose 12 points to 45.8 in August, strongly indicating that the current weakness is expected to be temporary. This index is at its highest reading since January 2015. This was at the consensus forecast of a reading of 2.0 for August. . Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The yellow line is an average of the NY Fed (Empire State) and Philly Fed surveys through August. The ISM and total Fed surveys are through July. The average of the Empire State and Philly Fed surveys was slightly negative again in August (yellow). This suggests the ISM survey will probably indicate sluggish expansion this month.

August 2016 Philly Fed Manufacturing Survey Now Slightly In Expansion. However, Key Elements Significantly Declined.: The Philly Fed Business Outlook Survey climbed into expansion. Key elements significantly DECLINED and returned to contraction. The only other manufacturing survey released so far for this month was in contraction. This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently. The index improved from -2.9 to +2.0. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) -5.0 to 5.5 (consensus +2.0). Firms responding to the Manufacturing Business Outlook Survey suggest that growth was positive but tenuous this month. The diffusion index for current general activity moved from a negative reading to a marginally positive reading, while the indicators for new orders and employment suggested continued general weakness in business conditions. Of the current broad indicators, the diffusion index for shipments recorded the strongest reading. The respondents were confident about future growth, as their forecasts of future activity showed notable improvement. The index for current manufacturing activity in the region rose 5 points to only 2.0 in August, as the share of firms reporting an increase in activity (35 percent) barely exceeded the share reporting a decrease (33 percent). This is only the third positive reading of the index in the current year (see Chart).

 Philly Fed 'Hope' Jumps As New Orders Plunge, Employment Crashes To 7 Year Lows -- Despite a modest bounce in Philly Fed headline data - thanks purely to a jump in 'hope' from 33.7 to 45.8 (the highest in 18 months) - the underlying components of the Philly fed survey are a disaster. New orders collapsed, employment crashed to 7 year lows, Average workweek plunged, prices paid soared, and inventories fell. 6 of the 9 indicators fell... But hope soared to 18 month highs... Optimism is all they have left... The August Manufacturing Business Outlook Survey indicated, on balance, that growth in the region’s manufacturing sector is currently weak. The survey’s indicators for current general activity and shipments were positive, while the indicators for new orders and employment were negative. The indicators for future conditions rose sharply from last month’s readings, however... The current new orders index dropped significantly from a reading of 11.8 in July to -7.2 in August. The percentage of firms reporting an increase in new orders (27 percent) was less than 1 point lower than last month; however, the percentage of firms reporting a decrease (34 percent) was 18 points higher than last month. The current shipments index rose slightly, from 6.3 to 8.4. The percentage of firms reporting an increase in shipments (35 percent) was 6 points higher than last month. The indexes for unfilled orders and delivery times fell into negative territory, recording values of -15.0 and -3.8, respectively. The index for inventories dropped from -4.3 to -9.2. The indicators for unfilled orders, delivery times, and inventories have been negative for most of this year. The survey’s indicators of employment weakened considerably. The employment index fell 18 points to -20.0, which is its largest negative reading for the current year. Although 67 percent of the firms reported no change in employment this month, the percentage reporting decreases (25 percent) significantly exceeded the percentage reporting increases (5 percent). The workweek index also fell, from -3.6 to -11.5. Twenty-five percent of the firms reported a decrease in average work hours, and only 13 percent reported an increase.

Mexico's New Auto Plants Unable To Find Enough Labor... As Detroit Still Suffers Massive Unemployment -- North American auto OEMs and their tier 2 suppliers have been in a race to move auto production across borders to low-cost countries (LCCs) for the past couple of decades as soaring wages, pension and OPEB obligations made production in the U.S. all but impossible. Supporters of minimum wage hikes could learn from the efforts of the United Auto Workers Union which did a masterful job negotiating off-market wage and benefits packages which ultimately only served to provide their members with permanent job losses. Of course, the groundwork for the shift of auto production to Mexico was laid with the passage of NAFTA in 1993 by former President Bill Clinton (a fairly inconvenient fact that Hillary would prefer to forget).  Since then, Mexico has been a huge beneficiary of automotive plant relocations with offsetting closures coming from the U.S. and Canada.  A chart from the Wall Street Journal, perfectly illustrates the transition of production capacity to our southern neighbor.   And now, with Detroit unemployment still over 10% (in spite of Obama's stellar jobs "recovery"), newly constructed auto plants in Mexico have only 1 problem, they can't find enough labor.  Per the Wall Street Journal, soaring auto demand (or if you're as cynical as we are, soaring demand for subprime paper backed by loans on brand new $70,000 Escalades made to people with a 550 credit score) and substantial new auto manufacturing capacity in Mexico has resulted in a bit of a labor crisis.  To attract workers, OEMs are being forced to pay over 300% more than minimum wage and provide incentives like retention bonuses and "new cowboy boots."  Another lesson for minimum wage supporters...labor markets work...when labor demand exceeds supply then wages rise.  Unfortunately, the opposite is also true as low-skilled American workers are acutely aware.

 High-Tech Manufacturing Isn't Worth Much - Justin Fox --These are the world's five largest technology companies, ranked by revenue:  How about that Hon Hai!?! The full name is Hon Hai Precision Industry Co., but you probably know it as Foxconn, the main name it does business under. It's the Taiwan-based contract manufacturer with hundreds of thousands of employees in mainland China, several of whom probably put your iPhone together. Foxconn is really big, and it's about to get bigger after completing the acquisition Friday of once-great Japanese electronics maker Sharp.  But before you get all excited (or worried) about tables turning and China rising, here's how profitable those same five companies are:  You know the story about It started out as a bookstore, and a big part of its revenue still comes from the low-margin retailing of low-tech products. In fact, according to the Global Industry Classification Standard taxonomy, it's really a consumer discretionary company, with peers such as Macy's and McDonald's. But Amazon has been investing more money in research and development than all but one or two other companies on earth -- which is why I've included it here among the world's tech giants, and also another big reason its margins are so low.  Foxconn doesn't sell books, and its $1.6 billion in R&D spending last year was about 11 percent of Amazon's total (and also much lower than the R&D spending of the other three companies listed above). It just so happens that contract manufacturing of electronics is a really low-margin business. Foxconn's profit margin is 3.1 percent; at the No. 2 contract manufacturer, California-based Flex (formerly Flextronics) it's 2 percent.

 Skills gap for US manufacturing workers mostly a myth, paper says -- For years, employers, pundits and policymakers alike have bemoaned the lack of qualified workers available to fill vacant manufacturing jobs in the U.S. Despite the prominence of the skills-gap debate, a new paper co-written by a University of Illinois expert in labor economics and workforce policy finds that the demand for higher-level skills in U.S. manufacturing jobs is generally modest. Three-quarters of U.S. manufacturing plants show no sign of hiring difficulties for open positions, says new research from Andrew Weaver, a professor of labor and employment relations at Illinois. "Not a week goes by without someone declaring that a huge skills gap exists in the U.S. workforce," he said. "A lot of ink has been spilled on this topic, but it's frequently without evidence. The popular sentiment encourages people to think that employers have high skill demands, but U.S. workers just aren't up to snuff, and that's why manufacturing work is being outsourced overseas." However, the results show that U.S. manufacturers are generally able to hire the skilled workers they seek. "We estimate an upper bound of job vacancies due to a potential skills gap of 16 to 25 percent of manufacturing establishments - a finding that sharply contrasts with other surveys that have reported figures of more than 60-70 percent," Weaver said. The paper, which will be published in the journal ILR Review, is the first nationally representative survey to measure the precise skills manufacturers are looking for in conjunction with hiring outcomes and organizational characteristics. According to Weaver, "non-representative surveys from trade associations and consulting firms" have driven the conversation to date.

 Weekly Initial Unemployment Claims decreased to 262,000 -- The DOL reportedIn the week ending August 13, the advance figure for seasonally adjusted initial claims was 262,000, a decrease of 4,000 from the previous week's unrevised level of 266,000. The 4-week moving average was 265,250, an increase of 2,500 from the previous week's unrevised average of 262,750. There were no special factors impacting this week's initial claims. This marks 76 consecutive weeks of initial claims below 300,000, the longest streak since 1970.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

Millennials and the Labor Force: A Look at the Trends - dshort - Millennials make up the largest percentage of our population today, yet have seen some of the lowest labor force participation growth and highest unemployment out of all age groups since the turn of the century. This has larger implications when coupled with slow wage growth, high home prices, and mounting student debt. The general consensus is that Millennials consist of individuals born between the early 1980s to the early 2000s. Here we will focus on the Bureau of Labor Statistics data for those born between 1981 and 2000. Based on this definition, Millennials currently make up about 32 percent of the Civilian NonInstitutional Population, which is the lowest fraction of the population for this cohort since the BLS began its five-year breakdown of employment data. The range for the 16-34 age group over time has been about 32-44% of the total civilian population, with the largest percentage in the late 1970s through the early 1980s. Here is a comparison of the five cohorts since the turn of the century. Looking at the Labor Force Participation Rate (LFPR) for the 16-34 age range since 1948 you will see that it has declined rapidly since 2000. See Trends in the Teenage Workforce for an in depth look at the teenage workforce. For reference, here is a pair of charts. The first is a close up look at Millennial LFPR growth since 2000, in which we break down further the Millennials into five year cohorts. The teen year drop off since the turn of the century is clear here and the 25-34 cohort has declined only slightly, in line with other age groups (except those 55 and over). The second is a growth comparison chart for the overall range cohorts since 2000.

New Millennial Trend: Working During the Summer - Young people sought jobs in greater numbers this summer—and more actually landed them. The unemployment rate for 16- to 24-year olds in July, the traditional peak for summer jobs, fell to the lowest level since 2007, before the most recent recession began, the Labor Department said Wednesday. July’s not-seasonally adjusted rate of 11.5% is more than double the broader unemployment rate, but only slightly elevated from 2007’s 10.8% youth rate. This year, 2.6 million people between 16 and 24 entered the labor force between April and July—and 1.9 million found jobs, according to the annual report on summer employment. Those gains pushed total youth employment to the highest level since 2008 and helped stabilize labor-force participation among young people. The gains are in line with an economy that’s steadily adding jobs.  And the temporary influx of young workers in part explains why the unadjusted overall jobless rate in July, 5.1%, was above the more widely reported seasonally adjusted rate of 4.9%. Labor-force participation among young people held essentially steady from last summer at 60.1%. Stable participation among youth could help ease a long-running downshift in the share of Americans seeking employment. Youth labor-force participation dropped fairly steadily from a peak of 77.5% in July 1989 until 2010. That trend showed young people pursuing more education or other nonwork interests contributed to the overall decline in labor-force participation, alongside older Americans leaving their jobs. Participation increased this year among the youngest workers, those 16 to 19. That suggests the labor market is tightening for low-skill jobs that teens often seek.

Payroll Employment Growth: Strong Enough? -  Atlanta Fed's macroblog - The U.S. Bureau of Labor Statistics' estimate of nonfarm payroll employment is the most closely watched indicator of overall employment growth in the U.S. economy. By this measure, employment increased by 255,000 in July, well above the three-month average of 190,000. Yet despite this outsized gain, the unemployment rate barely budged. What gives? Well, for a start, there is no formal connection between the payroll employment data and the unemployment rate data. The employment data used to construct the unemployment rate come from the Current Population Survey (CPS) and the payroll employment data come from a different survey. However, it is possible to relate changes in the unemployment rate to the gap between the CPS and payroll measures of employment, as well as changes in the labor force participation (LFP) rate, and the growth of payroll employment relative to the population. The following chart shows the contribution of each of these three factors to the monthly change in the unemployment rate during the last year.  Because payroll employment has generally been growing faster than the population, it has helped make the unemployment rate lower than it otherwise would have been. But as the chart makes clear, the other two factors can also exert a significant influence on the direction of the unemployment rate. The labor force participation rate contribution (the red segments of the bars) and the contribution from the gap between the CPS and payroll employment measures (blue segments) can vary a lot from month to month, and these factors can swamp the payroll employment growth contribution.

Middle-Income Jobs Finally Show Signs of a Rebound - The American economy is finally creating more middle-income jobs, according to a new analysis released Thursday by the Federal Reserve Bank of New York, in a turnabout from the feast-and-famine pattern earlier in the recovery, when hiring was strongest at the bottom and top of the wage scale. The findings suggest that it may soon be time to retire a familiar criticism of the long but lackluster economic rebound that has been underway since the end of the Great Recession in 2009: the hollowing out of the American middle class. Between 2013 and 2015, employers added nearly 2.3 million workers earning from $30,000 to $60,000 a year, primarily in fields like education, construction, transportation and social services. That was roughly 50 percent more than in either the high-wage or low-wage categories during the same period. By contrast, the Fed researchers found, of the nearly 7.6 million jobs created from 2010 to 2013, only about a fifth fell into the middle-tier category, with the largest number instead coming from lower-paid sectors like food preparation and health care support. “The tide has begun to turn,” said William C. Dudley, president of the New York Fed. “For the first time in quite a while, we are seeing gains in middle-wage jobs actually outnumber gains in higher- and lower-wage jobs nationwide.” Although the economy has created nearly 15 million jobs since employment bottomed out in early 2010, the gains in the recovery have been noticeably uneven. While many cities along the East and West Coasts have been prolific job creators, parts of the Midwest and South have not experienced similar improvements. At the same time, most American workers have made only paltry wage gains until recently, despite steady hiring that has helped bring the national unemployment rate down to 4.9 percent last month from a high of 10 percent in late 2009.

Key Presidential Swing States Gain Jobs in July --Employment rose and unemployment fell or held steady last month across five key states that could decide this year’s U.S. presidential election.Total nonfarm payrolls, adjusted for seasonal factors, rose in July from the prior month in Florida, North Carolina, Ohio, Pennsylvania and Virginia, the Labor Department said Friday. Unemployment rates ticked down last month from June in North Carolina and Ohio, and were unchanged in the other three states. It’s not clear if an improving labor market or other economic factors will do much to shift voter preferences or the election’s outcome. The U.S. economy has sent mixed signals this year—with solid job gains alongside modest output growth—that have complicated efforts by both major-party candidates to frame the issue headed into the fall campaign.  A basic indicator of the job market’s health is the unemployment rate, which in July was 4.9% for the U.S. as a whole. It’s hovered at or below 5% since last fall, held in place by an uptick in workforce participation as businesses continued to add jobs. In July, state unemployment rates ranged from a low of 2.8% in South Dakota to a high of 6.7% in Alaska. Unemployment was below the U.S. average in Florida (4.7%), North Carolina (4.7%), Ohio (4.8%) and Virginia (3.7%) and above average in Pennsylvania (5.6%). Unemployment rates have declined since January across all of the states except Pennsylvania, where joblessness has climbed a full percentage point so far this year. Those five states offer a combined 95 electoral votes, more than a third of the 270 needed to win the White House, and all are expected to draw heavy attention from both major-party nominees.

Where Median Incomes Have Fallen the Most - Justin Fox --Of all the indicators describing the not-very-impressive U.S. economic performance of the first decade and a half of the 21st century, the least impressive is probably median household income. It hit an all-time high in 1999 of $57,843 (converted into 2014 dollars), and as of 2014 stood at $53,657 -- a 7.2 percent decline. Monthly estimates by the former U.S. Census Bureau officials at Sentier Research indicate that median income made a big recovery in 2015 (the official 2015 numbers aren't out yet), but as of this June was still below the 1999 level. The typical American household remains poorer than it was 16 years ago.  In a nation as vast and diverse as the U.S., economic trouble like that tends not to be evenly distributed So I was curious: How does the Great Median Income Slide break down by state? Thanks to a Census Bureau spreadsheet that you can download right here, I have the answer. Here are the states where median household income has slid the most since 1999: I see a clear pattern on the downside: The states that have struggled the most tend to have manufacturing-intensive economies (Delaware and Nevada are the exceptions). Also, it's worth pondering for a moment just how bad things have been in some of these states. The typical household in Michigan and Mississippi was more than 20 percent poorer in 2014 than in 1999. And Mississippi, which had the fifth-lowest median income in 1999, was dead last in 2014, with a median household income ($35,521) less than half that of Maryland, the most-affluent state.

Four measures of real wage growth: pace of growth is decelerating --In the last several years, I have written a number of posts documenting the stagnation in average and median wages, for example here and here.  Several of the series were just updated for the first quarter, so now is a good time to take another look.We have a variety of economic data series to track both average and median wages:

The good news is that, with underemployment under 10%, we are generally continuing to see improved real wage growth compared with earlier in this expansion.  The below graph tracks monthly average (mean, not median) hourly wages (blue), median wages from the employment cost index (red), real compensation per hour (brown), and median usual weekly earnings (green). All are adjusted for inflation.  Since the quarterly index of median wages only started in Q1 2001, I have normed the indexes to 100 at that time:  Real compensation per hour did decrease in Q2. Otherwise, all 3 other measures are at highs since the turn of the Millennium. Here is a longer term view.  The ECI only started in 2001, but the other 3 go back in time at least into the 1960s:

 Tcherneva: Time for a US Job Guarantee - RT Boom Bust report - video interview

 How WalMart Makes You Pay for Its (Lack of) Policing -- Yves Smith --One of the oft-used tricks of our modern system of socialism for the rich is to have the government pick up costs that should properly be borne by private concerns. A common ruse is to have the operator of a new plant or large facility set up a bidding war between prospective locations, pitting them against each other to win the jobs that it will supposedly generate. The fallacy of this approach, from the perspective of the community, is that the tax gimmies often wind up being so large as to fully offset the gains from the expected increase in jobs. And that’s before you get to the fact that many of these newbies to the local economy aren’t additive, but partly or in the case of WalMart, almost fully displace established local businesses. Those existing players not only often offered high wages than the new entrants, but they also had reason to keep the interest of the community in mind (for instance, they might donate equipment to a local charity). And the most aggressive national players shift other costs onto taxpayers. WalMart and fast food chains pay below a living wage, forcing workers to rely on government assistance like food stamps and Medicaid.  Bloomberg, in an in-depth report, describes yet another way that WalMart makes local communities pay for the privilege of having it drive local retailers out of business: by refusing to police its stores properly. The result is a safety risk to its shoppers, since the incidence of petty crimes like shoplifting and violent crimes (which do take place in WalMart stores) are highly correlated. And even though the Bentonville giant is well aware of its crime problem, and says it is in the process of tackling it, experts say the company is moving at an unduly slow pace so as to lessen the impact on profits.

Care Work as the Work of the Future - Across the world there is much gloom and doom about the impact of technological changes on jobs, as automation and other innovations are seen to threaten not just blue-collar jobs but also many forms of office work. It is true that the way that most of our economies are organised at present, heavily reliant on market mechanisms with less and less public intervention to alleviate the adverse effects, there could well be an increase in technology- driven unemployment. But even so, some of the extreme pessimism may be misplaced because of the possible emergence of other forms of employment that are more based on human interaction. Particularly, some essential services that enhance the quality of life – which are often broadly clubbed into the composite term “the care economy” – are unlikely to be either as efficient or as socially useful if the element of human interaction is reduced. Many care services necessarily require face to face relationships, and even if technologies can assist in these and make them more productive, the human element cannot be eliminated. Indeed, better quality care (whether in paid or unpaid forms) typically requires more intensive human input, so standard approaches based on puerile notions of labour productivity are simply irrelevant in such activities. This in turn means that the care economy broadly defined will continue to be an important source of employment generation in the foreseeable future, and is likely to expand at a faster rate than many other economic activities. This is especially so in the many countries – certainly across the developing world – where care services are currently hugely underprovided by society and therefore forced to be delivered (often in extremely difficult and haphazard ways) by unpaid family labour.

 Privatization: CCA’s No-Bid Family Immigrant Detention Contract Pays Off Whether They House Detainees or Not -- David Dayen -  A while back I wrote a long piece for Talking Points Memo about the privatization of the criminal justice system. And one thing I learned is that it’s a misnomer to call the two big shots of this industry, Corrections Corporation of America and Geo Group, “private prison companies.” Because prisons are not their most lucrative business line; in fact, they only hold around 8 percent of all U.S. prisoners. In recent years, these companies have diversified into a number of associated businesses, from transportation to electronic monitoring to community corrections.  But their biggest growth opportunity – and if you listen to their earnings statement calls they’ll tell you – comes from federal contracts for warehousing migrants. As much as 45 percent of CCA and Geo revenue comes from the federal government now. And while we don’t normally see the terms of these agreements, the Washington Post unearthed one that is breathtaking in how it slathers private operators in taxpayer dollars. Privatization watchers take note. The contract in question gives CCA the right to operate the South Texas Family Residential Center, a 2,400-bed facility for women and children asylum seekers in the remote scrubland of Dilley, Texas, that has been nicknamed “baby jail.” Women and children were never detained before; they were just given a summons to appear in court. But with the influx of migrants in 2014, the Obama Administration reacted to public pressure by effectively jailing families fleeing Central American violence. Not only was this a no-bid contract handed to CCA for four years and $1 billion, but under the terms, they would get paid whether the beds were filled or not.

Food Stamp Use Drops as States Decline Federal Benefits: Chart - Bloomberg: Food-stamp enrollment in the U.S. is declining from record levels, in part because some states are ending benefits earlier than they have to. Seven states, all led by Republicans, have decided this year to end waivers for some able-bodied recipients that were made available in the 2009 federal stimulus bill -- even though the benefits are federally funded.

 Nearly 100 people shot in Chicago in less than a week - Chicago Tribune: Nearly 100 people have been shot in Chicago in less than a week, pushing the number of shooting victims so far this year to more than 2,500 — about 800 more than this time last year, according to data kept by the Tribune. Between last Friday afternoon and early Thursday, at least 99 people were shot in the city, 24 of them fatally. At least nine people were killed on Monday alone, the deadliest day in Chicago in 13 years, according to Tribune data. Among the wounded that day was a 10-year-old boy shot in the back as he played on his front porch in Lawndale.The number of shooting victims in Chicago stood at 2,514 Thursday morning. At this time last year, 1,725 people had been shot.  The city has not seen this level of gun violence since the 1990s, a trend the Police Department has blamed on lax gun laws and feuding gang factions. Over eight hours from Wednesday evening through early Thursday, three people were killed and at least 10 others were wounded in the city. A 45-year-old man was killed and two others were wounded when someone walked up to their van in the Gresham neighborhood around 1:55 a.m. Thursday, yelled "Hey" and started shooting, police said. The three — two men and a woman — had been stopped at a stop sign in the 8000 block of South Marshfield Avenue when the gunman opened fire, police said.

Junk-rated Chicago Public Schools eyes up to $945 million of bonds | Reuters: Despite its junk credit ratings, the Chicago Public Schools is gearing up to sell up to $945 million of bonds to finance capital improvements over multiple years, a spokeswoman for the district said on Tuesday. The country's third-largest public school system has set an Aug. 24 public hearing and vote by its board of education on the general obligation bonds. "CPS is committed to ensuring that our students have safe, comfortable and modern schools where they can learn," district spokeswoman Emily Bittner said in a statement. Escalating pension payments, drained reserves and debt dependency have pushed CPS' credit ratings to junk. As a result, investors have demanded hefty yields for the district's bonds. Even a private sale of $150 million of 30-year GO bonds by CPS last month to J.P. Morgan came at a 7.25 percent yield, which was 513 basis points over the yield for AAA-rated bonds on Municipal Market Data's benchmark scale.

 Why American Schools Are Even More Unequal Than We Thought - Education is deeply unequal in the United States, with students in poor districts performing at levels several grades below those of children in richer areas. Yet the problem is actually much worse than these statistics show, because schools, districts and even the federal government have been using a crude yardstick for economic hardship.  A closer look reveals that the standard measure of economic disadvantage — whether a child is eligible for a free or reduced-price lunch in school — masks the magnitude of the learning gap between the richest and poorest children. Nearly half of students nationwide are eligible for a subsidized meal in school. Children whose families earn less than 185 percent of the poverty threshold are eligible for a reduced-price lunch, while those below 130 percent get a free lunch. For a family of four, the cutoffs are $32,000 for a free lunch and $45,000 for a reduced-price one. By way of comparison, median household income in the United States was about $54,000 in 2014. Eligibility for subsidized school meals is clearly a blunt indicator of economic status. But that is the measure that policy makers, educators and researchers rely on when they gauge gaps in academic achievement in schools, districts and states. The National Assessment of Educational Progress, often called the Nation’s Report Card, publishes student scores by eligibility for subsidized meals. Under the federal No Child Left Behind Act and its successor, the Every Student Succeeds Act, districts have reported scores separately for disadvantaged children, with eligibility for subsidized meals serving as the standard measure of disadvantage. With Katherine Michelmore, a postdoctoral researcher at the University of Michigan, I have analyzed data held by the Michigan Consortium for Educational Research and found that this measure substantially understates the achievement gap.

The debate on school discipline -- School discipline has become an increasingly contentious topic. Critics argue that schools suspend students too readily, punish students too harshly, and are unfair in their treatment of black and Latino youth. These charges have been particularly leveled at charter schools, by advocacy groups and media outlets. Of course, relaxing discipline may come at a price, in terms of school climate and by threatening the learning and safety of other students.  It seems to me self-evident that there is at least some truth to each position. Yet, given the state of the current debate, the salient points and opportunities for good-faith compromise risk getting buried under invective and hysteria.  In hope of fostering open, constructive, and informed debate on this vital issue, I’m pleased to share two thoughtful takes on the question that help delineate the competing views in a measured and illuminating manner. Max Eden, senior fellow of education policy at the Manhattan Institute, makes the case that proposed disciplinary reforms risk undermining learning and school safety. Hailly Korman, a principal at Bellwether Education Partners, argues that disciplinary reform is necessary and appropriate, and that it can be pursued in a manner that maintains school safety and orderly classrooms. I hope you’ll read and make up your own mind.

Schools that obsess about standardized tests ruin them as measures - Vox - The video changed everything. The surreptitious recording of a teacher berating a first-grader for failing to explain a math problem correctly, ripping up her paper, and then inexplicably telling the subdued child to go sit in the "calm down chair" went viral and jump-started a long-running national debate over the "no excuses" charter school model — a pedagogical approach marked by heavy workloads, rigid zero-tolerance discipline, and a relentless focus on metrics, particularly standardized tests. The Success Academy Charter Schools are arguably the best-known institutions that follow this model. The storyline its proponents push is that no-excuses schools may be tough but they prepare students well: They represent a kind of educational tough love.In real life, though, the data seems to show that Success Academy thrives by a combination of kicking out poorly performing students and training the remainder to perform well on tests that kids at other schools don’t really care about — or don’t care as much about. Other critics have focused on how Success Academy focuses on excluding students who are not likely to perform well on tests — an option public schools don’t have. A parent of a kindergartener with a speech disability complained to the New York Daily News that the academy tried to force her son back into the public schools by framing his frustration in class as a disciplinary problem and repeatedly suspending him. The New York Times revealed that one principal at a Success Academy school had a list of low-performing students labeled "Got to Go." When a school uses selection and attrition policies that effectively filter out many of the extremely poor, students speaking English as a second language, and the learning disabled, that clearly calls into question test score advantages that such a school might have over an ordinary public school.

 Pay Gap Between Public-School Teachers and Similar Workers Is Wider Than Ever -  WSJ - Teachers and their unions have long complained that educators are undervalued and underpaid. A new study of public-school pay seeks to show by just how much and warns of a worsening problem that could make it harder to find and keep good teachers. The study, being released just in time for the school year’s start, found the pay gap between public-school teachers and similar professionals is wider than ever, with teachers on the losing end of it. Public-school teachers last year made 17% less in weekly wages than other workers with similar education levels and years of experience, compared with just 4% less in 1996, according to the study published by the Economic Policy Institute, a left-leaning think tank partly funded by teachers’ unions. Since 1996, teachers’ average weekly inflation-adjusted wages have fallen $30 to $1,092 in 2015, while the weekly average for all other college graduates has risen $124 to $1,416, the study found. “Teachers face low wages, high levels of student debt, and increasing demands on the job. Eliminating the teacher-pay penalty is crucial to building the teacher workforce we need,” said economist Lawrence Mishel, president of the Economic Policy Institute and a co-author of the study along with EPI research associate Sylvia Allegretto, an economist at the University of California, Berkeley. While unions have managed to mitigate the divide (the pay gap for teachers in unions is six percentage points narrower than for other teachers) they haven’t been able to close it completely. The study isn’t based on occupational comparisons, but rather, comparisons between teachers and workers with similar levels of education and years of experience, Mr. Mishel said. He said he has done previous studies comparing teachers with occupations deemed similar, such as reporters, accountants and underwriters, and came up with similar findings.

America’s cash-strapped teachers are a target for predatory lenders - Cutbacks to school funding mean that budgets for items like markers, staplers and construction paper have been slashed to the bone. One Connecticut teacher reported that her funding per child for the entire school year is now $1.60, down from $15 about a dozen years ago.  While teachers beg parents for help, and make pitches for support for specific projects from the general public on, they inevitably end up dipping into their own pockets to fill in the gaps. The average teacher forks over $500 of his or her own money every year, with 10% spending more than $1,000 on their students, for a total of $1.6bn nationwide. Meanwhile, there’s new evidence that teachers are making an ever greater financial sacrifice in other ways. We’re still prone to argue that while teachers tend to collect relatively small paychecks, relative to their levels of education and experience, their benefits help to compensate for that. That long summer holiday? The healthcare and other benefits? The pension?  Well, a new report from the Economic Policy Institute tells us that it’s time to re-evaluate our assumptions. In 1996, in absolute terms, teachers earned 4% less than workers with the same kinds of education and credentials. Today, that wage penalty is 17.3%. Adjusted for benefits, they are still 11% underpaid, compared to a 2% wage gap back in 1996. The report notes that this is most dramatic for women, for whom teaching was once a way to earn better wages than they could anywhere else. In 1960, the EPI notes, women teachers had a 14.7% wage gap in their favor. Today, they earn 13.9% less than they could, on average, by taking their skills elsewhere.

The State of Higher Ed Funding - With a new academic year approaching, we’ve updated our major report on state funding trends for public colleges and universities, which shows that 46 states are spending less per student than they did before the recession. While most states have boosted per-student funding in the last year, 12 states cut it. Overall, funding for public two- and four-year colleges is almost $10 billion below its pre-recession level, after adjusting for inflation.  Our update reflects developments in one of those 12 states, Illinois, where an agreement between the governor and lawmakers earlier this summer ended a year-long budget impasse that forced public colleges to go most of the 2015-16 academic year with no state financial support. Lawmakers had approved just under $600 million in state support in April solely for expenses in the 2015-16 academic year.  The budget agreement included another $1 billion for additional expenses in 2015-16, plus some funding for the first half of next year. These resources fall far short of the public investment Illinois used to make to help its residents get the benefits of a college degree. Including the recent funding, state support for higher education in Illinois fell 37 percent per student from 2015 to 2016. Funding is down 54 percent per student since the 2007-08 school year, when the Great Recession hit; only Arizona has cut more (see graph).  Illinois spends around $3,500 less per student on its college campuses than it did just before the recession – more than twice the average cut nationally of roughly $1,600 per student.

Princeton University Kindly Requests You Stop Using "Gender-Binary" Hate Speech Like "Freshman" --For those of you, like us, who are constantly putting your foot in your mouth with highly offensive terms like "businessman" instead of "businessperson" or "freshman" instead of "first-year student," Princeton University has published the perfect pamphlet to help you develop a more "gender-inclusive" vocabulary.  As Princeton points out, "gender-inclusive" language is much preferred to the traditional "gender-binary" language used by people in ancient times who largely identified as men OR women.  Can you imagine?  How could they live in such an unsafe space? For those of you who are still unsure if your language is "gender-inclusive" compliant, Princeton offers the following definitions: Gender-inclusive language is writing and speaking about people in a manner that does not use gender-based words. Gender binary is the traditional view on human gender, which does not take into consideration individuals who identify as otherwise, including and not limited to transgender, genderqueer, gender non-conforming, and/or intersex. Princeton also provides a number of helpful tools in the pamphlet, like the one below, which offers helpful "gender-inclusive" alternatives to traditional hate-speech terminology like "fireman," "freshman," "anchorman," and "headmistress."

 The Elite “Let Them Eat Education” Fallacy -naked capitalism - Yves here. If you’ve read Thomas Frank’s book Listen, Liberal, he charts how the Democratic party abandoned the working class and came to represent professionals, the more elite, the better. The Democrats regularly take the position that the solution to all sorts of economic problems, like inequality and unemployment, is education. You too can have a bright, secure future as a symbol manipulator!There are plenty of reasons to doubt this theory. The shift in the balance of power towards employers means that the payoff to getting a good general education is questionable. worker rights have been so badly diluted that average job tenures were down to just a bit over four years, and it’s likely that more recent data would show a further decrease. That might not be so bad if employers will willing to hire individuals with general skills, but that is less and less true. When I was a kid, a college education from a decent school meant you were pretty much assured a job, even if that job might not be one you were so keen about, because employers expected to have to train new workers. That investment meant that employers had incentives to retain those employees so as to recoup the cost of new hires being less productive while they were getting up to speed. As we know too well, many employers prefer to treat workers as disposable, even though the managerial cost of replacing people is not cheap, particularly when the job skills are narrowly spec’ed.The result is that students increasingly have to take a mercenary approach to their education. But how can one possibly sus out what skill set at age 20 to 23 might form the foundation for a 30+ year career? Look at how one of the formerly secure paths, that of being a doctor, has been turned on its head by the way insurers and the ACA are increasingly pushing doctors into being employees of health care organizations and practicing corporatized medicine. Not only is that profoundly unattractive to MDs who care about patient health, but it is also leading a lot of doctors to abandon treating medical conditions and instead converting their practices to niches that serve the wealthy so they can avoid being under the thumb of insurers, such as cosmetic procedures or anti-aging.

One Simple Chart Illustrates The Absurdity Of College Cost Inflation --The simple chart below from the American Enterprise Institute beautifully illustrates the absurd inflation of college tuition and textbooks over the past 20 years.  In real terms, the cost of college has effectively doubled over that time period.  Now what would cause such massive inflation?  Could it be our government tripping over itself to provide cheap student loans for children to spend on vacations, iPads and kegs (i.e. "college"; see "What Student Loans Are Used For: Vacations, iPads, Kegs, Entertainment").  Or, per the Daily Caller, perhaps the issue is administrative bloat at our institutions of higher education: The exact reason prices have increased so much has been hotly debated, but one critical factor at most schools is administrative bloat. While student to faculty ratios have remained relatively steady over time, the number of administrators and other non-teaching staff has exploded at schools across the country. But we don't want to stress out our young Millennials too much.  We're quite sure the debt burden associated with your $200,000 anthro degree will be socialized very soon.

Marshals Are Arresting People in Texas Who Have Outstanding Student Loans - Here’s what the U.S. government says about the student loan you may have been tardy about paying back: “If your loan is placed with a collection agency, you will be responsible for costs incurred to get payment. The holder of your loan can take other actions to collect as well.” Those “other actions” involve withholding your tax refund or, in some cases, garnishing your wages. And, this week in Texas, they began to involve federal agents in combat gear bursting into debtors’ houses and arresting them. That’s what happened to Paul Aker. Seven armed U.S. marshals arrived at his door in Houston last Thursday, arrested him on the spot, and took him to jail. He owed all of $1,500, outstanding since 1987. Aker told Fox 26 that without any warning, his 29-year-old debt was forcibly being collected; the marshals took him to federal court and made him sign a payment plan. “It was totally mind-boggling,” Aker told Fox 26.   Texas congressman Gene Green explained to Fox 26 that the federal government has been contracting out student-loan collections to private debt collectors, who are allowed to deploy the U.S. marshals as their enforcement arm. “There’s bound to be a better way to collect on a student loan debt,” said the congressman. Around Houston, that “better way” involves 1,200 to 1,500 arrest warrants. Student debt is at an all time high in the U.S., where students hold an average of $35,000 in federal debt, according to an analysis of government data on Edvisors.

A New Report Sheds Light on Profiteering by So-Called Debt-Relief Companies -Using deceptive ad slogans like “Obama’s New Forgiveness Program” and “We Work for the Department of Education,” private companies are charging student-loan borrowers for services that falsely claim to provide debt relief, forgiveness, and consolidation. The pervasiveness of these so-called debt-relief companies is a growing problem for millions of borrowers—a problem that gets far too little attention.  In July 2016, Student Debt Crisis and NerdWallet conducted a survey of customers of privately operated student-debt-relief companies in an attempt to shed light on their abusive profiteering. Prior to this survey, advocates, experts, and legislators remained largely in the dark about their predatory practices.  Survey results from 6,363 respondents discovered that the average borrower paid $613 for private debt-relief services that are, in fact, offered for free by student-loan servicers and the Department of Education. Sixty-five percent said their financial situation was not improved. Those who paid for student loan debt relief, forgiveness, or consolidation services reported high prices and abysmal satisfaction, confirming that these companies are generating massive revenue for assisting borrowers with something they can easily do themselves through free programs.  It doesn’t stop there. One-in-four borrowers are contacted directly by these companies on a weekly basis. Such frequency highlights the unrelenting tactics student-debt-relief companies use to entrap borrowers, including targeted social-media ads, persistent phone calls, and direct text messages. “It’s highly unethical and should be illegal for these so-called ‘debt-relief’ companies to be preying on already financially vulnerable students and graduates,” said Nicole W., a Student Debt Crisis member.  It is no surprise that borrowers who are uncertain of their financial security are vulnerable targets for these practices. 70 percent of borrowers are eligible for lower payments under government programs that cost nothing, but very few actually know about the plans.

Clawing Back Tuition Payments -- Are tuition payments for an adult child's education, while the parents are insolvent, constructively fraudulent? As the WSJ reported this week, Bankruptcy Judge Hoffman (D. Mass.) recently held that they are not. But other courts have disagreed. In fact, there seem to be courts on both sides of this (although apparently, no circuit decisions yet).  In this latest case, In re Palladino, the debtors made tuition payments for their adult daughter's college education. There was no question that the debtors were insolvent when they made payments or that they did so within the last two years. The only question was whether the debtors received "reasonably equivalent value" (REV) under section 548 of the Bankruptcy Code (and Massachusett's UFTA).  Courts have interpreted REV as requiring an economic benefit, which could be indirect, but has to be "concrete" and "quantifiable."  Here, the court explained that [The Palladinos] believed that a financially self-sufficient daughter offered them an economic benefit and that a college degree would directly contribute to financial self-sufficiency. I find that motivation to be concrete and quantifiable enough ... A parent can reasonably assume that paying for a child to obtain an undergraduate degree will enhance the financial well-being of the child which in turn will confer an economic benefit on the parent. This, it seems to me, constitutes a quid pro quo that is reasonable and reasonable equivalence is all that is required. That is all well and good, but it seems to me completely ignores the definition of "value" in the statute as well as the fact that the Palladinos' have no legal obligation to support their adult daughter. I can understand the desire for this result.

Pension Duration Dilemma - Why Pension Funds Are Driving The Biggest Bond Bubble In History --The pension problem is often attributed to low returns on assets.  As Bill Gross frequently points out, low interest rates are the enemy of savers and pension funds have some of the biggest savings accounts around.  That said, the impact of declining interest rates on the asset side of a pension's net funded status is dwarfed by the much more devastating impact of declining discount rates used to value future benefit obligations.  The problem is one of duration.  By definition, pension liabilities represent the present value of future benefit payments owed to retirees which is a virtually perpetual cash flow stream.  Obviously, the longer the duration of a cash flow stream the larger the impact of interest rate swings on the present value of that stream. We created the chart below as a simplistic illustration of the pension "duration dilemma."  The chart graphs how a pension liability grows in a declining interest rate environment versus the value of 5-year and 30-year treasury bonds.  As you can see, a $1BN pension that is fully funded at prevailing interest rates would be nearly $700mm underfunded if interest rates declined 300bps and all of their assets were invested in 30-year treasury bonds.  The result is obviously even worse if the fund's assets are invested in shorter duration 5-year treasuries.  So what do you do when perpetually declining interest rates continue to drive your funded status lower and lower despite your return profile?  Well you move further and further out the yield curve, of course, in an attempt to match your asset duration with that of your liabilities.  As the Wall Street Journal recently pointed out:    By their nature, the liabilities of these kinds of investors—the money they promise to pay their clients when they retire—span very long into the future.Their assets—the securities they buy—are generally shorter-dated. This means their assets and liabilities have different “duration.” Duration measures sensitivity to interest-rate changes, so higher-duration liabilities change in value much more than their assets if rates change.

Early Look at 2017 Cost-Of-Living Adjustments and Maximum Contribution Base -- Bill McBride - The BLS reported this morning: The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.4 percent over the last 12 months to an index level of 234.789 (1982-84=100). CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

  • • In 2014, the Q3 average of CPI-W was 234.242. In the previous year, 2013, the average in Q3 of CPI-W was 230.327. That gave an increase of 1.7% for COLA for 2015.
  • • In 2015, the Q3 average of CPI-W was 233.278. That was a decline of 0.4% from 2014, however, by law, the adjustment is never negative so the benefits remained the same this year (in 2016).

Since the previous highest Q3 average was in 2014 (not 2015), at 234.242, we have to compare Q3 this year to two years ago. Click on graph for larger image. This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year. Note: The year labeled for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year). CPI-W was up 0.4% year-over-year in July, and although this is very early - we need the data for July, August and September - my current guess is COLA will be slightly positive this year - but COLA could be zero again. Contribution and Benefit Base The law prohibits an increase in the contribution and benefit base if COLA is not greater than zero, so there was no change in the contribution and benefit base for 2016. However if the there is even a small increase in COLA (it will be close this year), the contribution base will be adjusted using the National Average Wage Index (and catch up for last year).

Retirees Need $130,000 Just to Cover Health Care, Study Finds -  The average single 65-year-old woman can expect to need $135,000 to spend on health care in retirement, while a man will spend $125,000, according to estimates from Fidelity Investments. (The difference is because the woman is expected to live longer—an additional 22 years, vs. 20 years more for the man.)Every year, Fidelity estimates how much it will cost for today's average 65-year-olds to cover health-care expenses for the rest of their lives if they retire now. For a while, it looked as if health care costs were holding steady, but Fidelity this year says couples need to set aside a record $260,000 for Medicare premiums and all other out-of-pocket medical costs—up 6 percent from last year and 18 percent from 2014. Prime culprits in accelerating health expenses are prescription drugs, especially high-priced specialty drugs, Fidelity says. And as the economy recovers, retirees are using more health care, driving up costs. Fidelity's estimates, based on an analysis of Medicare's claims database and trends in survey data, assume that retirees are eligible for Medicare and try to capture all the costs it doesn't cover—including premiums, co-payments, and things Medicare doesn't pay for, such as hearing and vision exams. But the estimates are only averages, and people's costs can vary widely, according to where they live and how healthy they are. The estimates also don't include long-term care, the sometimes-astronomical costs of home health care or nursing homes that aren't covered by Medicare. Long-term care insurance is available but expensive; although premiums vary greatly, Fidelity estimated that a retired couple would need to pay an additional $130,000 for a policy offering an inflation-adjusted $8,000 per month for long-term care over three years.

Texas awards $1.6M health grant to woman fearful she can get HIV from fetuses flushed into sewers -- Earlier this month, Everett testified at a hearing at the Austin, Texas statehouse on a proposed requirement that women either bury or cremate the remains of an aborted fetus. According to The Austin Chronicle, Everett testified about her concerns of an impending public health disaster if fetuses were flushed down toilets. She argued that the general public could be afflicted with STDs or even HIV due to fetuses flooding the sewer systems. “What if one day something horrible escaped into the sewer system?” she said, as the audience snickered. Everett’s claims are scientifically impossible. Just days later, the Texas legislature awarded The Heidi Group $1.65 million in taxpayer money for the organization’s “health care services.” Their organization doesn’t provide health care services. While the group’s website advertises “Helping Texas Women,” further examination reveals their claims to have “programs” lists merely a phone number, the page that offers to help women with pregnancy/infant loss says “Page Coming Soon” and if a woman needs a pregnancy test they have a list of links to crisis pregnancy centers, that counsel women against abortion.

Just Released: Firms Assess the Effects of the Affordable Care Act -- The Federal Reserve Bank of New York this morning released the results of its August 2016 business surveys, including the supplemental survey report on health coverage costs and the effects of the Affordable Care Act (ACA) on firms in the region. Health care costs increased 8.5 percent this year and are expected to rise by 10 percent in 2017, based on the median responses of surveyed businesses. Among the more widely mentioned factors that firms said were contributing to higher costs were increased premiums from insurance providers, higher costs for prescription drugs, the ACA, and an aging workforce.  About 60 percent of respondents to the surveys said they are making at least some changes to their health care plans in response to the ACA. The most frequently cited adjustments were raising deductibles, boosting co-pays, and increasing out-of-pocket maximums. A majority of those surveyed, however, maintained that they are not changing the range of services covered nor the size and breadth of the health care network for their health care plans.  Fewer than one in five businesses in our surveys said they are reducing the number of workers in response to the ACA. Firms were also asked if they are adjusting their mix of full-time and part-time workers; the vast majority said they are not. A minority of firms reported that they are doing at least one of the following because of the ACA: increasing the proportion of workers who are part-time, reducing compensation, and reducing other benefits. The report compares many of these findings to similar questions asked in earlier surveys.

Obamacare Sticker Shock: Average 2017 Premium Surges 24% --  Two weeks ago, we asked readers to spot the "odd inflation out" when looking at the map below. The reference, of course, was to the state by state surge in proposed 2017 Obamacare premiums, contrasted with what the government contends is a modest 1.0% inflation rate. Now, courtesy of a new study by independent analyst Charles Geba, we can also calculate what the average Obamacare premium increase across the US will be: the average rate hike is projected to hit a whopping 24% this year. Gaba has crunched the numbers for insurers participating in the ACA exchanges in all 50 states, including a handful of recent updates.  As Politico notes, Cigna and Humana recently revised their rate requests in Tennessee, and the new filings are dramatically higher. Cigna is now asking for a 46% average increase, up from 23%, and Humana is requesting a 44% increase, up from 29%, The Tennessean reported on Friday. Expect these numbers to rise even more as insurance companies exit even more states. So far, the average approved rate increase is roughly 17% according to weighted averages across just five states, Mississippi, New York, Oregon, Rhode Island and Vermont, Gaba reports. "Combined, all [five states] only make up around 6.3 percent of the total population," Gaba writes. "The numbers will no doubt jump around quite a bit as additional, larger states are plugged into the mix."  Here is what Charles Gaba calculated:

The big ObamaCare bubble is about to explode—commentary: Since the 2010 passage of the Patient Protection and Affordable Care Act (ACA or Obamacare), the health-care industry has seen record growth and increased revenues. Why? Illness, especially chronic, sadly is a moneymaking business. Illness requires more office visits, more hospitalizations and inevitably more bills. Obamacare halted insurance companies' practice of rating premiums based on a customers illness history, or as more commonly known, preexisting conditions. In the 2013 roll out of the Obamacare exchanges, the promised result was that more people would have insurance coverage. Undoubtedly, this part of the law worked. By Jan. 7, 2016, more than 11.3 million Americans had signed up for Obamacare; by March, 20.3 million were covered. A large percentage of these new insureds were high-risk. As NBC reported in April, "Last month, an analysis of medical claims from the Blue Cross Blue Shield Association concluded that insurers gained a sicker, more expensive patient population as a result of the law." While bad for insurance companies, this was very good for the bottom lines of the merging large healthcare systems and newly formed physician monolith groups. A drafter of the law admitted the law was founded on the belief that the "consolidation of doctors into larger physician groups was inevitable and desirable." With consolidation, the dollars have racked up. According to U.S. News & World Report, "from June 3, 2010, to June 30, 2015, the Russell 3000 Healthcare benchmark (an all capitalization index) posted a gain of 176.8 percent." So there are profits, but where is the bubble? Joe Cortelli, a health insurance expert from the nationwide consulting group HIG, explains: "We have done nothing to improve the outcomes of the 10 percent of the population that drives 80 percent of our claims costs. We have merely pumped billions of dollars into these [Obamacare] exchanges masking the real problems. Unless the government can continue to pump money into these exchanges, the end result is not that hard to imagine. It is not a question of how, but when, this will all come home to roost."

Aetna decision exposes weaknesses in Obama's health-care law. -  Insurance giant Aetna’s decision to stop offering much of its individual coverage through the Affordable Care Act is exposing a problem in President Obama’s signature health-care law that could lead to another fraught political battle in Congress. Aetna’s announcement Monday night was the latest sign that large insurers are losing money in the Affordable Care Act’s marketplaces, heightening concerns about the long-term stability of a key part of Obama’s domestic policy legacy. But addressing this issue could open the door to a nasty political fight, given that some Republicans have vowed to repeal the law outright. If insurers continue to lose money, more are likely to withdraw from the marketplaces, a move that would reduce choices for consumers and could contribute to higher premiums. In one county, Aetna’s exit in 2017 could leave no insurers offering policies through its marketplace. Aetna said it will exit 11 of the 15 states where it offers coverage through the Affordable Care Act, widely known as Obamacare. That affects about 80 percent of its customers covered through insurance marketplaces. The marketplaces, known as insurance exchanges, were created to provide coverage for Americans who cannot get affordable health benefits through a job. A key aspect of the health-care law, the marketplaces allow people to purchase insurance online with subsidies based on their income.

Is Aetna’s withdrawal from the exchanges payback for the Justice Department’s antitrust suit? -- Aetna has denied any link between the Justice Department’s effort to block its merger with Humana and the company’s departure from the exchanges. Turns out those denials are not so true. Jonathan Cohn and Jeff Young at the Huffington Post have unearthed a letter from Aetna’s CEO to the Justice Department before the antitrust suit was filed: [I]f the [merger] deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses. Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint … [I]nstead of expanding to 20 states next year, we would reduce our presence to no more than 10 states .… [I]t is very likely that we would need to leave the public exchange business entirely and plan for additional business efficiencies should our deal ultimately be blocked. By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies … to supporting even more public exchange coverage over the next few years. In some quarters, the letter will be taken to prove that Aetna tried to blackmail the administration. Maybe that’s right. But, as Cohn and Young point out, there’s some evidence that Aetna was just stating a fact: that blocking the merger really would change its financial calculus about whether to stay in some exchanges. The line between a sincere promise and a strategic threat can be hazy.

 Aetna’s withdrawals from health exchanges raise questions about Obamacare’s viability - When Aetna Inc. announced that it would withdraw from three-quarters of the states where it offers Affordable Care Act exchange plans, the move wasn’t entirely unexpected: The company had signaled its woes early this month. But the decision by one of the nation’s largest health insurers to withdraw from 11 of 15 state exchanges follows similar moves by UnitedHealth Group, the largest U.S. health insurer, and Humana Inc., another large health insurer. The string of bad news marks a tidal shift for the ACA. Where insurers, including Aetna, had once planned on exchange expansions next year, many are instead curtailing their coverage. Aetna’s pared-down 2017 exchange participation “raises further questions about the long-term viability of the ACA marketplaces,” said Susquehanna analyst Chris Rigg. Read: Aetna to retreat from most of its Affordable Care Act markets Aetna explained the decision as a way to “limit our financial exposure moving forward,” after pretax losses of $200 million in the second quarter and losses totaling $430 million on individual products since January 2014. The company did not specify what portion of the losses was attributable to individual public plan offerings. The company criticized the ACA’s “inadequate” risk-adjustment mechanism, which is meant to limit insurers’ losses as they start covering sicker individuals. It’s a common criticism from health insurers, which have long said that the risk-pool program isn’t working the way it’s supposed to, though others say big insurance companies should instead change their model to keep costs down.

The Unstable Economics in Obama’s Health Law -- Barack Obama’s signature health-care law is struggling for one overriding reason: Selling mispriced insurance is a precarious business model.  Aetna Inc dealt the Affordable Care Act a severe setback by announcing Monday it would drastically reduce its participation in its insurance exchanges. Its reason: The company was attracting much sicker patients than expected. Indeed, all five of the largest national insurers say they are losing money on their ACA policies and three, including Aetna, are pulling back from the exchanges as a result. The problem isn’t technical or temporary; it’s intrinsic to how the law was written. By incentivizing insurers to misprice risk, the law has created an unstable dynamic. Total enrollment this year will be barely half the 22 million the Congressional Budget Office projected just three years ago. Premiums, meanwhile, are set to skyrocket, which will further hamper enrollment. It isn’t clear how this can be fixed. Historically, millions of Americans went without insurance because they’re not poor enough for Medicaid, but too poor or too sick to afford private insurance. The ACA tackled their predicament directly by expanding Medicaid and giving individuals subsidies. It also did so by in effect requiring healthy customers to pay higher premiums than their actual claims would justify to subsidize sicker, older customers. The premise of insurance, of course, is that the lucky subsidize the unfortunate. Most holders of auto or flood insurance will pay more in premiums than they collect in benefits unless their car crashes or their house floods. Nonetheless, insurers want premiums to reflect all the known risks of the insured. So if you have a teenager you pay more for auto insurance and if you live on a floodplain you pay more for flood insurance.

The Difficult Math of American Health Care - James Kwak - The truth is that health care in America is just too expensive. Everyone knows that, but not everyone is aware of what that means for the health-insurance market. In general, people think that goods and services should be allocated by markets in which people only buy things if they value them at more than their price. But the basic problem is that health care has gotten so expensive that many people who have to bear its real cost are saying they’d rather not. At the end of the day, who has health insurance in the U.S.? It’s people on Medicare and Medicaid, who don't pay the full cost of their coverage because the government picks up most or all of it. It’s people on employer-sponsored plans, who tend not to realize they pay the full cost because they get large (though declining) subsidies from their employers. And it’s people who buy Obamacare policies, many of whom don't pay the full cost because they get subsidies, and many of whom place a high value on insurance because they know they are sicker than average. In other words, at current prices, the health-insurance market is a huge loss-making system. The losses exist because the total price of health insurance—premiums, cost-sharing, Medicare payroll taxes, general revenues that fund Medicare and Medicaid, etc.—exceeds the total amount that individuals would collectively be willing to spend on it. The losses are borne by the federal and state governments (and hence taxpayers); workers who don't realize that they end up paying the full cost of their policies in the form of lower wages; healthy people who either buy more coverage than they need or pay penalties for not being covered; and, in some cases, insurance companies.

Obamacare Doomed As Insurers Lose $2 Billion On Plans In 2016 (Prompting 2017 Rates To Soar) -The typical rosy Democrat narrative on Obamacare highlights the decline in uninsured Americans as evidence of its great "success" while conveniently ignoring the fact that most of the "newly insured" are actually coming from the expansion of Medicaid.  The fact is that Obamacare is a debacle and is on the verge of collapse (see our previous post "Obamacare On "Verge Of Collapse" As Premiums Set To Soar Again In 2017"). Our reasoning is quite simple and is the same reason Obamacare was doomed from the start.  As we've pointed out numerous times in the past, the true downfall of  Obamacare will be in its inherent "adverse selection bias."  "Sicker/older" people have every incentive to enroll while "younger/healthier" people, the ones that were supposed to subsidize everyone else by buying policies they didn't need, are choosing to simply pay their penalties instead.  So what you're left with is a pool of "sicker/older" people who consume a massive amount of healthcare but whom don't pay "their fair share" because Obamacare specifically caps the rates that can be charged to the "sicker/older" people at 3x the rates charged to "younger/healthier" people (who cares if they consume 20x more healthcare...3x just sounded about right).  And as a recent article from Bloomberg confirms, the negative impacts of "adverse selection bias" are playing out in insurers' financials.  Per Bloomberg, the major U.S. insurers are set to lose roughly $2BN on Obamacare in 2016.  UnitedHealth has announced they lost $850mm on Obamacare in 2016 while Aetna, Anthem and Humana are expected to lose about $300mm each.  

Aetna, Obamacare and health insurers’ 10 dirty secrets - Whom do U.S. health insurers think they’re kidding? The answer, of course, is: everybody. Industry giant Aetna just said it is dropping most of its Obamacare plans. That follows similar moves by rivals. It’s dealt a serious blow to the Affordable Care Act and its goal of universal health care in America. Conservatives I know say they are celebrating — somewhat prematurely — “the death of Obamacare.” Aetna cited losses on the plans as its reason. News reports since then say there’s another factor at play. The company may be engaging in political retaliation against the Obama administration for trying to block its merger with rival Humana. But that’s not the only thing the industry isn’t being candid about.  Here are 10 other things they won’t tell you.

  • 1. They’re a scam. The entire health-insurance industry consists simply of taking our money — and then paying us back around 80 cents on the dollar, or less. That’s all. They add no value, and serve no other purpose.
  • 2. They are terrible gatekeepers. The actual outcome? Here in America we have the highest health-care costs in the world. Oops.
  • 3. They waste money hand over fist. Aetna said it has lost $430 million on Obamacare plans during the first two years. During that same time the company spent $23 billion on administration, marketing, paperwork, junkets, bonuses and other overhead. That’s a ridiculous 26 cents for every dollar it paid out in actual benefits.
  • 4. They’re booming. Socialism” never looked so profitable.
  • 5. They avoid sick people. The No. 1 way to make a profit is to sell health insurance to people who won’t need it. Aetna said it was losing money on Obamacare because it had too many sick customers who wanted to use their insurance. Bummer.
  • 6. They deny treatment whenever they can. It’s not malice — it’s math. Private health insurers only make money if they keep payouts below premiums. Actually, because of their high costs, they need to keep the payouts way, way below premiums. And that means if their customers do get sick, they have every incentive to try to deny treatment.

 Sanders revs up ‘public option’ fight after Aetna leaves ObamaCare - Sen. Bernie Sanders (I-Vt.) and other healthcare reform advocates are revving up their push for a “public option” after Aetna’s retreat from the ObamaCare marketplace this week. Sanders on Tuesday vowed to bring back the debate on a government-run insurance option one day after the nation’s third-largest insurer announced a major pullback from the exchanges. The senator said he would reintroduce his legislation to create a “Medicare-for-all” system in the next session of the Senate, “hopefully” after Democrats regain control of the chamber in the November elections. “In my view, the provision of health care cannot continue to be dependent upon the whims and market projections of large private insurance companies whose only goal is to make as much profit as possible,” Sanders said in a statement on Tuesday. “That is why we need to join every other major country on earth and guarantee health care to all as a right, not a privilege,” he said. Aetna announced late Monday that it would pull out of ObamaCare exchanges in 11 states, including Arizona, Florida and Texas. The company’s CEO, Mark Bertolini, cited $200 million in losses over the past few months as a major reason for the move. The insurer’s high-profile departure is a major blow to the healthcare law. Still, longtime public-option proponents believe they have a new opportunity to take aim at the healthcare law's heavy reliance on insurers for coverage.

The Link Between Health Spending and Life Expectancy: The US is an Outlier -- naked capitalism. Yves here. It should come as no surprise that, with the most fabulously overpriced health care system in the world, it delivers notably poor outcomes in terms of measurable results, such as life expectancy. This post seeks to get a better understanding as to why. Note that the analysis omits certain issues, for instance, that there is solid evidence that suggests that more unequal societies are more unhealthy. But that would mean US results should be compared to the subset of pretty to very unequal counties, and you’d still find the same result, that high US expenditures do not translate into better results. This short study identifies that spending on healthcare is very unequal, and intuitively seems not explainable by differences in the health of the population (and Medicaid data suggests that this intuition has merit). So the question for reader is: what might explain this pattern? One issue, which is not discussed as often in the press as it needs to be, is that the driver of the high cost of end of life care often amounts to what Lambert calls, “Insert tube, extract rents” of sheer looting. The press will occasionally feature stories about how an aged parent goes into a hospital or other institutional setting, and despite the relatives having a medical power of attorney plus clear, legally well documented instructions that the patient does not want high cost interventions with limited life extension potential, that the medical professionals come close to or actually do threaten the family with litigation if they attempt to remove the patient or restrict care.Another issue for patients is the way that they’ve been conditioned to believe that Something Can Be Done when they have a condition that is pretty much a permanent impairment. This is particularly common with orthopedic procedures. I see individuals in my gym that I can tell from how they discuss their surgeries that they’ve been overtreated for no or negative benefit.

The medical debt crisis: The prognosis is still dire for Americans struggling to pay off massive health care bills -  Recent evidence suggests that the Affordable Care Act is helping to reduce the burden of medical debt for American consumers. Yet, especially in states that have not expanded Medicaid, millions of Americans still lack insurance and many plans offer thin coverage. The result is that in 2014, 64 million people were struggling with medical debt, the leading cause of bankruptcy in the United States. In my latest Demos report, “Enough to Make You Sick: The Burden of Medical Debt,” I explore how medical debt affects household finances and why we need more aggressive policies to reduce medical debt.   My report details the results of two surveys (in 2008 and 2012) Demos commissioned to explore the finances of lower to middle-income households carrying credit card debt. I find that households carrying medical debt on their credit card are more likely to take extreme measures to pay off their debts and forgo care. Medical debt has significant negative impacts on household finances, even when people are insured. A public option could help reduce the chances of people taking on medical debt, and that more rigorous consumer protection could mitigate the consequences.

It's Not Just Texas. Maternal Deaths Are High Across The U.S.: Pregnancy-related deaths in Texas nearly doubled in 2011, a symptom of the United States' abysmal maternal mortality record. The pregnancy-related death rate in Texas nearly doubled between 2010 and 2012 ― the same time period that the state severely cut women’s health funding, most notably at Planned Parenthood, according to a new study. The research, which will be published in the September issue of the journal Obstetrics and Gynecology, found that 148 Texas women died in 2012 from pregnancy-related causes, either while pregnant, or soon after being pregnant, up from 72 deaths in 2010. Similarly, the rate in Texas jumped from 18 deaths per 100,000 births in 2006 to 36 deaths per 100,000 births in 2014. But sadly, Texas is just an extreme snapshot of the United States’ bigger maternal mortality problem. The U.S. is the only developed country in the world where maternal deaths actually increased between 1993 and 2013, according to the World Health Organization. While 99 percent of maternal deaths happen in developing countries, the U.S. shoulders a disproportionate burden for a developed nation. Other countries where maternal mortality increased during that same time period included Afghanistan, Botswana and Chad.

Nanoparticles: Should We Be Worried?: We're ingesting them in cookies, cakes, and Jell-O, but the science is still out on what nanoparticles do to the human body. Nanoparticles can be found in practically everything—including, it now turns out, powdered baby formula. How nervous should we be?  The fast but unsatisfying answer is that nobody yet knows. The baby formula scare is a result of a study publicized by the Friends of the Earth which, annoyingly, doesn’t present a lot of hard data. Nanoparticles of hydroxyapatite, titanium dioxide, and silica dioxide have been identified in at least six popular brands of baby formula—but it’s not clear how many particles are present or how hazardous these particles actually are. The study zeroes in on the needle form of nano-hydoxyapatite which, at extreme magnification, looks like a creepy tangle of barbed wire.The U.S. Food and Drug Administration recognizes hydroxyapatite, a calcium compound and a normal constituent of bones and teeth, as safe. Scientists point out that compounds on the macro scale, however, may be a whole different kettle of fish from the same compounds on the nano scale. By virtue of their small size, nanoparticles may exhibit very different properties and behaviors. Nano-hydroxyapatite, especially in its prickly-looking needle form, may be capable of doing damage to cells and tissues. Preliminary studies have shown that nano-hydroxyapatite rapidly dissolves in the digestive tract. This means it may be a plus as a delivery mechanism for essential calcium. On the other hand, this doesn’t preclude the possibility that some nanoparticles may still enter the bloodstream and travel throughout the body, perhaps even crossing the crucial blood-brain barrier.

5,400 diagnosed with cancers linked to September 11 attacks - (CNN) Next month will mark 15 years since the terrorist attacks of September 11, 2001, but thousands of people across the country continue to feel its effects on their health. As of June 30, the Centers for Disease Control and Prevention's World Trade Center Health Program enrolled more than 5,400 people who have been diagnosed with cancers linked to the 9/11 attacks, according to statistics released by the program. That's triple the number of people enrolled with cancer diagnoses since January 2014, when 1,822 had signed up. From January 2013 to January 2016, the number steadily increased by an average of 1,525 people per year. The number of people with 9/11-related cancers could be even higher; the 5,441 number reflects only the people who've chosen to enroll in the federal health program. The program provides health care, medical monitoring and treatment to thousands of people directly affected by the 9/11 attacks.Among those in the program, 4,692 are first responders, emergency responders, recovery and cleanup workers, and volunteers who helped in the aftermath of the attacks on the World Trade Center, the Pentagon and the crash site near Shanksville, Pennsylvania. The other 749 people are other survivors who lived, worked or went to school near the World Trade Center on September 11 or in the subsequent months. Almost half of the 5,441 with cancer diagnoses range from ages 55 to 64.  People enrolled in the program have been diagnosed with 6,378 separate cancers, indicating that several people have been afflicted with more than one type of cancer linked to 9/11. Many of the cancer diagnoses are believed to have resulted from exposure to known and suspected carcinogens and pollutants after the attacks. The health program issues certifications when a person is approved for treatment within the program. Although the number of cancer certifications issued by the program stands at 6,378, a certification does not necessarily signify a new cancer diagnosis.Nearly 3,000 people were killed in the attacks on September 11. Since then, tens of thousands have experienced related health problems.

Pollution makes air in parts of California dangerous to breathe - CBS News: - In the West, extreme heat, combined with thick smoke from wildfires and air pollution from millions of cars, is making the air in some places dangerous to breathe. Back in the 80s, thick hazy smog was as much a part of the Los Angeles skyline as the Hollywood sign. Today, while Los Angeles County's air quality has improved, health officials say pollution kills 1,300 people a year, making it the deadliest air in the country. According to a new study, that number is more than triple the number of air pollution related deaths in New York, and twice the total in Texas."We see that the annual number of excess deaths is quantitatively very similar to the number of deaths from alcohol related traffic fatalities," said lead author of the study Kevin Cromar. In California, heavy traffic, industrial commerce, lack of rain and wildfires, are all to blame for the air pollution. "Bad air and high levels of pollution become deadly to a society because chronically people are ingesting these particulate molecules," said Dr. Anthony Cardillo.

Hard Times in Venezuela Breed Malaria as Desperate Flock to Mines -  It is a society turned upside down, a place where educated people abandon once-comfortable jobs in the city for dangerous, backbreaking work in muddy pits, desperate to make ends meet. And it comes with a steep price: Malaria, long driven to the fringes of the country, is festering in the mines and back with a vengeance. Venezuela was the first nation in the world to be certified by the World Health Organization for eradicating malaria in its most populated areas, beating the United States and other developed countries to that milestone in 1961. Since then, the world has dedicated enormous amounts of time and money to beating back the disease, with deaths plummeting by 60 percent in places with malaria in recent years, according to the W.H.O. But in Venezuela, the clock is running backward. The country’s economic turmoil has brought malaria back, sweeping the disease out of the remote jungle areas where it quietly persisted and spreading it around the nation at levels not seen in Venezuela for 75 years, medical experts say. It all starts with the mines. With the economy in tatters, at least 70,000 people from all walks of life have been streaming into this mining region over the past year, said Jorge Moreno, a leading mosquito expert in Venezuela. As they hunt for gold in watery pits, the perfect breeding ground for the mosquitoes that spread the disease, they are catching malaria by the tens of thousands. Then, with the disease in their blood, they return home to Venezuela’s cities. But because of the economic collapse, there is often no medicine and little fumigation to prevent mosquitoes there from biting them and passing malaria to others, sickening tens of thousands more people and leaving entire towns desperate for help.

Another deadly virus is poised to go global  -- An outbreak of yellow fever that's been affecting the Democratic Republic of Congo and Angola, killing more than 400 people and sickening even more, is poised to spread beyond central Africa. It's already the region's largest outbreak in decades.  Yellow fever is transmitted by the same mosquito that transmits the Zika virus. The symptoms can be anything from a general fever to jaundice (that's where the "yellow" comes in) to a severe liver disease with bleeding.  While the more severe symptoms are relatively rare, the virus kills about half of those who develop them. There's no treatment once you get yellow fever. There is a vaccine that protects against it, but a current vaccine shortage has some groups worried that there won't be enough doses to contain the most recent outbreak. "There is no known cure for yellow fever and it could go global," Heather Kerr, country director of the Democratic Republic of Congo for the charity Save the Children, said in a statement. On Tuesday, the World Health Organization launched a vaccination campaign with the hope to vaccinate more than 14 million people in affected areas. The organization is working with limited supplies of the vaccine, and it takes a minimum of 6 months to manufacture more vaccines.  To make up for that, the WHO plans to use just a fifth of a vaccine dose per person, which would spread the limited supply to a wider population but protect those people only for about a year.

Vaccine Shortage Could Spread African Yellow Fever Outbreak Abroad, Charity Warns - A deadly yellow fever epidemic that has afflicted southern and central Africa this year could soon spread worldwide, exacerbated by a severe vaccine shortage, the charity Save the Children warned on Tuesday.The organization issued the warning a day before the beginning of a mass vaccination campaign it is helping to administer in the Democratic Republic of Congo, starting with the capital, Kinshasa, where about 10 million people are at risk.Because of the vaccine shortage, just seven million emergency doses are available for the campaign, Save the Children said in its statement: “too few to even fully cover Kinshasa, let alone the whole of the D.R.C.”As an emergency measure, on the advice of the World Health Organization, the doses will be severely diluted to treat five people instead of one, Save the Children said. The diluted doses provide a stopgap immunity of about one year, as opposed to lifetime immunity from a full dose.“We’ve got to urgently reach as many children and families as we can with the supplies that are left, and this is the only way we are able to do that right now,” Heather Kerr, the Save the Children director for the Democratic Republic of Congo, said in the statement. “We can only hope this will be enough to stop the epidemic from spreading any further.” Ms. Kerr added that it was critical to start the campaign “so that we can try and stop yellow fever spreading by land and air to more cities in Africa and across the world.”Yellow fever, a hemorrhagic virus spread by the same type of mosquito that carries the Zika virus, has killed nearly 500 people in Angola and the Democratic Republic of Congo since December. It is the largest outbreak to hit the region in 30 years.

US Declares State of Emergency in Puerto Rico Over Zika: — The U.S. Secretary for Health and Human Services on Friday declared a state of emergency in Puerto Rico because of the widespread transmission of the Zika virus, which poses a "significant threat" to public health. The statement came at the request of Alejandro García Padilla, governor of the U.S. commonwealth, where the Zika virus is spreading rapidly, threatening hundreds of pregnant women and their unborn babies and women of childbearing age. The declaration will allow HHS to provide added support to the government of Puerto Rico to address the outbreak on the island. Specifically, declaration allows the government of Puerto Rico to apply for funding to hire and train unemployed workers to assist in vector control and outreach and education efforts through the U.S. Department of Labor’s National Dislocated Worker Grant program. It also allows Puerto Rico to temporarily reassign public health workers funded through Public Health Service Act programs to assist in the Zika response. As of Aug. 12, the Puerto Rico health department has had 10,690 laboratory-confirmed cases of Zika, including infections in 1,035 pregnant women. It believes the actual number of infections is likely higher because most people with Zika infections have no symptoms and might not seek testing.

Florida Keys Environmental Coalition: No Consent Given for GMO Mosquito Experiment | Global Justice Ecology ProjectVia Florida Keys Environmental Coalition: In May of 2015 the FDA Science Team reviewing the Oxitec EA predicted that political pressure would very likely affect the outcome of any decisions. “We have witnessed this exact scenario twice this year, as political anxiety influenced the scientific process and now adds risk to all, by permitting the introduction of a less than properly vetted Genetically Modified organism into the wild without any practical possibility of recall.” said Barry Wray, the Executive Director for the Florida Keys Environmental Coalition (FKEC). FKEC has been lock step with the Lower Keys communities in seeking a proper vetting of the Genetically Modified Mosquito (GMM) experiment as proposed by Oxitec. “Any experiment proposed for the Florida Keys community has not sought proper consent and the community has consistently objected to being subjected to this experiment. We do not anticipate and object to, any experiment proceeding, without the consent of those subjected to it. The fact that all experimentation plans are void of any Health Department oversight, have no established goals for disease reduction and now rely on the financial ability of a company suffering $65M/quarter losses to meet any legal liabilities, serves as an indicator of the level of negligence the approval of the this proposed experiment provides, in terms of protecting the public.” added Wray.  When asked to provide preliminary funding, to help the communities at risk of vector borne transmissions of Zika, Dengue and other Flaviviruses, Congressional leaders provided none.  The emergence of locally transmitted Zika in South Florida effectively would suggest that each of the elected members is a collective culprit in spawning their own anxiety and this region’s vulnerability.  

Farmers Dealing with Fall-Out from Monsanto’s New GE Crops -  Farmers in Missouri, Arkansas, and Tennessee are confronting widespread crop damage and bracing for lower yields as a result of agrichemical giant Monsanto’s botched roll-out of new genetically engineered soybean and cotton crops. The company, whose current line of glyphosate-tolerant crops are failing to control weeds throughout the U.S. and across the globe, developed a new line of soybean and cotton with traits that make it tolerate applications of an older herbicide dicamba. However, while its seeds are available for purchase on the market, and Monsanto is encouraging farmers to grow them, the company has yet to receive EPA regulatory approval for the dicamba herbicide meant to be used with the plants. A spate of news reports over the past two months in southern soybean growing regions finds that many farmers are illegally applying off-label dicamba-based herbicides to Monsanto’s new GE crops in an effort to control weeds resistant to glyphosate. Use of this highly volatile herbicide is causing widespread crop damage not only to soybeans that don’t carry the resistance trait, but other crops in the region, including peaches, melons, and tomatoes. Dicamba has a strong propensity to volatilize small particles of the herbicide into the air and drift far off-site. Sensitive crop species can be damaged by dicamba at levels in the parts per million. A study published by Pennsylvania State scientists in late 2015 found dicamba drift was “frequently responsible for sublethal, off-target damage” to plants and insects. Researchers found that even very low rates of dicamba herbicide exposure negatively impacted plant flowering, and thus insect pollination.

Illegal herbicide use may threaten survival of Missouri's largest peach farm --Bader can hardly stand looking at the 900 acres of peach trees that fill his orchards. Some have limbs that are almost entirely defoliated, while countless others have tufts of leaves that are crinkled and yellow, or remain green but are full of holes. While investigators from the state Department of Agriculture continue to search for an official diagnosis, Bader believes he is one of many area farmers victimized by dicamba, a drift-prone herbicide suspected of causing widespread damage to crops in southeastern Missouri and beyond.  The problem has reached a fever pitch in the Bootheel, where more than 100 complaints of drift have been reported since late June — exceeding the Department of Agriculture’s usual statewide caseload for an entire year. Kevin Bradley, a professor of plant sciences at the University of Missouri and a lead agricultural extension scientist, said that everything he’s seen suggests dicamba is responsible for crop damage on farms across the area, though he has not observed Bader’s case firsthand.  Bader blames the problem on people he calls “dicamba outlaws” — area farmers suspected of unauthorized or “off-label” use of the herbicide. Though dicamba has been around for decades, new technology is bringing it to the fore as weeds develop greater resistance to glyphosate-based herbicides such as Roundup. To combat them, Monsanto, the Creve Coeur-based biotech seed company, released genetically modified cotton that is resistant to dicamba in 2015 and, this year, started selling a variety of dicamba-resistant soybeans. But the company’s corresponding dicamba herbicide is still awaiting approval from the Environmental Protection Agency — leaving farmers without a complete package of products. Despite clear warnings forbidding use of dicamba substitutes, it’s believed that a number of farmers went ahead and sprayed other forms of the herbicide, hurting nearby farmers with non-resistant crops.

Pesticides linked to ‘large-scale population extinctions’ of wild bees: A major 18-year study has found evidence linking controversial "neonicotinoid" pesticides with “large-scale population extinctions” of wild bees for the first time. The insecticides have been shown to have “sub-lethal” effects on bees, which are vital pollinators for many crops, in laboratory-style conditions and small-scale studies. But their actual effect in the real world was not well understood – until now. The use of neonicotinoids has been restricted by the European Union and banned in some places, such as the US state of Maryland, because of growing concern about their effects on bees.Last month the UK Government refused an application to use the pesticide – by the National Farmers Union – for the second time this year, although it has previously approved its use. However campaigners fear the restrictions will be lifted after the UK leaves the EU. The study looked at nearly 32,000 surveys of 62 wild bee species that were carried out across much of England between 1994 and 2011 inclusive. The researchers examined the effect of the first widespread use of neonicotinoids as a treatment on oilseed rape seeds in 2002. This was mainly designed to protect the crop from another insect, the cabbage stem flea beetle. But, writing in the journal Nature, the researchers concluded: “Our results provide the first evidence that sub-lethal impacts of neonicotinoid exposure can be linked to large-scale population extinctions of wild bee species, with these effects being strongest for species that are known to forage on oilseed rape crops.”

'Zombie' honeybees make first appearance in Canada -- Honeybees infected with deadly parasitic maggots that make them behave like zombies have been found in Canada for the first time. Beekeeper Sarah Wallbank, who lives just outside Nanaimo, on Vancouver Island, noticed bees acting strangely in July. They were coming out at night — a time when bees normally sleep in their hives — and repeatedly smashing themselves into her porch light."These bees were so frenetic," she told CBC News. "It's like somebody agitatedly tapping their fingers on a desk —  tap tap tap tap tap."Eventually, the bees fall to the ground and stagger around in a tight circle like zombies, then die within a few hours.  Wallbank was sure the strange behaviour wasn't natural. She did an internet search and came across the website for ZomBee Watch, a citizen science project based out of San Francisco State University that tracks bees showing zombie-like behaviour.  Brian Brown, a phorid fly expert at the Natural History Museum of Los Angeles County, confirmed that her bees were indeed "zombie bees" infected with the maggots of a parasitoid fly called Apopcephalis borealisA. borealis, which is found all over North America, from Alaska to the southern U.S., was known to target bumblebees or yellow jacket wasps as hosts, said John Hafernik, professor of biology at San Francisco State University.  But it's only within the past decade that the flies have been found parasitizing honeybees in the U.S., and Wallbank's observation was the first time that had ever been seen in Canada.

Annual U.S. Agriculture Energy Consumption by Commodity Report August 2016 – Big Picture Agriculture - The ERS USDA August 2016 report, "Trends in U.S. Agriculture’s Consumption and Production of Energy: Renewable Power, Shale Energy, and Cellulosic Biomass" has been published. From it, the area of interest which I'd like to focus on is the "Energy Consumption by Principal Commodity" section. First, I've selected a few key points from the report:

  • Farms consume energy directly in the form of gasoline, diesel, electricity, and natural gas, and indirectly in energy-intensive inputs such as fertilizer and pesticides.
  • In 2014, fuel and electricity constituted 12-16 percent of total cash expenses for rice, cotton, peanut, and poultry producers compared with 7-10 percent for other crop and livestock producers.
  • Indirect energy expenses, in the form of fertilizers and pesticides, ranged from 16-36 percent of total cash expenses for crop producers in 2014.
  • Tillage reduced through conservation or no tillage is associated with lower fuel but greater fertilizer and pesticide expenditures for corn and wheat producers.
  • Reduced tillage is associated with greater fuel but lower fertilizer expenditures for cotton producers.
  • Domestic fertilizer prices have not substantially fallen despite the large decrease in the U.S. natural gas price (natural gas accounts for about 75-85 percent of fertilizer production costs). This is due to the relatively high cost of shipping natural gas, which has resulted in regionalized natural gas markets, as compared with the more globalized fertilizer market.
  • In 2014, the agricultural sector consumed 1,714 trillion Btu of energy, accounting for about 1.74 percent of total U.S. primary energy consumption, and about 60 percent of this energy was consumed directly.
  • In recent years, farms producing wheat, corn, and sorghum, along with cotton and rice, had the highest shares of energy-based inputs.
  • Natural gas is used in greenhouse heating and grain drying, as well as for operating trucks, tractors, machinery, and irrigation water pumps. Producers of specialty crops, corn, poultry, and cotton had the largest average expenditures per farm for natural gas at $3,105, $2,906, $2,866, and $2,575, respectively.

Next, I've selected some key graphs from the report:

Ethanol: bad for cars, bad for consumers, bad for the economy and really, really bad for the environment -- An excerpt appears below from my op-ed in yesterday’s US News and World ReportUnwind the Ethanol Mandate” about one of the biggest political boondoggles in history – ethanol and the ethanol mandate. Back in 2007 when political cheerleaders like Sen. Chuck Grassley of Iowa (the “king of ethanol hype”) were promoting ethanol with fantastic claims like “Everything about ethanol is good, good, good,” Rolling Stone magazine responded with the best sentence on ethanol I’ve ever read: “This is not just hype — it’s dangerous, delusional bullshit.” And what’s not good at all about demon ethanol (Paul Krugman’s phrase) are the serious negative effects it’s having on the environment: And yet, today, despite our reverence for the Great Plains and the fragile ecosystem of the grasslands, more and more of this majestic landscape is being converted to corn production for purely political reasons. Ironically, those who should have been working to protect the grasslands have mistakenly encouraged their demise. Back in 2004, when concern about U.S. energy security was escalating and biofuels were promoted as an innovative, green solution to our growing dependence on foreign fuel, environmental groups enthusiastically supported the establishment of the renewable fuel standard, better known as the ethanol mandate. In fact, the Natural Resources Defense Council, an influential international environmental advocacy group, released a 96-page report in 2004 predicting that a biofuels mandate would reduce greenhouse gas emissions by 1.7 billion tons per year, improve air quality, reduce soil erosion and even expand wildlife habitat. Now more than a decade after the ethanol mandate became law in 2005, these same environmental groups that lobbied so vigorously for its establishment are now recoiling in horror at the ecological Frankenstein they helped create.

U.S. Corn Crop Relies Upon Irrigation -- (Big Picture Agriculture infographic) All corn producing regions are not equal. Some land is less suitable for growing corn, which is a thirsty crop and hungry for expensive inputs. As the above infographic shows, in some regions precious aquifer water is being pumped unsustainably to grow corn.  Two points policy needs to consider:
1) In some cases this irrigated corn is being converted to ethanol, and then exported to far reaching corners of the globe.
2) It requires energy to pump water out of the ground, so the small net energy gain claims of corn ethanol turn negative when irrigation is used to grow that corn.

 California farm communities pay price for decades of fertilizer use -- A pollutant that has leached into California aquifers since farmers first began using synthetic fertilizer continues to accumulate and would not be removed from groundwater even if the state’s agriculture businesses abruptly quit using nitrogen-based materials to boost the productivity of their crops. That’s one of the themes of a new study from the UC Davis Agriculture Sustainability Institute that assesses the scale and sources of a kind of pollution that can harm infants if it seeps into groundwater and contributes to respiratory problems if it drifts into the air as a gas. The report is the widest look yet at pollution from nitrogen, a common contaminant that the State Water Quality Control Board has tried in fits and starts to remove from Central Valley agricultural communities over the past decade. The report’s authors offer a range of solutions – from creating a cap-and-trade-style market for nitrogen emissions to encouraging better waste-management practices on farms – but they concede that it could take decades to clean up groundwater that has collected fertilizer runoff since the 1940s. “We don’t have enough technology on the shelf to be able to address the issue now,” said sustainability institute director Tom Tomich, who led the study. “There’s a need for collaboration with farmers and ranchers to develop solutions to these challenges.”

Death Toll Rises to 7 in Historic Louisiana Flooding; 20000 Rescued --The federal government declared a major disaster in Louisiana Sunday after torrential rain inundated the state killing at least seven people, flooding thousands of homes and prompting thousands of water rescues. The death toll rose on Sunday when several more victims of the massive flooding in Louisiana were discovered by authorities, including a grandmother who drowned saving her grandson in Rapides Parish. According to KALB, the woman's vehicle was swept from a flooded road in Hineston.Louisiana Gov. John Bel Edwards said Sunday that more than 20,000 people had been rescued by all participating agencies and volunteers since the flooding outbreak began. "This is a serious event," Edwards said. "It is ongoing. It is not over." The governor said in a press conference Sunday that as many as 10,000 people were in shelters as a result of the widespread flooding. The downpours have sent at least six river gauges to record levels in Louisiana. This includes the Amite River, which exceeded its previous record by over 6 feet in Magnolia, and by over 4 feet in Denham Springs. Flooding triggered by the heavy rainfall has killed at least seven people since Friday.

How over 2 feet of rain caused historic flooding in Louisiana in less than 72 hours - Southern Louisiana is under water after three days of record-breaking rain. The historic and deadly flooding began to take shape Friday and continued through the weekend as wave after wave of moisture pummeled the Baton Rouge region. The disaster was caused by two weather-related features — extreme humidity and near-stationary low pressure that hovered over the Gulf Coast for days. Precipitable water — a measure of how much moisture is in the air over a certain location — was off the charts. Day after day, weather balloons relayed precipitable-water data that came close to or exceeded any other weather event on record in the region. On Friday morning, the precipitable-water reading was 2.8 inches. “Obviously we are in record territory,” the National Weather Service wrote. Moisture values this large increase the likelihood of major flooding when there’s a sufficient trigger mechanism, like a low pressure cyclone. However, much more water vapor can be injected into the air when the flow converges. This is why rainfall totals can be far greater than the total precipitable water measured by weather balloons. Satellite imagery depicts how thunderstorms blossomed day after day, pulsing as the sun came up and fading as it sank below the horizon. The massive area of low pressure crawled west and then seemed to stop and linger over Louisiana for three days. All-told, over 20 inches of rain fell in less than 72 hours around Baton Rouge. Rainfall rates peaked at six inches per hour. A flood warning remains in effect for the rivers around Baton Rouge.

Louisiana Flood of 2016 resulted from 2-day, '1000-year' rainfall -- The Louisiana Flood of 2016 was triggered by a complicated, slow-moving low-pressure weather system that dumped as much as two feet of rain on parts of East Baton Rouge, Livingston and St. Helena parishes in 48 hours. The record two-day rainfall in those areas had a 0.1 percent chance of occurring in any year, the equivalent of a "1,000-year rain", according to the Lower Mississippi River Forecast Center, based at the Slidell office of the National Weather Service. In the two-day period ending Saturday at 7 a.m., several parishes saw rainfall amounts equaling a 1 percent chance of occurring in any year, a so-called 100-year event. They included including parts of Tangipahoa, East Feliciana, Washington, Ascension, Lafayette, Iberville and St. Martin.  The flood's atmospheric origins can be traced to a mid-level low pressure system and a weak, surface-level low that got their start over the Big Bend region of the Florida Gulf Coast on Aug. 5. That's when the National Hurricane Center warned that storminess over Florida might drop into the Gulf of Mexico and form a tropical depression.  Instead, the storminess hugged the northern Gulf Coast and never took on the characteristics of a tropical cyclone, said James Franklin, chief of forecast operations at the National Hurricane Center. "It was an area of low pressure, but it didn't meet the criteria that the Weather Service has for it to be considered a tropical cyclone, so it was just a low pressure area," Franklin said Monday (Aug. 15).   But while the low was not moving, individual thunderstorms kept forming on its south and southwest side and drifted through the Baton Rouge area -- over and over again on Thursday, Friday and Saturday. Heavy rains also were falling in waves across the south central and southwest Louisiana coast, causing flooding there, too.

Historic Flood Event in Louisiana From 20-30 Inches of Rain -- A historic flooding event continues over southern Louisiana, where widespread rainfall amounts in excess of twenty inches since Friday have brought all ten river gauges on the Amite, Tickfaw, and Comite Rivers to record flood crests, flooded thousands of homes, and caused over 1,000 water rescues. The most extreme floods have occurred on the Amite River, which flows along the east side of the Baton Rouge metropolitan area. Flood waters stranded hundreds of cars on Interstate 12 just east of Baton Rouge for more than 24 hours, Saturday through Sunday. About 25 miles east-southeast of Baton Rouge, the flood crest on the Amite River appears likely to overtop the levee system built at Port Vincent after the destructive floods of April 1983 (at the tail end of the 1982-83 “super” El Niño). The flood control system was designed to handle a recurrence of the 14.6-foot crest observed in that record event. However, the Amite at Port Vincent had already reached 14.91 feet as of 9:15 am CDT Sunday, and it is projected to hit a crest of 16.5 feet early Monday, remaining above the previous record until Tuesday. Major flooding can be expected to the south of Port Vincent in southern parts of Ascension Parish, where voluntary evacuations are already in effect. “If you can get out, get out now,” said parish president Kenny Matassa on Sunday morning.Some of the 24-hour rains that fell on Friday in Louisiana (ending at 11AM CDT/16UTC) had a recurrence interval at over 500 years, according to Metstat. Topping the list of phenomenal rainfall amounts catalogued by the NWS Weather Prediction Center for the period 6:00 am CDT Tuesday, August 9, 2016, through 9:00 am CDT Sunday was 31.39” near Watson, Louisiana. Other impressive amounts:
27.47”  Brownfields, LA
22.84”  Gloster, MS
14.43”  Panama City Beach, FL
8.97”  Fairhope, AL
8.11”  Williamsville, MO
7.90”  Cobden, IL

Louisiana flooding is the country’s ‘worst natural disaster’ since Hurricane Sandy, Red Cross says  — Five days into this disaster, adrenaline is giving way to exhaustion and — for many of those who left their homes amid rising water — a constant, churning anxiety about the future. Thousands are still holed up in shelters or at friends’ houses on high ground, relying on Facebook videos and word-of-mouth for an answer to the question on everyone’s tongues: How bad is the damage?  After two feet of rain began falling Thursday night, water rose quickly in Baton Rouge and then migrated east and south, leaving a vast swath of damage. At least 40,000 homes have been damaged, according to Gov. John Bel Edwards (D). The death toll has risen to 13. Roads remain flooded and closed, while schools, businesses and government offices have been shut down for days. The country has not seen a natural disaster this bad since 2012, when Hurricane Sandy pummeled the East Coast, according to the American Red Cross. “The current flooding in Louisiana is the worst natural disaster to strike the United States since Superstorm Sandy,” Brad Kieserman, vice president for disaster services operations and logistics for the Red Cross, said in a statement. “The Red Cross is mounting a massive relief operation, which we anticipate will cost at least $30 million and that number may grow as we learn more about the scope and magnitude of the devastation.”

Missouri Flooding Prompts Evacuations, Knocks Out Power to Thousands in St. Louis -- Thousands lost power in the St. Louis area and more than 30 homes had to be evacuated south of the city due to flooding that swamped roads and even left a woman trapped as she went into labor. The floods were triggered by heavy downpours Sunday night and Monday morning that followed a weekend of intense rainfall in St. Louis and southeastern and south-central Missouri. Roads in St. Louis County were flooded, and more than 13,000 Ameren customers lost power Monday morning – many of which were in the St. Louis area – according to the St. Louis Post-Dispatch.  Some 50 miles to the south, about 30 homes were evacuated in De Soto when heavy rain caused flash flooding. "It came up pretty rapidly," De Soto Police Chief Rick Draper said. "Around 3:45 a.m. is when we started getting some calls." The sudden surge of water went down about as rapidly — by mid-morning, residents were mostly able to return home, where some found water damage, Draper said. Parts of St. Louis County, especially in the Florissant area, received more than 7 inches of rain from late Sunday night into mid-morning, and the rain was still falling, according to National Weather Service meteorologist Patrick Walsh. Cape Girardeau in southeast Missouri had about 8 inches of rain for the weekend.

Our Opinion: The look of climate change in Louisiana - Berkshire Eagle - It is difficult to determine what triggers a unique weather event, but put enough of them together and you get a pattern. A pattern that looks like climate change. The extraordinary rainfall in southern Louisiana that has killed at least eight residents and forced tens of thousands of residents from their homes is the most extraordinary of eight events since May of last year that exceeded National Oceanic and Atmospheric Administration predictions for an amount of precipitation that will occur once every 500 years. This may not be a result of climate change, but this is what climate change is expected to look like. David Easterling, a director at the National Centers for Environmental Information, told The New York Times that the 31 inches of rain in parts of Louisiana is a once in a thousand years event according to the Centers. However, Dr. Easterling added that those predictions were made on the assumption that the climate was stable, which it no longer is because of climate change. "This is exactly what scientists have been predicting," Vermont-based climate activist Bill McKibben told The Times. "The basic physics are simple. Warm air holds more water vapor." When that saturated air hits cold air blizzards can be the result. The dawdling of the United States and the nations of the world means that much of the damage that triggered climate change cannot be undone. Further damage can be lessened, however, by increasing reliance on the green energy sources that don't heat up the atmosphere.

Disasters like Louisiana floods will worsen as planet warms, scientists warn - The historic and devastating floods in Louisiana are the latest in a series of heavy deluges that some climate scientists warn will become even more common as the world continues to warm. On Tuesday, the National Oceanic and Atmospheric Administration (Noaa) is set to classify the Louisiana disaster as the eighth flood considered to be a once-in-every-500-years event to have taken place in the US in little over 12 months. Since May of last year, dozens of people have been killed and thousands of homes have been swamped with water in extreme events in Oklahoma, Texas, South Carolina, West Virginia and Maryland. Noaa considers these floods extreme because, based on historical rainfall records, they should be expected to occur only once every 500 years.The Louisiana flooding has been so exceptional that some places in the state experienced storm conditions considered once-every-1,000-year events. Close to 2ft of rain fell over a 48-hour period in parts of southern Louisiana, causing residents to scramble to safety from flooded homes and cars. At least six people have died, with another 20,000 people having to be rescued. Even Louisiana governor John Bel Edwards had to evacuate after his governor’s mansion in Baton Rouge was swamped with chest-high water. A federal state of emergency has been declared, with 12,000 people crowding into shelters. The National Weather Service balloon released in New Orleans on Friday showed near-record levels of atmospheric moisture, prompting the service to state: “We are in record territory.” Climate scientists have warned that the build-up of moisture in the atmosphere, driven by warming temperatures, is likely to cause a greater number of floods in the future.

Major rivers of Vietnam’s Mekong Delta become unusually deeper: Vietnamese scientists have warned of the unusual increase in the depth of two major rivers in the Mekong Delta, with sand mining and hydropower dams said to be the cause. According to experts, instead of being accreted, the 250-kilometer long Tien (Front) River and 200-kilometer Hau (Back) River have become five to seven meters deeper since 2008. The Mekong separates in Phnom Penh into the Tien River, the main northern branch, and the Hau River, the primary southern distributor, after entering Vietnam. Leaders of the Truong Phat Company based in Tien Giang Province have submitted a letter to the Ministry of Transport, asking for the temporary cessation of sand exploitation in a 40-kilometer section of the Tien River. Against the backdrop of new record depths of the river, a continuation of dredging activity would cause serious subsidence, Tran Duy Phuong, director of the firm, explained. Only 12,000 cubic meters of sand was collected from a 10-kilomter section of the river during a four-month operation, Phuong said, adding that he had ordered his employees to stop the activity due to the strange phenomenon. “Prior calculation indicated that about 1.5 million cubic meters of sand would be accumulated from the river area. Some locations were up to 16 or 17 meters deep,” the director elaborated.

Deadly Bacteria Spread across Oceans as Water Temperatures Rise - Scientific American: Deadly bacteria are spreading through the oceans as waters warm up, and are increasing infection risks, according to a new study. Multiple species of rod-shaped Vibrio bacteria live in the world’s oceans, and their populations rise and fall based on many different variables, changing the likelihood of making people sick. A report published yesterday in the journal Proceedings of the National Academy of Sciences examined the role of the changing climate in Vibrio infections. In the United States, Vibrio bacteria cause about 80,000 illnesses and 100 deaths each year. The species that causes the devastating diarrheal disease cholera, Vibrio cholerae, is responsible for up to 142,000 deaths around the world annually, according to the World Health Organization. Other species, like Vibrio vulnificus, can also infect humans, often through undercooked seafood or from wounds exposed to contaminated seawater. These plankton samples were collected from nine areas in the North Atlantic and the North Sea between 1958 and 2011. During this time frame, sea surface temperatures increased by roughly 1.5 degrees Celsius. From the plankton samples, researchers measured the presence and abundance of Vibriobacteria and compared the information to climate records. Controlling for other variables like ocean salinity and acidity, researchers found that Vibrio bacteria populations increased as sea surface temperatures rose. “Such increases are associated with an unprecedented occurrence of environmentally acquiredVibrio infections in the human population of Northern Europe and the Atlantic coast of the United States in recent years,” researchers wrote in the study.

Unsafe shrimp and the question of seafood farming - In the United States, 90 percent of all shrimp eaten is imported. However, only a fraction of those imports is inspected for harmful additives. Overlooking an unsafe shipment can have serious health consequences. Many shrimp farms use antibiotics to keep their shrimp alive, and harmful residues can end up in the mouths of consumers. In this episode of Techknow, Shini Somara meets with US Food and Drug Administration inspectors at a port in southern California to learn more about how shrimp is federally tested. FDA inspectors select a sample for inspection based on a calculated risk score. The risk score takes into account company history, country of origin and other shipment information to determine how likely it is that the given shipment is violating US health standards. A selected sample is then transported to a lab where it is analysed for harmful residues. Despite this selection process, critics question whether the FDA is doing enough to protect consumers from harmful residues. Among these critics is Urvashi Rangan, who headed a study on imported shrimp for Consumer Reports magazine. "Of the 205 imported farmed samples that we found, 11 of those actually had illegal residues of antibiotics on them," she says.   The use of antibiotics in shrimp farming raises serious public health concerns. The frequent use of antibiotics can lead to antibiotic-resistant strains of bacteria. "If you get an infection from these bacteria," says microbiologist David Love, "It can be harder to treat using antibiotics, especially if these bacteria are resistant to the antibiotics that your doctor would prescribe."

Climate Change Is Turning The Water Around Us Into A Threat: We grasp the connection now between our changing climate and the quantity of water around us. Scientists say that climate change means both more frequent and severe droughts and a heightened risk of flooding. What about the quality of our water? Crises as disparate as Florida’s “guacamole-thick” algal blooms and the record number of cases of Legionnaires’ disease are linked to the effects of climate change on water safety ― or so a paper published last month iin the journal Nature argues. And problems like these appear to be getting worse. But the extent to which climate change is working with other factors to muddy the water isn’t clear, said Anna Michalak, a faculty member in global ecology at the Carnegie Institute of Science and author of the paper. “We tend to think of water quality issues as local phenomena controlled by what people are doing at a relatively local-to-regional scale,” Michalak told The Huffington Post. The reality, she said, is that water quality depends on the interaction between human behaviors and “things that have to do with weather and meteorology — and they themselves are changing as a result of the climate.” For instance, when changing climate and weather patterns combine with the excessive use of fertilizer on farmland — which contributes to nitrogen runoff into waterways — the results can be extreme. In the Gulf of Mexico, the toxic algal blooms have created a Connecticut-sized “dead zone” wreaking havoc on both the ecosystem and the local economy. And algal blooms are just one example of this costly relationship. Here are some others:

The Blob That Cooked the Pacific -- In a typical year eight whales are found dead in the western Gulf of Alaska. But in 2015 at least a dozen popped up in June alone, their bodies so buoyant that gulls used them as fishing platforms. All summer the Pacific Ocean heaved rotting remains into rocky coves along the more than 1,000-mile stretch from Anchorage to the Aleutian Islands. Whole families of brown bears feasted on their carcasses. In the past few years death had become a bigger part of life in the ocean off North America’s West Coast. Millions of sea stars melted away in tide pools from Santa Barbara, California, to Sitka, Alaska, their bodies dissolving, their arms breaking free and wandering off. Hundreds of thousands of ocean-feeding seabirds tumbled dead onto beaches. Twenty times more sea lions than average starved in California. I watched scientists lift sea otter carcasses onto orange sleds as they perished in Homer—79 turned up dead there in one month. By year’s end, whale deaths in the western Gulf of Alaska would hit a staggering 45. Mass fatalities can be as elemental in nature as wildfire in a lodgepole pine forest, whipping through quickly, killing off the weak and clearing the way for rebirth. But these mysterious casualties all shared one thing: They overlapped with a period when West Coast ocean waters were blowing past modern temperature records.  As hotter oceans destroy coral reefs in the tropics and melting ice alters life in the Arctic, it’s been easy to overlook how much warm water can reshape temperate seas. No more. Between 2013 and earlier this year, some West Coast waters grew so astonishingly hot that the marine world experienced unprecedented upheaval. Animals showed up in places they’d never been. A toxic bloom of algae, the biggest of its kind on record, shut down California’s crab industry for months. Key portions of the food web crashed. Was this a quirk, an unlikely confluence of extremes that conspired to make life harsh for some sea creatures? Or was it, as one scientist says, a “dress rehearsal”—a preview, perhaps, of what hotter seas may one day bring as climate change unleashes its fever in the Pacific?

Climate scientists make a bold prediction about sea level rise -- Three top climate scientists just made a very bold prediction regarding sea level rise; we should know in a few years if they are correct. As humans emit greenhouse gases, it’s causing the Earth to warm. That’s indisputable and proven. We can actually measure the amount of extra heat. Since most of it ends up in the oceans, we can also measure other changes in the oceans. For instance, the oceans are rising. We know that’s indisputable. Measurements taken from physical gauges and from satellites confirm sea level rise.  A very recent paper published in Nature has evaluated the history of sea level rise, and what they find is really interesting. The lead author (John Fasullo from the National Center for Atmospheric Research) and his colleagues tried to determine if the rate of sea level rise is changing. That is, are the water levels rising linearly, the same amount each year? Or, is the rate increasing (faster and faster each year)?   Using satellite data, the authors found little evidence of an acceleration. However, they show that this is because the satellites began measuring in 1993, right after a large volcanic eruption (Mount Pinatubo). This eruption temporarily reduced global warming because particles from the eruption blocked sunlight. Just by coincidence, the timing of the satellites and the eruption has affected the water rise so that it appears to be linear. Had the eruption not occurred, the rate would have increased. This allows the scientists to make a prediction:  barring another major volcanic eruption, a detectable acceleration is likely to emerge from the noise of internal climate variability in the coming decade.

Alaska's Warmth So Far This Year Is Off the Charts -Alaska has had the warmest start to any year dating to the 1920s, according to a government report released Monday.The state's January-July 2016 mean temperature of 33.9 degrees Fahrenheit was 8.1 degrees above the long-term (1925-2000) average and smashed the previous record in 1981, according to data from NOAA's National Centers for Environmental Information. Perhaps even more notable, this was the first time in 91 years of records the January-July mean temperature in our 49th state was above freezing."The warm sea-surface temperatures have been a large factor in the air temperatures," said Alaska-based climatologist Dr. Brian Brettschneider. "In the Gulf of Alaska and Bering Sea, sea-surface temperatures are at 100-year highs." "Only one day since December has been below (cooler) than average statewide," said Brettschneider, emphasizing perhaps the most stunning statistic of them all. Nearly every major reporting station in Alaska has had its warmest January through July, according to the Southeast Regional Climate Center, including Fairbanks, Anchorage, Juneau, Barrow and Nome. July was the single warmest month on record in Anchorage, topping July 1977. July was also the muggiest month (highest monthly dewpoint) on record in Fairbanks, as well as several other locations across the state, according to Brettschneider In fact, it's increasingly likely Alaska will top its record warm year, even if the rest of the year is cooler. "If August-December is anywhere above the bottom 1/4 percentile (i.e. warmer than the coolest 25 percent of August-December periods), 2016 will be Alaska's warmest year on record," said Brettschneider in a tweet Monday.

Warm Nights Tip the Scales as Summer Grinds On -- Data for July 2016 make it clear that this summer is worming its way into the nation’s warmest batch on record, thanks in large part to consistently sultry nights in many areas. Meteorological summer so far--June plus July--has been the fifth warmest for the contiguous U.S. in 122 years of recordkeeping, according to the July climate report released on Thursday by NOAA’s National Centers for Environmental Information (NCEI). Ahead of 2016 at this point are the scorching Dust Bowl summers of 1934 (#4) and 1936 (#1) along with the recent 2006 (#3) and 2012 (#2). The toasty summer so far is the result of the nation’s warmest June on record followed by its 14th warmest July. Last month’s warmth was focused across the nation’s southern and eastern halves (see Figure 1), with New Mexico and Florida each recording their hottest July on record. Fourteen other states made it into their top ten warmest for July. It’s the muggy nights that are imprinting themselves on the psyche of millions of Americans this summer. The average daily minimum for the contiguous U.S. was the warmest on record for June and July combined: 60.57°F, beating out 2015, 2010, 2002, and 2006. (See Figure 2.) Warmer nights are a hallmark of a climate being heated by added greenhouse gases, and it’s long been recognized that nights should generally warm more than days, and winters more than summers, as climate change proceeds. Of the eight June-July periods with the warmest average daily temperatures (including both highs and lows), four are from Dust Bowl years. However, the eight years with the warmest average daily minimum temperatures are all from the 21st century. Urban heat islands are no doubt helping to increase overnight lows in large metropolitan areas; however, the nationwide extent of the trend toward warm nights goes well beyond this effect.

Earth's hottest month on record was July 2016: NASA -  Earth just had its hottest month yet, and the record-shattering warmth shows no signs of stopping. According to NASA, global average surface temperatures during July were 0.84 degrees Celsius, or 1.51 degrees Fahrenheit, above average. This beats all previous Julys, with July 2011 coming in second at 0.74 degrees Celsius above average.  The large anomaly seen during July 2016 means that the month was the hottest on Earth since instrumental records began in 1880. Separately, the National Oceanic and Atmospheric Administration (NOAA), also found that July was the planet's hottest month ever recorded. July is typically the planet's hottest month of the year due to the fact that the Northern Hemisphere has more land area than the Southern Hemisphere, making Northern Hemisphere summer the warmest month. July is now the tenth month in a row to be the warmest such month on record in NASA's database.It is now virtually certain that 2016 will beat 2015 for the dubious distinction of the hottest year on record. The NOAA also found that July was the hottest such month on record, hottest month overall, and an unprecedented 15th month in a row that set a monthly temperature record.

The Earth Just Experienced the Hottest Month on the Books. Period. - On Monday it was confirmed that the Earth has broken an ominous climate milestone amid a wave of troubling records: July 2016 was the hottest recorded month—ever. According to new NASA data, the global mean surface temperatures last month were 0.84° Celsius (1.51° Fahrenheit) above average and was the warmest July in their data set, which dates back to 1880. This marks the 10th straight month to set a new monthly warming record, based on NASA's analysis. "Every month so far this year has been record hot," reported Climate Central's Andrea Thompson. "In NASA's data, that streak goes back to October 2015, which was the first month in its data set that was more than 1C hotter than average." The National Oceanic and Atmospheric Administration (NOAA) releases its monthly temperature report on Wednesday and it is likely theirs will reflect a 15-month streak of record-shattering heat. (Some previous reporting on monthly records here, here, here, and here.) What's more, because July is typically the hottest month of the year, it stands that July 2016 was "the warmest month of any in a data record that can be extended back to the nineteenth century," according to the U.K.-based Copernicus Climate Change Service (CCCS), which last week published similar temperature results. CCCS explained: Global temperature usually peaks in July, when the land masses of the northern hemisphere are on average at their warmest. It varies by more than 3° C over the course of each year.  The largest recent deviation from this annual cycle occurred in February this year, but July was still more than 0.5° C warmer than the 1981-2010 average for the month. This made July 2016 the warmest month of any in a data record that can be extended back to the nineteenth century.

Every Month This Year Has Been the Hottest in Recorded History -- Despite the cruise ship that’s now plowing through a melting Arctic, or the wildfires that have consumed parts of North America, and devastating drought that's stricken in East Africa, it can still be easy to ignore sometimes that our climate is rapidly changing. But 2016 has been a remarkable year for record-breaking temperatures, and even in the midst of it, July stands out as the hottest month of all.  On Wednesday, the US National Oceanic and Atmospheric Administration (NOAA) announced that July was the hottest month ever recorded on our planet, since modern record-keeping began in 1880.  JUST IN: #July was hottest month on record for globe - @NOAANCEIclimate #StateOfClimate NASA has reached the same conclusion. July smashed all previous records.  July 2016 was absolutely the hottest month since the instrumental records began.  Keep in mind that July almost always stands out as the warmest month in a given year, across the planet. “July is, climatologically speaking, the world’s warmest month of the year,” NOAA climatologist Ahira Sanchez-Lugo told me in an interview. That’s because the Northern hemisphere “has more landmass, and less ocean” than the South, she continued, and the land heats up more quickly.  But this July was the hottest month recorded on Earth, ever—beating the previous record, which was actually just set the July before.

Fires, Floods, and Scorchers: Earth Destroys Yet Another Heat Record - As more than 100,000 Americans flee destructive wildfires in California and floods in Louisiana, earth sends yet another reminder that the worst is yet to come: a new record for planet-wide heat. Last month wasn’t just the hottest July on record for the surface of earth. It continued the longest-ever streak of record-breaking months—15, according to data released on Wednesday by the National Oceanic and Atmospheric Administration (NOAA). July followed the hottest June, May, April, March, February, January, December, November, October, and September, along with last August, July, June, and May. The extremes of recent months are such that we're only midway into 2016, and there’s already a greater than 99 percent likelihood that this year will go down as the hottest on record, according to Gavin Schmidt, who directs NASA’s Goddard Institute for Space Studies. NASA and NOAA maintain independent records of the earth’s temperatures, and both agree that last month was a scorcher. "July 2016 was absolutely the hottest month since the instrumental records began," Schmidt wrote on Twitter.  The interactive chart below shows earth’s warming climate, measured by land and sea, dating back to 1880.

As Peat Bogs Burn, a Climate Threat Rises -  In discussions of how nature regulates carbon dioxide in the atmosphere, forests receive most of the attention for their ability to absorb and store carbon. But peatlands play an important role, too.There are an estimated 1.6 million square miles of peatlands, or about 3 percent of the earth’s land surface, mostly in northern latitudes in Canada, Alaska, Europe and Russia.Peat is made up of sphagnum and other mosses, which hold a large amount of water and contain compounds that inhibit decomposition. The peat slowly builds up over centuries because the annual growth exceeds the decay. A relatively small amount of peat is mined to burn as fuel, to improve backyard gardens or to add smokiness to Scotch. But most of it stays where it is, and because it accumulates carbon over such a long time, it contains more carbon than is in all the world’s trees and plants, and nearly as much as the atmosphere does. Like forests, peatlands are threatened by climate change. Warming temperatures can dry out bogs, making them more susceptible to fires, and to deeper, more intense burning. A peat fire, which can smolder like a cigarette for months, can release a lot of carbon. “If it were to be released, the global CO2 concentration would be much higher.” The world has already had vast releases of carbon from peat, in Indonesia. Last year, bogs that had been drained for agriculture, and were drier because of El Niño-related warmth, burned for months, creating a haze visible from space and causing widespread health problems. At their peak in September and October, the fires released more carbon per day than was emitted by the European Union.

 California is in flames right now, with fires fueled by historic drought -- Dry conditions and high winds have made the Clayton fire nearly impossible to control. “We had this fire contained at 5 percent Saturday. But today it’s still 5 percent. It tells you that the fire keeps moving and moving and moving in different directions.” The fire has added to a summer of misery in California. The state has nine active wildfires as large as 25 acres or more, including the Clayton fire that forced nearly 1,500 residents to flee their homes after it erupted Saturday in dry conditions created by the state’s extreme drought. On Sunday the blaze doubled in size. More than 3,800 fires have scorched over 112,900 acres of state land since January. That’s 20 percent more fires than at this point last year, and well above the state’s five-year average of 3,200 fires and 85,900 acres for the same time span. Wildfires are also charring federally owned land in the state. Add those in, and the number of fires shoots to 4,600 with more than 306,000 acres burnt in 2016, according to Cal Fire. As of Monday, the federal National Interagency Fire Center showed California leading the fire-prone West in the number, size and intensity of wildfires. In June, the U.S. Forest Service estimated that 26 million trees had died in six counties across 760,000 acres in the Sierra Nevada mountains that run along California’s spine — bringing the number of dead trees, which are fuel for fire, to 66 million during four years of drought. The service blames heat, dryness and a greedy little beetle for the devastation.

Wildfire burns with ferocity never seen by fire crews (AP) — A wildfire with a ferocity never seen by veteran California firefighters raced up and down canyon hillsides Wednesday, instantly incinerating homes and forcing thousands of people to flee, some running for their lives just ahead of the flames. A day after it ignited in brush left tinder-dry by years of drought, the blaze had spread across nearly 47 square miles and was raging completely out of control. The flames advanced despite the efforts of 1,300 firefighters. Authorities could not immediately say how many homes had been destroyed, but they warned that the number will be large. “There will be a lot of families that come home to nothing,” San Bernardino County Fire Chief Mark Hartwig said after flying over a fire scene he described as “devastating.” “It hit hard. It hit fast. It hit with an intensity that we hadn’t seen before,” he said. No deaths were reported, but cadaver dogs were searching the ruins for anyone who was overrun by the flames. In 40 years of fighting fires, Incident Commander Mike Wakoski said, he had never seen conditions as extreme as those in Cajon Pass, where the fire broke out Tuesday morning. Residents like Vi Delgado and her daughter April Christy, who had been through a major brushfire years before, said they had never seen anything like it either. “No joke, we were literally being chased by the fire,” a tearful April Christy said in a voice choked with emotion as she and her mother sat in their minivan in an evacuation center parking lot in Fontana. “You’ve got flames on the side of you. You’ve got flames behind you,” Christy said, describing a harrowing race down a mountain road. She was led by a sheriff’s patrol car in front while a California Highway Patrol vehicle trailed behind and a truck filled with firefighters battled flames alongside her.

‘A very dangerous place to be': Huge California blaze forces 82,000 evacuations — A monster wildfire raged through an ever-bigger expanse of southern California on Wednesday, fed by a dangerous combination of hot weather, bone-dry conditions and breezy winds. Dark, thick smoke blocked the sky in communities turned ghost towns, with schools closed and more than 82,000 people ordered to evacuate from their homes. Despite firefighters from communities statewide being called into service, the Blue Cut fire continued to advance through the canyons, valleys and mountains of rural San Bernardino County, about 60 miles east of Los Angeles. Twenty-four hours after the first flames curled along a remote ridge, officials acknowledged that the 30,000-acre blaze was zero percent contained. No residents have been hurt, but six firefighters attached to the San Bernardino Fire Department were trapped while defending property and helping evacuate several hundred homes, officials reported. Two were injured.  “We were fully engulfed in smoke,” firefighter Cody Anderson told KCBS-TV, as reported by the Associated Press. “It was really hard just to see your hand in front of your face. We just hunkered down and sat there and waited for the fire to blow over.”  More than 1,300 personnel were expected to be on the different fire lines during the day. That number could climb into the “several thousands” by Thursday, and they’ll be deployed in 12-hour day and night shifts, officials said.

Fast-Moving Fire Bears Down on Southern California – WSJ - On Thursday morning, a wildfire continued to rage across the region. Thick, orange lines of flames twisted through the hills. Firefighters have made mild progress: the fire remained at over 25,000 acres and was only 4% contained, according to fire officials Thursday morning. Officials said they hoped to reopen the northbound side of Interstate 15—the main route between Las Vegas and Los Angeles and a vital trade and commuting corridor through the region. But firefighters face another difficult day of hot, dry weather. Winds were expected to pick up after sunrise, with gusts of up to 30 miles an hour fanning the flames. The Blue Cut fire ballooned to almost 30,000 acres, just one day after it started about 75 miles east of Los Angeles on Tuesday. The flames forced the closure of parts of Interstate 15, the main route linking Los Angeles and Las Vegas. By Wednesday, 82,000 people were still under evacuation orders. Still more were cut off from their homes by road closures. California, in the midst of a protracted drought and a heat wave, is ablaze from top to bottom. More than 10,000 firefighters are battling eight large wildfires across the state. But this fire stands out because of its speed and size—and the sheer number of people forced to flee. Gov. Jerry Brown declared a state of emergency in San Bernardino County. “The fire was really exhibiting behavior that we’ve never seen,” said Chon Bribiescas, a spokesman with the U.S. Forest Service. There were rare fire whirls—or large walls of fire—of about 50 to 100 feet, he said. About 1,600 firefighters were battling the Blue Cut blaze. The fire halted freight-rail movements through the Cajon Pass, the key transit point between Southern California ports and the interior U.S. Rail connections to the ports of Los Angeles and Long Beach, which together make up the largest gateway for U.S. imports, were completely cut off. BNSF Railway, which along with Union Pacific Inc. move trains through the region, said in a customer service advisory that it expects delays of up to 48 hours.

California's Blue Cut fire: climate change dismissed as 'excuse' on the ground -- This was a 25,000-acre patch of California going up in smoke, as large patches of California do every summer and autumn, which is why it’s called fire season. Fires are not only inevitable, they can benefit the landscape by purging undergrowth and regenerating ecosystems. They are natural. But the fire currently ripping through this collection of rural communities in San Bernardino county, 60 miles east of Los Angeles, does not seem normal and certainly not beneficial to humans or nature. In a matter of hours it cut major roads and forced the evacuation of more than 80,000 people in an abrupt, panicked exodus. The speed astonished seasoned fire fighters. They have seen big, fast, wild conflagrations before, such as the 2013 Rim fire in northern California, but the Blue Cut fire raced through the landscape with alarming velocity. The smoke is visible from Las Vegas, Huntington Beach – and space. “It hit hard, it hit fast – it hit with an intensity that we haven’t seen before,” said San Bernardino County fire chief Mark Hartwig. “There will be a lot of families that will come home to nothing.” “Climate change is real and it is with us,” Robert Bonnie, undersecretary for natural resources and environment at the US Department of Agriculture, told the Guardian in February. “The whole US Forest Service is shifting to becoming an agency dominated by wildfires. We really are at a tipping point. The current situation is not sustainable.” Related: Fire starters: California cracks down on those who ignite blazes, arsonist or not This is news to some of those caught up in the Blue Cut fire, many of them political conservatives. “Climate change? A farce. I’ve been here since 1996 and it’s been the same: it gets hot in summer and the place burns,” said Rich Kerr, mayor of Adelanto. Ryan Gilmore, 21, and Sonya Haffner, 42, “horse people” from Riverside, drove overnight on their own dime to help residents evacuate animals. “This,” said Haffner, indicating the smoke, “is just a hot period. It’ll go back eventually.” Gilmore agreed. “The world goes through cycles. Global warming is a bunch of crap.” He flicked some ash from his shoulder. “It’s just another excuse for people to whine about something.” By early Thursday officials reported some progress: the fire was 4% contained.

India's forests are worth $1.7 trillion, more than the GDP of Russia or Brazil — Quartz: India has decided to put a financial value on its forests: Rs115 trillion, or an astounding $1.7 trillion. This is lower than India’s GDP, pegged at $2.1 trillion, but higher than the GDPs of countries such as Canada, Korea, Mexico or Russia. The valuation was arrived at by an expert panel that the Indian government set up in 2013. The committee was asked to decide on the net present value (NPV) of forest land in case they had to be diverted for industrial or construction purposes. "The moment you put a value to these forestlands is when people take these concerns (regarding diverting forest land) seriously.” India’s environment ministry has now approved the committee’s report, the Hindustan Times reported. Since 1980, the Indian government has approved the diversion of 1.29 million hectares of forestland for non-forest purposes. India has a total forest area of seven lakh square kilometres, which grew by 0.54% over the past two years. The new report pegs the NPV between Rs9.87 lakh and Rs55.55 lakh per hectare.“Using 14 forest type groups and four forest canopy cover classes, 56 classification units have been formed for the estimation of the economic value of forests,” the report said on its method of calculation. In India, private companies and other agencies are made to pay a fee to the government in return for allowing them to set up projects on forest land. As per the rules, these “user agencies” have to deposit money for compensatory afforestation, besides paying the net present value.

Deforestation: A lingering legacy -- When we humans cut down tropical forest, we have a good idea that there will be consequences. We know that clearing the land for a farm or a pasture or the timber it holds comes at the cost of a burst of carbon into the atmosphere, and that the habitat anchored by those trees will change pretty drastically, forcing animals, plants, and other organisms to adapt, move, or disappear. What’s not as clear is how long those changes take to unfold. As a result, we may not have an accurate picture of the extent of carbon emissions and the loss of species from areas that we have already deforested. Isabel Rosa is the lead author of a study in the journal Current Biology published this month that attempts to better understand the carbon and species extinction “debts” that we have to pay as a result of clearing forestlands between 1950 and 2009. To do that, Rosa and her colleagues created a computer model based on current data to “backcast” when and where these effects occurred or will occur. “We have all the technology to really do a good job at monitoring landscape change [from now on],” Rosa said. “But we’re still going to have to always rely on models to go back in time and see what happened in the last 100 years and how that has impacted the future.” Key among the team’s findings is that, even if we had stopped cutting down rainforest in 2010, we would still expect the planet to face about the same amount of carbon emissions that we would get from five or ten years of continued deforestation. And, based on their modeling, that past deforestation would mean the end of another 140 vertebrate species – which is more than the total number of such species known to have gone extinct between 1900 and 2000.

Himalayas suffering from climate change most: Environment Minister Anil Madhav Dave - Environment Minister Anil Madhav Dave today said the Himalayan range has been suffering from the ill-effects of pollution “the most” even as he discussed various issues including impact of climate change on the range and retreat of glaciers with MPs of the region. Chairing the third meeting with MPs from the Himalayan region last evening, Dave also underlined the need for having an interface on the real problems of the Himalayan region to help proper planning to mitigate them. “Man, wild animals and forests have been living in harmonious co-existence. No Scheduled Tribe has ever posed a threat to the forests. Himalayas must be seen as a single whole and not in different parts. Himalayan range is one of the areas that has been suffering the ill-effects of pollution the most,” Dave said. Some of the issues discussed at the meeting included the possibility of disaster risk reduction, climate change impact, retreat of Himalayan glaciers, forest fires and the need to reduce out migration. The government has underlined the need for an interface on the real problems of the Himalayan region, as it will help in proper planning, an official statement said.

Scientists warn anthrax just one threat as Russian permafrost melts -  A recent anthrax outbreak in the far north of Russia left a child dead, 23 people infected and the government scrambling to deploy hundreds of rescue workers and soldiers to stop any further spread.The source, scientists say, seems likely to have been the long-buried corpses of reindeers on Yamal peninsula uncovered as Russia's permafrost melts — and then been passed on to grazing herds. The fear now is that this is not a freak incident and that other diseases — some dating back to the Ice Age — could be unleashed as global warming thaws Russia's icy northern expanses. "Most likely the source of the epidemic were the thawing animal burial sites for animals that died of anthrax 70 years ago,"  . Russia is warming about 2.5 times more rapidly than the world's average, and the Arctic region is warming quicker than the rest of the country. Yamal, the peninsula straddling the northern Kara Sea and the Gulf of Ob, is sparsely populated by mostly indigenous nomadic reindeer herders. Temperatures there in July were up to eight degrees higher than normal, reaching 34 degrees Celsius.  Besides anthrax, there are plenty of other dangers lurking in shallow Arctic graves which might be unlocked from the ice after centuries, said Viktor Maleyev, deputy chief of Russia's Central Research Institute of Epidemiology. "We had smallpox graves" in the Far North at the end of the 19th century, and scientists are discovering new "giant viruses" in mammoths, he said. "Their pathology has not been proven, we must continue to study them.

 Smallpox could return as Siberia's melting permafrost exposes ancient graves -- Smallpox – a deadly disease eradicated from the world in 1977 – could return as the frozen tundra of Siberia melts and releases the virus from the corpses of people who died in a major epidemic about 120 years ago, experts have warned. The disease was once one of the most feared in the world. Up to 30 per cent of people who caught it would die, according to the World Health Organisation, after experiencing symptoms including a high fever and the characteristic pus-filled spots. Spores of potentially fatal anthrax from dead people and reindeer that had been entombed in the permafrost are already thought to have infected 24 patients currently in hospital in Salekhard near Russia’s north coast. But health experts told the Siberian Times this was a warning sign that there could be worse to come. Boris Kershengolts, of the Siberian branch of the Academy of Sciences, said: “Back in the 1890s, there occurred a major epidemic of smallpox. There was a town where up to 40 per cent of the population died.  “Naturally, the bodies were buried under the upper layer of permafrost soil, on the bank of the Kolyma River. “Now, a little more than 100 years later, Kolyma's floodwaters have started eroding the banks.” The melting of the permafrost has speeded up this erosion process.

Collapsing Greenland Zachariae Isstrom glacier could raise sea levels by half a metre, say scientists - The huge Zachariae Isstrom glacier in northeast Greenland started to melt rapidly in 2012 and is now breaking up into large icebergs where the glacier meets the sea, monitoring has revealed. The calving of the glacier into chunks of floating ice will set in train a rise in sea levels that will continue for decades to come, the US team warns. “Even if we have some really cool years ahead, we think the glacier is now unstable,” said Jeremie Mouginot at the University of California, Irvine. “Now this has started, it will continue until it retreats to a ridge about 30km back which could stabilise it and perhaps slow that retreat down.” Mouginot and his colleagues drew on 40 years of satellite data and aerial surveys to show that the enormous Zachariae Isstrom glacier began to recede three times faster from 2012, with its retreat speeding up by 125 metres per year every year until the most recent measurements in 2015. The same records revealed that from 2002 to 2014 the area of the glacier’s floating shelf shrank by a massive 95%, according to a report in the journal Science. The glacier has now become detached from a stabilising sill and is losing ice at a rate of 4.5 billion tons a year. Eric Rignot, professor of Earth system science at the University of California, Irvine, said that the glacier was “being hit from above and below,” with rising air temperatures driving melting at the top of the glacier, and its underside being eroded away by ocean currents that are warmer now than in the past. “The glacier is now breaking into bits and pieces and retreating into deeper ground,” he said. The rapid retreat is expected to continue for 20 to 30 more years, until the glacier reaches another natural ledge that slows it down.

Climate urgency: we've locked in more global warming than people realize: While most people accept the reality of human-caused global warming, we tend not to view it as an urgent issue or high priority. That lack of immediate concern may in part stem from a lack of understanding that today’s pollution will heat the planet for centuries to come, as explained in this Denial101x lecture: So far humans have caused about 1°C warming of global surface temperatures, but if we were to freeze the level of atmospheric carbon dioxide at today’s levels, the planet would continue warming. Over the coming decades, we’d see about another 0.5°C warming, largely due to what’s called the “thermal inertia” of the oceans (think of the long amount of time it takes to boil a kettle of water). The Earth’s surface would keep warming about another 1.5°C over the ensuing centuries as ice continued to melt, decreasing the planet’s reflectivity. To put this in context, the international community agreed in last year’s Parisclimate accords that we should limit climate change risks by keeping global warming below 2°C, and preferably closer to 1.5°C. Yet from the carbon pollution we’ve already put into the atmosphere, we’re committed to 1.5–3°C warming over the coming decades and centuries, and we continue to pump out over 30 billion tons of carbon dioxide every year.

Bracing Ourselves for the Climate Tipping Point - On Monday, the National Aeronautics and Space Administration released its updated global temperature data for July, and a stunning record was broken: For as long as we’ve been keeping track (since 1880), and likely since long before, there has never been another month as warm as the one just past. And never is a long time: An extrapolation of recent research shows last month likely marked Earth’s warmest absolute temperatures since human civilization began, thousands of years ago. That’s a pretty big deal. Depending on how you count, our planet briefly surpassed the 1.5-degree Celsius mark above pre-industrial levels this year, and may have also touched two degrees during a February-to-March global heat wave that coincided with the peak of El Niño. (The Earth’s absolute temperature was much warmer during the month just past, because our planet’s land area is concentrated in the Northern Hemisphere, and land heats more quickly than water during the summer.) These numbers are particularly meaningful, since they are the upper limits the world community agreed to less than a year ago in the landmark Paris Agreement on climate change; and embody the point past which scientists agree “dangerous” impacts will become unavoidable. Sure, humanity has agreed to these temperature goals, but there’s a difference between agreeing to do something and actually doing it. The steady stream of new global temperature records point to the possibility that those goals might no longer be in reach. So, what does it mean that we’re now in uncharted territory? And have we already come too far to avoid key planetary tipping points? What hope should we have that we’ll fix this sooner rather than later?

New York Uses Record Electricity As City Melts Under Unprecedented Heatwave -- As New Orleans battles historic floods, the heat wave gripping the Tri-State area continued on Sunday, with the temperature at JFK airport hitting a high of 95F degrees, setting a new daily record and eclipsing the old record high of 93F set in 2003.  When accounting for humidity, the heat index rose to as high as 105 to 110 degrees in some spots. The unprecedented heatwave meant air conditioners were cranked up to the max, and as a result Con Ed broke a new record for weekend New York City electricity consumption at 1 p.m. Saturday, with a record 11,664 megawatts of electricity usage; the previous weekend record was 11,533 megawatts July 23, 2011. The utility attributed demand to “sweltering heat and humidity that is baking the area. Con Edison said Saturday it was reducing voltage by 5 percent in certain Brooklyn neighborhoods to protect equipment and maintain service. The area includes: Sheepshead Bay, Marine Park, Gerritsen Beach, Midwood, Flatbush and East Flatbush. PSEG customers without power on Long Island and in New Jersey totaled 950. Connecticut Eversource customers without power totaled 1,133 in eastern sections of the state. As the following chart from Reuters show, air conditioning demand has already been well off the long-term average, and is expected to continue at this pace.It's not just New York and its surroundings: overall US aircondition usage has been some 11% higher than the norm so far in 2016, hinting at some bumper utility earnings results for the third quarter.

An unbearable heat wave plaguing New Yorkers may also be causing roaches to fly - If unsolicited steam baths and especially putrid smells aren't bad enough, weather conditions along the East Coast also threaten to bring about a phenomenon no New Yorker ever wants to see: flying cockroaches.   The National Weather Service has issued an "Excessive Heat Warning" for the New York City area, meaning the combination of heat and humidity could make it feel like it's 105 degrees or more outside.  And as DNAinfo reports, this combination creates a perfect storm for roaches to take flight.  "In hot steam tunnels, something with the temperature and the humidity encourages them to fly," Ken Schumann, an entomologist at Bell Environmental Services, tells DNAinfo. "When it's warm and steamy that seems to be what they like." Srini Kambhampati, a professor and chair of the biology department at the University of Texas at Tyler, tells NBC News that it's possible roaches are more active in this current weather because their development depends on ambient temperature.  And "because of the extreme heat, they may be trying to find a more comfortable place in which to live — that is, they are on the move to find a better, cooler place," he says.

As the mercury soars, fear grows over ‘air-con effect’ -- Most of the world will have air conditioning in their homes, workplaces and cars within 20 years, requiring thousands of power stations to be built and potentially accelerating climate change, energy experts say. As temperatures shatter records worldwide in 2016 and Britain anticipates its second heatwave of the summer, demand for the technology is exploding. “Globally, 2016 is poised to be another record-breaking year for temperatures. This means more air conditioning. Much more. It is becoming an air-conditioned world,” says Lucas Davis, an energy economist at the University of California in Berkeley. “The growth in air conditioning has been staggering. China is the sweet spot. The number of households that have it has doubled in five years. Every year, 60 million more units are being sold there, eight times as many as are sold annually in the United States.” As large developing countries such as India, Mexico, Indonesia and Brazil grow richer, staying cool may come to be seen as a necessity and not a luxury, leading to severe energy shortages and major environmental stress, says Davis. But Davis, who expects nearly all households in warm countries to have air conditioning within 20 to 30 years, warns that the extra energy needed will be dramatic and could have huge consequences for global warming. “We are talking about hundreds of new power stations having to be built in China alone over the next 20 or 30 years,” he says.

Who owns the wind? We do, Wyoming says, and it's taxing those who use it -- Not long after it became clear that the robust winds that blow down from the Rocky Mountains and across the sea of sagebrush here could produce plenty of profit in a world that wants more renewable energy, some of the more expansive minds in the Wyoming Legislature began entertaining a lofty question: Who owns all of that wind? They concluded, quickly and conveniently, that Wyoming did. Then, with great efficiency for a conservative state not traditionally tilted toward burdening the energy industry, they did something no other state has done, before or since: They taxed it. In the four years since Wyoming began taxing power generated by wind turbines, it has collected a little less than $15 million in revenue. No, that is not much money in a resource state rocked by the simultaneous decline in the prices of coal, oil and natural gas, a state trying to close a budget gap that could reach $500 million. But now, as one of the world’s largest wind farms is about to begin construction here on a project aimed at providing clean electricity to nearly a million homes in California and the Southwest — potentially transforming this fossil fuel state into a major player in renewables — some powerful state lawmakers are looking to raise those taxes. And some in the wind industry, which has long benefited from incentives and subsidies, say they are worried. The company that has spent nine years trying to build the wind project says higher taxes could further delay or even halt the plan. “Just about every legislator we’ve met with asks us, ‘You tell us how much we can tax you before we put you out of business,’” said Bill Miller, chief executive of the Power Co. of Wyoming, which is planning the wind farm. “I just shake my head and say, ‘Zero.’

Turns out wind and solar have a secret friend: Natural gas -- We’re at a time of deeply ambitious plans for clean energy growth. Two of the U.S.’s largest states by population, California and New York, have both mandated that power companies get fully 50 percent of their electricity from renewable sources by the year 2030. Only, there’s a problem: Because of the particular nature of clean energy sources like solar and wind, you can’t simply add them to the grid in large volumes and think that’s the end of the story. Rather, because these sources of electricity generation are “intermittent” — solar fluctuates with weather and the daily cycle, wind fluctuates with the wind — there has to be some means of continuing to provide electricity even when they go dark. And the more renewables you have, the bigger this problem can be. Now, a new study suggests that at least so far, solving that problem has ironically involved more fossil fuels — and more particularly, installing a large number of fast-ramping natural gas plants, which can fill in quickly whenever renewable generation slips. The  In the study, the researchers took a broad look at the erection of wind, solar, and other renewable energy plants (not including large hydropower or biomass projects) across 26 countries that are members of an international council known as the Organisation for Economic Co-operation and Development over the period between the year 1990 and 2013. And they found a surprisingly tight relationship between renewables on the one hand, and gas on the other. “All other things equal, a 1% percent increase in the share of fast reacting fossil technologies is associated with a 0.88% percent increase in renewable generation capacity in the long term,” the study reports.

U.S. regulators unveil final rule on truck emissions limits | Reuters: U.S. regulators on Tuesday announced new standards aimed at cutting greenhouse gas emissions from medium- and heavy-duty trucks by up to 25 percent by 2027. The final rules issued by the U.S. Environmental Protection Agency tracked proposals issued last year, although there were new provisions that won support from truck and engine makers, as well as environmental groups. Medium- and heavy-duty vehicle and engine manufacturers were given until 2027 to fully achieve the new emissions targets. California regulators had argued for the standards taking effect in 2024. California also agreed its regulators will not issue separate requirements, while the state and environmentalists got about a 10 percent greater reduction in carbon emissions and fuel use under the final proposal than originally proposed. Truck and engine makers have developed new technology that promise to make more ambitious standards achievable, officials said. The deal on greenhouse gas limits for heavy commercial vehicles was struck after more than 400 meetings involving regulators, companies and environmental groups. It ultimately won the backing of California's Air Resources Board, truck and engine manufacturers and environmental groups.

Analysis: Aviation could consume a quarter of 1.5C carbon budget by 2050 - The aviation industry faces huge challenges if it is to meet its own self-imposed climate change targets, according to a new UN report. And even if it does meet all its targets, aviation will still have consumed 12% of the global carbon budget for 1.5C by 2050, Carbon Brief analysis shows. If it fails to reach this target, its share of this budget could rise to as much as 27%. The sector has an aspirational goal to cap its emissions at 2020 levels, so that any growth after this year is achieved in a “carbon neutral” way. This will not be easy. Airlines estimate that air travel will grow by an average of just under 5% per year up to 2034 — and the emissions from these extra air miles will be difficult to decarbonise. The International Civil Aviation Authority (ICAO), the UN body for flying, has set out the difficulties of cutting emissions in a growing sector in its 2016 Environmental Report, which is released every three years. The UN report forecasts the greenhouse gas emissions of the aviation sector out to 2050, and looks at how they could be reduced. The following chart shows the extent to which improvements to the aviation sector itself could help to cut emissions.

Chinese Airlines Wave Wads of Cash to Lure Foreign Pilots -  Chinese airlines need to hire almost 100 pilots a week for the next 20 years to meet skyrocketing travel demand. Facing a shortage of candidates at home, carriers are dangling lucrative pay packages at foreigners with cockpit experience. Giacomo Palombo, a former United Airlines pilot, said he’s being bombarded every week with offers to fly Airbus A320s in China. Regional carrier Qingdao Airlines promises as much as $318,000 a year. Sichuan Airlines, which flies to Canada and Australia, is pitching $302,000. Both airlines say they’ll also cover his income tax bill in China. Air traffic over China is set to almost quadruple in the next two decades, making it the world’s busiest market, according to Airbus Group SE. Startup carriers barely known abroad are paying about 50 percent more than what some senior captains earn at Delta Air Lines, and they’re giving recruiters from the U.S. to New Zealand free rein to fill their captains’ chairs.

Can today’s EVs make a dent in climate change? | MIT News: Could existing electric vehicles (EVs), despite their limited driving range, bring about a meaningful reduction in the greenhouse-gas emissions that are causing global climate change? Researchers at MIT have just completed the most comprehensive study yet to address this hotly debated question, and have reached a clear conclusion: Yes, they can. The study, which found that a wholesale replacement of conventional vehicles with electric ones is possible today and could play a significant role in meeting climate change mitigation goals, was published today in the journal Nature Energy by professor Jessika Trancik, et al. “Roughly 90 percent of the personal vehicles on the road daily could be replaced by a low-cost electric vehicle available on the market today, even if the cars can only charge overnight,” Trancik says, “which would more than meet near-term U.S. climate targets for personal vehicle travel.” Overall, when accounting for the emissions today from the power plants that provide the electricity, this would lead to an approximately 30 percent reduction in emissions from transportation. Deeper emissions cuts would be realized if power plants decarbonize over time.

What Will You Do When The Lights Go Out? The Inevitable Failure Of The US Grid  - When you hear about the possible insufficiency, unreliability, or lack of resiliency of the U.S. power grid, your mind might naturally move toward the extreme, perhaps National Geographic’s Doomsday Preppers. Talks about what a U.S. power grid failure could really mean are also often likened to survivalist blogs that speak of building faraday cages and hoarding food, or possibly some riveting blockbuster movie about a well-intentioned government-sponsored genetically altered mosquito that leads to some zombie apocalypse. But in the event of a power grid failure—and we have more than our fair share here in the U.S.—your survivalist savvy may be all for naught. This horror story doesn’t need zombies or genetically altered mosquitos in order to be scary. Using data from the United States Department of Energy, the International Business Times reported in 2014 that the United States suffers more blackouts than any other developed country in the world. Unfortunately, not much has been done since then to alleviate the system’s critical vulnerabilities. In theory, we all understand the wisdom about not putting all our eggs in one basket, as the old-adage goes. Yet the U.S. has done just that with our U.S. power grid. Sadly, this infrastructure is failing, and compared to many other countries, the U.S. is sauntering slowly behind many other more conscientious countries, seemingly unconcerned with its poor showing.

Scientists to probe ways of meeting tough global warming goal | Reuters: Scientists on Thursday set the outlines of a report on how to restrict global warming to a limit agreed last year by world leaders - even though the temperature threshold is at risk of being breached already. The U.N.-led study, due to be published in 2018 as a guide for governments, will look into ways of cutting greenhouse gas emissions to cap the rise at 1.5 degrees Celsius (2.7 Fahrenheit) above pre-industrial levels. It will examine impacts of a 1.5C rise on vulnerable parts of the world including Greenland's ice sheet and coral reefs. Thelma Krug, a Brazilian scientist who led the four-day meeting in Geneva, said it will also cast the fight against climate change as part of a wider struggle to end poverty and ensure sustainable growth. "Rapid changes are needed for (no rise above) 1.5C," she told Reuters. World leaders agreed to work towards that target at a meeting in Paris in December, also requesting the report as part of a global agreement to phase out greenhouse gas emissions, mainly from burning fossil fuels, in the second half the century. The global rise reached 1.3C in the first half of 2016, which is almost certain to be the warmest year since records began in the 19th century, beating 2015. Some studies indicate emissions could breach levels consistent with 1.5C within about five years. Many show temperatures overshooting that limit and then being reduced later by extracting greenhouse gases from the atmosphere with yet-to-be developed technology.

We Need to Literally Declare War on Climate Change – McKibben - In the North this summer, a devastating offensive is underway. Enemy forces have seized huge swaths of territory; with each passing week, another 22,000 square miles of Arctic ice disappears. Experts dispatched to the battlefield in July saw little cause for hope, especially since this siege is one of the oldest fronts in the war. “In 30 years, the area has shrunk approximately by half,” said a scientist who examined the onslaught. “There doesn’t seem anything able to stop this.” In the Pacific this spring, the enemy staged a daring breakout across thousands of miles of ocean, waging a full-scale assault on the region’s coral reefs. In a matter of months, long stretches of formations like the Great Barrier Reef—dating back past the start of human civilization and visible from space—were reduced to white bone-yards.Day after day, week after week, saboteurs behind our lines are unleashing a series of brilliant and overwhelming attacks. In the past few months alone, our foes have used a firestorm to force the total evacuation of a city of 90,000 in Canada, drought to ravage crops to the point where southern Africans are literally eating their seed corn, and floods to threaten the priceless repository of art in the Louvre. The enemy is even deploying biological weapons to spread psychological terror: The Zika virus, loaded like a bomb into a growing army of mosquitoes, has shrunk the heads of newborn babies across an entire continent; panicked health ministers in seven countries are now urging women not to get pregnant. And as in all conflicts, millions of refugees are fleeing the horrors of war, their numbers swelling daily as they’re forced to abandon their homes to escape famine and desolation and disease.World War III is well and truly underway. And we are losing.

Trump: Climate change won't be ‘devastating’ -- Republican presidential nominee Donald Trump said Thursday “there could be some impact” from a changing climate, “but I don’t believe it’s a devastating impact.” In an interview with The Miami Herald, Trump reiterated he’s “not a big believer in manmade climate change,” and while he acknowledged problems such as rising sea levels, he attributed them to “a change in weather patterns, and you’ve had it for many years.” “I would say it goes up, it goes down, and I think it’s very much like this over the years,” he said. “We’ll see what happens. I mean, we’ll see what happens. ... Certainly, climate has changed.” Trump has long said he doesn’t believe in the science behind climate change, even though there is broad agreement among researchers that human activity has contributed to the phenomenon.  Florida is expected to struggle with rising sea levels induced by climate change, and Miami recently undertook a $500 million push to prepare for it.  Asked about that effort, Trump said, “That’s probably not the worst thing I’ve ever heard.” But he said local governments should take the lead in preparing for climate change, not federal officials who have looked to regulate the underlying causes of it.

Prominent global warming doubter says there was a “hit list” apparently targeting climate scientists -- In a comment on an August 3rd post at the Wattsupwiththat website, Patrick J. Michaels of the conservative Cato Institute said that there has been a “hit list” apparently targeting climate scientists, and that he had influence over who was on it.At this point, it is unclear exactly what this list was about. But from what Michaels said, it looks like it consisted of scientists being targeted for termination from their jobs. Considering the salience of global warming in the presidential election, and the unsettling nature of these comments, I decided to depart from my usual coverage of the science of our planet here at ImaGeo and try to shine a light on this. Michaels, past president of the American Association of State Climatologists, and current Director of Cato’s Center for the Study of Science, is one of the most highly quoted doubters of mainstream science on climate change.  The post by Anthony Watts at the Wattsupwiththat website did little more than reproduce a copy of the press release announcing that Thomas Karl, director of the National Centers for Environmental Information, was retiring.. Then, on Aug. 4th, Michaels wrote his response in the comments section of the post. Rhetorically addressing Karl, Michaels said.  I saved your job in 2000. You were on a hit list and I had you taken off because I thought you were a straight shooter. Seven months later what is detailed above happened. Click on the image at right to see a screenshot of Michaels’ entire comment, including what he says convinced him that Karl was not a “straight shooter.” In those comments, Michaels alleges that Thomas Karl engaged in unethical scientific behavior.

If the US took its climate goals seriously, coal beneath federal land would stay there - In January, Interior Secretary Sally Jewell put an immediate moratorium on all new leasing of coal from federal land.Coal from public land represents about 40 percent of US coal supply, but critics have long charged that it’s being leased to private developers for too cheap, at a rate that does not account for its current market price or its impact on climate change. The "programmatic review" is intended, in part, to make sure taxpayers get their money’s worth.The public comment period on the review has just ended. As expected, environmentalists flooded the Department of the Interior with hundreds of thousands of comments supporting the moratorium; the usual suspects (Republicans and the coal industry) are opposed.We’ll have to wait to see what the results of the review are — a draft report is expected later this year, with another opportunity for public comment — but in the meantime, it’s worth taking a step back and asking a simple question. The US, along with the other major nations of the world, has agreed to a simple climate target: Restrain global average temperature rise to no more than 2 degrees Celsius above preindustrial levels. So here’s our simple question: What would it mean for coal on public land? How much coal could the feds lease if they were serious about the 2 degree target?Green billionaire Tom Steyer’s climate advocacy group, NextGen Climate America, got curious about this, so it asked research outfit Carbon Tracker to look into it. The resulting report was just released. The answer to the simple question? None. Zilch. Zero.

US CO2 Emissions From Natural Gas Will Top Coal in 2016 | Greentech Media: A steady drumbeat of new natural-gas plants have replaced coal as the dominant source of electricity generation in the U.S.  At the beginning of 2016, America’s coal production fell to its lowest level in 30 years. The march away from coal is cheered by those who would like to see the U.S., and the world, move to a lower-carbon economy. But the increasingly heavy reliance on natural gas has exacted a toll. The energy-associated carbon dioxide emissions from natural gas are expected to top the CO2 emissions from coal for the first time more than 40 years, according to the U.S. Energy Information Administration. Source: U.S. Energy Information Administration Coal’s carbon intensity is about 82 percent higher than natural gas’ carbon intensity. But natural gas is used not only in electricity but also for heating. Last year, natural gas consumption for energy was 81 percent higher than coal consumption, bringing their CO2 emissions to a nearly equal footing.  Despite the rise in natural-gas carbon emissions, overall carbon intensity in the U.S. has been falling overall in recent years. But that cannot be attributed entirely to the switch from natural gas to coal. Instead, the increasing mix of renewables, primarily wind and solar, has also been key to pushing the country’s carbon intensity to lower levels.

35% of India’s total thermal power capacity lying unused: More than a third of India's 303 gigawatt thermal power capacity is lying unused while the rest is running at a shade over 55% utilisation owing to inadequate demand. Analysts said utilisation is expected to fall further if more capacity is added as planned by the government, portending losses for power firms. About 35% of the total capacity, or 104 gigawatt, is lying idle at present. The government added about 24,000 mw of fresh conventional capacity last year and plans to add 86 gigawatt by 2022. In addition, 100 gigawatt of solar capacity is to be added by 2022. "Falling capacity utilisation translates into losses and inability of new power plants to service interest costs, leading to non-performing assets at banks," said a senior analyst, who did not wish to be identified. The list of shut units includes a chunk of 31gigawatt capacity that was set up after 2009. These include 6,360 mw capacity that does have power supply contracts with distribution companies but is lying shut due to non-availability of coal. Another 5,650 mw have neither coal nor power supply contracts with any distribution company. The next set of 9,316 mw have coal supply contracts but does not have power supply agreements. Yet another set of 2,940 mw have letter of coal supply assurance from Coal India and has managed to sign power purchase agreements but has not been receiving coal from the state-run miner. The last set includes 3,300 mw of plants that do not have power purchase agreements and despite Coal India's assurance of supplies, have not been receiving coal. "While plants are shut due to unavailability of coal, Coal India is saddled with some 45 million tonnes of coal as of July 31. Its stock position has reached a level where the company is being forced to scale down productions, yet power plants are not receiving coal because the government is yet to change a policy that was framed when coal was in short supply,"

Coal Burning Causes the Most Air Pollution Deaths in China, Study Finds - — Burning coal has the worst health impact of any source of air pollution in China and caused 366,000 premature deaths in 2013, Chinese and American researchers said on Thursday. Coal is responsible for about 40 percent of the deadly fine particulate matter known as PM 2.5 in China’s atmosphere, according to a study the researchers released in Beijing. Those figures are consistent with what Chinese scientists have been saying in recent years about industrial coal burning and its relation to air pollution. The study, which was peer-reviewed, grew out of a collaboration between Tsinghua University in Beijing, one of China’s top research universities, and the Health Effects Institute, based in Boston, based in Boston, a research center that receives funding from the United States Environmental Protection Agency and the worldwide motor vehicle industry. The researchers’ primary aim was to identify the main sources of air pollution leading to premature deaths in China.The study attributed 155,000 deaths in 2013 related to ambient PM 2.5 to industrial coal burning, and 86,500 deaths to coal burning at power plants. Fuel combustion of both coal and biomass in households was another major cause of disease that year, resulting in 177,000 deaths, the study concluded. The researchers also found that transportation was a major cause of mortality related to PM 2.5, with 137,000 deaths attributed to it in 2013. In recent years, Chinese scientists have said that motor vehicle emissions are a leading source of air pollution in cities, although not as great as coal burning. Vehicle ownership is rising fast in China, and officials, carmakers, and oil and gas companies have quarreled over setting emissions standards. China consumes almost as much coal annually as all other countries combined, and coal burning in the country is the biggest source of both air pollution and greenhouse gas emissions, the leading cause of climate change.

 India air pollution death rate to outpace China - researcher | Reuters: The increase in people dying in India from air pollution will outpace the rate of such deaths in China, as India drags its heels over environmental rules while opening more coal mines, the head of a U.S. research group said on Thursday. "India's situation is getting worse at a much faster speed than China," Dan Greenbaum, president of Boston-based Health Effects Institute (HEI), told Reuters in Beijing. "It is definitely the case because India has not taken as much action on air pollution." HEI and a group of Chinese and Indian universities recently said that over half of world's air pollution-related deaths were in China and India. In China, coal-fired plants have been the worst source of pollution. But India has lagged behind in implementing stringent environment policies for coal emission. From now until 2020, China aims to cut coal output by 500 million tonnes, or about 19 percent of its current annual output, and reduce emission of major pollutants in the power sector by 60 percent. By contrast, India has just only launched an emission standard for coal-fired power plants this year. India is also ramping up coal production as Prime Minister Narendra Modi races to meet election promises to provide electricity to a population of 1.3 billion.

Peabody gets U.S. court approval for clean-up deals, executive bonuses | Reuters: Bankrupt coal company Peabody Energy won U.S. court approval on Wednesday for agreements with three states to partially cover $1.14 billion in potential environmental liabilities and for a bonus plan for its six top executives. Under the agreements, Wyoming can receive $127 million in cash if Peabody walks away from its mine cleanup obligations in the state while in bankruptcy, while New Mexico would receive $32 million and Indiana would get $17 million. Until now those liabilities were covered by a federal program known as self-bonding. It allows the largest miners to extract coal without setting aside cash or collateral. The program is currently under review. Peabody's agreements with Wyoming, New Mexico and Indiana are similar to deals reached by bankrupt coal miners Arch Coal and Alpha Natural Resources on self-bonds in Wyoming and West Virginia. Peabody also overcame objections by funds affiliated with the United Mine Workers of America to its executive bonus plan. The plan and another incentive plan for non-insider employees proposed setting aside up to $16.2 million in bonuses. Peabody's executive leadership team would be eligible for the bonuses if they hit performance targets through the end of next year.

Climate Guru Tells Calif. Governor Not To Close Diablo Canyon Nuclear Plant -- On Thursday,a letter to Governor Jerry Brown of California, about how nuclear energy was essential to fighting global warming, was sent by Dr. James Hansen and the leading climate scientists in the world, plus a long list of environmentalists.  The letter was prompted by a recent announcement by Pacific Gas & Electric Company to close its well-running, low-carbon, low-cost nuclear reactors at Diablo Canyon because of political pressure from the state of California and especially its Lt. Governor.  The widespread claim—that dozens of nuclear plants merit subsidies to protect the earth’s climate—has been borne out by reality. At the same time, tax subsidies for renewables, plus low natural gas prices, are making reactors uneconomic in the short term.  But, strangely, California doesn’t seem impressed by the threat of global warming, even after the state’s carbon emissions jumped when the San Onofre nuclear plant closed from a combination of technical and political reasons. That carbon-free electricity was replaced by natural gas and costly out-of-state purchases. Similarly, if Diablo Canyon closes, its almost 18 billion kWhs per year, the largest and lowest-carbon electricity generation in California, will be replaced by less than 2 billion kWhs per year of similarly-low-carbon renewables, less than 2 billion kWhs per year from efficiency, and over 10 billion kWhs per year from high-carbon natural gas and more out-of-state purchases. California would have little hope of achieving its emissions goals by 2030.  Hence, the following letter from Dr. James Hansen to Governor Jerry Brown (full letter here):

Nuclear power plant? Or storage dump for hot radioactive waste? | Bulletin of the Atomic Scientists: In addition to generating electricity, US nuclear power plants are now major radioactive waste management operations, storing concentrations of radioactivity that dwarf those generated by the country's nuclear weapons program. Because the proposed Yucca Mountain nuclear waste repository remains in limbo, and other permanent storage plans are in their infancy, these wastes are likely to remain in interim storage at commercial reactor sites for the indefinite future. This reality raises one issue of particular concern—how to store the high-burnup nuclear fuel used by most US utilities. An Energy Department expert panel has raised questions that suggest neither government regulators nor the utilities operating commercial nuclear power plants understand the potential impact of used high-burnup fuel on storage and transport of used nuclear fuel, and, ultimately, on the cost of nuclear waste management. Spent nuclear power fuel accumulated over the past 50 years is bound up in more than 241,000 long rectangular assemblies containing tens of millions of fuel rods. The rods, in turn, contain trillions of small, irradiated uranium pellets. After bombardment with neutrons in the reactor core, about 5 to 6 percent of the pellets are converted to a myriad of radioactive elements with half-lives ranging from seconds to millions of years. Standing within a meter of a typical spent nuclear fuel assembly guarantees a lethal radiation dose in minutes. Heat from the radioactive decay in spent nuclear fuel is also a principal safety concern. Several hours after a full reactor core is offloaded, it can initially give off enough heat from radioactive decay to match the energy capacity of a steel mill furnace. This is hot enough to melt and ignite the fuel’s reactive zirconium cladding and destabilize a geological disposal site it is placed in. By 100 years, decay heat and radioactivity drop substantially but still remain dangerous.

Russia interested in Saudi reactor plans: Russia says it is interested in Saudi plans to build 16 nuclear reactors as part of the kingdom’s purported aspirations to develop civilian nuclear technologies. Saudi Arabia says it will construct the reactors over the next 20 years at a cost of more than $80 billion, with the first reactor expected to come online in 2022. "We support the Saudi Arabian initiative aimed at the use of the civilian nuclear power sector,” Russian Energy Minister Alexander Novak said in an interview with the leading pan-Arab newspaper Asharq al-Awsat on Monday. “The ambitions of the Saudi government speak for themselves: The kingdom plans to build 16 nuclear reactors in 25 years. They will produce 20 percent of required electric power," Novak said. Novak said Saudi Arabia has no nuclear power infrastructure that makes the project challenging, adding Russia “has rich experience in developing such a base.” Russia helped Iran bring the first nuclear power plant in the Persian Gulf online in 2011. The two countries plan to build two more nuclear reactors in Bushehr as part of a broader deal for up to eight reactors in Iran. Saudi Arabia, however, is one of the staunchest opponents of Iran’s nuclear energy program, having stepped up its hostility after Tehran worked out a nuclear agreement with the West and other countries in July.

Russian nuclear bunkers: Is Putin building more? -  RUSSIA is reportedly building several nuclear command bunkers as the powerhouse looks to step up modernising its military and strategic forces. Construction has been under way for several years on dozens of the bunkers across Russia, The Washington Free Beacon reports, citing US intelligence sources. According to the conservative political site, the emergence of the bunkers come just days after US European Command warned that Moscow has adopted an “alarming” nuclear doctrine. Commander of US European Command Army General Curtis Scaparrotti said it was clear Russia was modernising its strategic forces. “Russian doctrine states that tactical nuclear weapons may be used in a conventional response scenario,” he reportedly said. Russia is modernising its military and strategic forces. “This is alarming and it underscores why our country’s nuclear forces and NATO’s continues to be a vital component of our deterrence.” Former Pentagon nuclear policy official Mark Schneider said Russia’s new national security policy discusses defending its citizens from a nuclear attack, and believed such a move showed the country was preparing for nuclear war.

The US Air Force wants to detonate plasma bombs in the sky - Radio communication is a weak point for most military operations — it is often not long enough or strong enough to adequately meet soldiers’ needs. The U.S. Air Force’s “go big or go home” solution to improve their long-distance calls? Supercharge the atmosphere by detonating aerial plasma bombs attached to tiny satellites, reports New Scientist. The Air Force is asking for help in developing plasma bombs, which would be delivered to the atmosphere by tiny cube satellites and then detonated to release ions upon arrival.The Air Force is working with several research teams, each of which is tasked with coming up with their own design for the plasma bombs. The first stage of the project is theoretical, requiring researchers to come up with an atmospheric plasma delivery method. Selected researchers then will be invited to test their proposal in a vacuum chamber simulator and eventually on exploratory flights. One team, comprised of researchers from Drexel University and General Sciences, is developing a controlled bomb that uses a chemical reaction to heat a piece of metal beyond its boiling point. Once vaporized, the metal will react with atmospheric oxygen to create the ionized plasma. Another proposal under development by researchers from the University of Maryland and Enig Associates also uses vaporized metals to supercharge the atmosphere. This proposal is much more explosive, though, using mini-detonations to heat pieces of metal rapidly, causing them to vaporize.

US Nuclear Bombs In Turkey At Risk Of "Seizure By Terrorists Or Other Hostile Forces" -- In early August, we reported that in the latest effort to spend the US defense budget the Pentagon was preparing to upgrade the US nuclear bomb arsenal, at a cost that had been estimated to range between $355 billion an up to $1 trillion. On Monday, a US-based think tank, The Stimson Center, responded to this proposal when it released a report titled "B61 Life Extension Program: Costs and Policy Considerations" which slammed the planned upgrades to the U.S. tactical nuclear bomb program as an “egregious” waste of money and said deployment overseas is risky. The report added that Washington could make Europe safer by withdrawing the nuclear bombs from bases in foreign nations, particularly envisioning recent events in Turkey and specifically the 50 or more US B61 nuclear bombs held at Incirlik air base. As a reminder, in the aftermath of the July 15 failed coup, Turkish authorities blocked the Incirlik base off completely, cutting the facility’s electric power and prohibiting any aircraft from flying in or out of the airfield. “The continued presence of these weapons at five sites in Europe, particularly in Turkey, raises serious risks of their seizure by terrorists or other hostile forces,” the report said.

US moves nuclear weapons from Turkey to Romania – Two independent sources told that the US has started transferring nuclear weapons stationed in Turkey to Romania, against the background of worsening relations between Washington and Ankara. According to one of the sources, the transfer has been very challenging in technical and political terms. “It’s not easy to move 20+ nukes,” said the source, on conditions of anonymity. According to a recent report by the Simson Center, since the Cold War, some 50 US tactical nuclear weapons have been stationed at Turkey’s Incirlik air base, approximately 100 kilometres from the Syrian border. During the failed coup in Turkey in July, Incirlik’s power was cut, and the Turkish government prohibited US aircraft from flying in or out. Eventually, the base commander was arrested and implicated in the coup. Whether the US could have maintained control of the weapons in the event of a protracted civil conflict in Turkey is an unanswerable question, the report says.

The nuclear mission must stay manned --Bulletin of the Atomic Scientists --A lot of things can and should be automated—but nuclear bombers are not one of them. Unfortunately, it’s not clear that Moscow agrees. Reports surfaced in July that Russia has begun development of a hypersonic nuclear bomber that can deliver nuclear strikes from outer space. Unnamed officials quoted in the semi-official Russian news organ Pravda say that the bomber will have an unmanned variant. Their statement has not been confirmed, but the idea that Russia would pursue an unmanned nuclear bomber is not new. The commander of Russia’s long-range aviation fleet, Lt. Gen. Anatoly Zhikharev, stated in 2012 that Russia was considering developing a “pilotless” sixth-generation nuclear bomber. While it’s too soon to know for sure whether or not the new Russian bomber will be unmanned, it’s apparent that Russian military officials have been considering that option for some time. And Russian policymakers have made no public promises that the nuclear mission would only be carried out by a manned version of the bomber. This development is deeply concerning. Deploying a highly autonomous unmanned nuclear bomber would significantly raise the risk of inadvertent or uncontrolled nuclear war. As the world prepares for war in the robotic age, the United States must take steps to ensure that the nuclear mission remains manned.

Husted nixes anti-fracking charter; group will appeal - A group proposing to turn Athens County into a charter form of government is taking the issue to the Ohio Supreme Court for a second year in a row after being rejected by the local elections board and the Ohio Secretary of State for the November ballot, also both for the second year in a row. The Athens County Board of Elections voted unanimously in July to reject the anti-oil and gas fracking charter proposal from the Athens County Bill of Rights Committee (ACBORC). Last year, the ACBORC appealed that decision to Athens County Common Pleas Court, and a local judge OKed the proposal for the November ballot. But then a private citizen appealed that decision to the Ohio Secretary of State, who knocked the proposal off the ballot. Finally, the matter ended up in the hands of the Ohio Supreme Court, which ruled that the Athens County proposal couldn’t go on the ballot, not because of home-rule provisions conflicting with the state law giving oil-and-gas regulatory supremacy to the ODNR, but because the proposal for the “charter” itself was not sufficiently complete or explained. This year, the ACBORC protested the elections board decision directly to Ohio Secretary of State Jon Husted, and on Monday he issued a decision rejecting the Athens County proposal along with similar proposals for Meigs and Portage counties. In his decision, Husted recognized that petitioners for each of the proposals had gathered and submitted enough valid signatures for the ballot, but focused his decision on the validity or invalidity of the petitions. Husted pointed to Article X, Section 3, of the Ohio Constitution requiring “all powers” and “all duties” be spelled out in a charter government proposal, calling it a “bedrock provision” and a “foundational prerequisite” for such proposals.

Appeals court upholds lower court ruling in injection well case - An appeals court has ruled against the Athens County Fracking Action Network in a case involving an injection well in Troy Twp. In a decision filed Tuesday, the 10th District Court of Appeals upheld a decision from Franklin County Common Pleas Court that sided with the Ohio Division of Oil and Gas Resources Management and K&H Partners, the company that developed the injection well. The issue in the case was whether the Ohio Oil and Gas Commission had jurisdiction to hear ACFAN’s challenge of a permit the state issued in 2013 for the company’s second well in Troy Twp. After the permit was issued, the Athens County Fracking Action Network took the matter to the commission in an effort to overturn the permit, however the commission agreed with the division and K&H Partners that the permit was a drilling permit, not an injection permit, and therefore the commission lacked jurisdiction to hear the matter.That decision was appealed by ACFAN to Franklin County Common Pleas Court, where Judge Patrick Sheeran agreed that the permit ACFAN appealed was a drilling permit over which the commission lacked jurisdiction. He said the commission only has powers given it by the General Assembly, and the legislature has not given authority for the commission to hear drilling permit cases. Injection permits, but not drilling permits, are appealable to the commission. ACFAN appealed Sheeran’s ruling, arguing that the permit issued in 2013 was, in fact, an injection well permit under the Ohio administrative code that provides for one permit for both drilling and injection. The 10th District Court of Appeals disagreed.

Crews clean up 6-mile spill; liquid used in Harrison County fracking - FREEPORT State and local officials were on the scene for about eight hours Monday cleaning up a spill from a tanker truck hauling water from a well site. The liquid is known as production water and is used in the oil and natural gas industry, said Eric Wilson, director of the Harrison County Emergency Management Agency. It is a byproduct of the drilling process. Production water contains a mixture of chemicals, mostly brine, as well as some hydrocarbons. It has a smell like diesel, he said. The tanker truck was hauling the production water from a well in Moorefield Township to a waste disposal area, he said. Wilson said he was notified of the spill at 4:42 a.m. The truck leaked the water on McElhaney Road and Scott Hill Road in Moorefield Township. The truck then turned onto state Route 799, which runs south of Clendening Lake, and on state Route 800. The leak was spread over a distance of 6 miles. The leak was caused either by a valve malfunction or an open valve. The tanker leaked a total of 160 gallons of production water. Wilson said the driver stopped the truck in Freeport and corrected the problem, because no water was found beyond the village. Firefighters from Freeport, Washington Township and Moorefield Township handled containment of the leak, he said.

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 Biological Diversity, 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.

Activists critical of federal hearing on PennEast pipeline -- Though scores of people lined up Tuesday afternoon to let the Federal Energy Regulatory Commission (FERC) know why they don't want the PennEast natural gas pipeline in Hunterdon County, environmental activists directed their ire toward FERC for changing its hearing procedures. At an earlier FERC hearing on the project at the Grand Colonial in Union (Union), speakers came to a microphone for hours to voice their opposition to the pipeline that would carry 1 billion cubic feet of natural gas each day 115 miles from near Hazleton, Pennsylvania, to another pipeline in Mercer County. The proposal has the pipeline entering Hunterdon County north of Milford and then paralleling the Delaware River before crossing into Mercer County southeast of Lambertville. But at Monday's FERC hearing at the Holiday Inn, those who wanted to speak about the pipeline were directed to stenographers and had three minutes to make a statement. "FERC has once again demonstrated its tremendous bias for, and partnership with, the pipeline industry, " said Maya van Rossum, leader of the Delaware Riverkeeper Network. "Recognizing that public hearings which allowed the public to hear one another testify was a valuable source of community education and mutual support, FERC is now forcing people to give their testimony in secret, with only a transcriber to hear their words." Van Rossum said the hearings have become a "mere diversion" and force residents "to struggle to craft three minutes of testimony that is meaningful and makes sense." FERC's timeline for input on the 1,524-page draft environmental impact statement gave residents less than a month to give comments. The report, issued in late July, immediately drew fire from critics because it concluded the pipeline's impact would be at "less-than-significant levels" with the implementation of PennEast's and FERC's proposed mitigation measures. "FERC needs to remember it works for the people of the United States not PennEast," said David Pringle, New Jersey campaign director for Clean Water Action.

PennEast critics accuse FERC of trying to control public comment  - Opponents of a plan to build a natural gas pipeline from northeastern Pennsylvania to central New Jersey registered their objections with federal regulators on Monday, and accused officials of trying to control public discussion on the controversial project. Participants were not allowed to hear each other’s testimony, nor were reporters granted access. Nevertheless, around 50 people expressed their views on a draft Environmental Impact Statement (EIS) for the proposed PennEast pipeline, published by the Federal Energy Regulatory Commission in July.Testimonies, lasting three to five minutes each, were delivered one-on-one to FERC officials sitting behind a line of black curtains at Penn’s Peak, a concert venue outside the town of Jim Thorpe, PA, near the pipeline route. A stenographer recorded the remarks but the officials did not respond to people’s comments, participants said. Mark Zakutansky, mid-Atlantic policy manager for the Appalachian Mountain Club, said the meeting’s format deprived participants of the right to hear each others’ views, which they would have had in a traditional public meeting. “These meetings have traditionally taken place in a more public format where people can hear other citizen comments,” Zakutansky said. “The more private nature of this meeting is not exactly what we had in mind; we feel the public has a right to hear each other’s testimony.”

 Too Much Pipe On My Hands? - Marcellus/Utica Takeaway Capacity to the Southeast - Of the 18 Bcf/d of incremental pipeline takeaway capacity out of the Marcellus/Utica that is due to come online over the next few years, nearly one-third is heading to demand markets in the Southeast via the Atlantic Coast states. The southeastern U.S is a fast-growing region, and its residents and businesses are becoming increasingly dependent on gas-fired power generation –– a real boon to Northeast gas producers. Today, we continue our look at how pipeline takeaway capacity will stack up against Northeast production over the next several years, this time with a focus on projects that will move gas to the Southeast. The central question in this series is whether, after years of capacity constraints, midstream companies might over-estimate the need for natural gas takeaway capacity out of the Marcellus/Utica, and simply build too many pipeline projects. To assess that, we started in Part 1 by looking at the Northeast production outlook and prospects for supply growth under three commodity price scenarios. We found that even the low price, low production scenario will mean at least some growth for Northeast supply due to the robust producer economics in some parts of the Marcellus/Utica. In Part 2, we began our look at the takeaway capacity side of things, starting with the East corridor. Of the 24 projects RBN is tracking in its Midstream Infrastructure Database Interface (MIDI), six projects totaling 3.3 Bcf/d are headed to the East (New England and Mid-Atlantic states); two projects of 0.65 Bcf/d combined to Canada; four projects of 4.3 Bcf/d to the Midwest via Ohio; eight projects totaling 4.5 Bcf/d to the Gulf Coast via Ohio; and four projects with 5.2 Bcf/d to the Southeast along the Atlantic Coast (see Figure 1 in Part 2). We also took a closer look at the six projects (3.3 Bcf/d) gunning for takeaway capacity out of the Marcellus/Utica to the New England and Mid-Atlantic states (the East corridor), with the majority of that capacity ramping up after 2017. However, as we noted, pipeline development to the heavily populated East Coast markets is especially fraught with public opposition and regulatory challenges that could cause delays or cancellations. We also noted that natural gas demand in New England and the Mid-Atlantic region is highly seasonal — modest during the off-peak summer season and high during cold winter months when demand from space heating kicks in. Those incremental takeaway flows will also depend on demand growth within the region. With all that in mind, in Part 3 we turned our attention to takeaway projects that will allow Northeast supply to seek out demand markets outside the region, starting with the four projects in the Midwest takeaway corridor. Next, in today’s blog, we look at each of the projects that will move Marcellus/Utica gas to the Southeast.

EPA’s Own Advisory Board Demands Revision of Deeply Flawed Fracking Report -- The Environmental Protection Agency's (EPA) Science Advisory Board, a panel of independent scientists, is calling on the agency to revise last year's much-maligned report that declared fracking to have "no widespread, systemic impacts on drinking water resources."  As the Washington Post reports: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 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, the conclusion can be defended.Environmentalists lauded the advisory panel's comments [pdf]. Lena Moffitt, director of the Sierra Club's Dirty Fuels Initiative, responded in a press statement:The Sierra Club is pleased to see the EPA's Science Advisory Board called out the agency's conclusion that there is no 'widespread, systemic' evidence that fracking contaminates drinking water for what it is: not supported by scientific facts. The EPA's own analysis shows that dirty oil and gas fracking contaminates drinking water, confirming what millions of Americans already know.

EPA Fracking Report Needs Some Big Revisions, Says Science Advisory Board: ― The Environmental Protection Agency’s Science Advisory Board released a review of a major agency report on hydraulic fracturing’s potential impacts on groundwater, and it took to task the way the report’s findings were framed. Hydraulic fracturing, or fracking, is a process used to extract oil and gas from rock formations using a high-pressure stream of water, sand and chemicals. The EPA’s draft report, which was released in June 2015, found “specific instances” of groundwater contamination from fracked oil and natural gas wells or wastewater disposal sites, but the agency concluded that there are no “widespread, systemic impacts on drinking water resources.” But the EPA’s Science Advisory Board, an independent body that exists to review the agency’s research programs and provide the administrator with advice, said in a letter to Administrator Gina McCarthy Thursday that it has concerns about the “clarity and adequacy of support” for several of the report’s major findings.The SAB is concerned that these major findings as presented within the Executive Summary are ambiguous and appear inconsistent with the observations, data, and levels of uncertainty presented and discussed in the body of the draft Assessment Report. Of particular concern in this regard is the high level conclusion statement on page ES-6 that “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.” The SAB finds that the EPA did not support quantitatively its conclusion about lack of evidence for widespread, systemic impacts of hydraulic fracturing on drinking water resources, and did not clearly describe the system(s) of interest (e.g., groundwater, surface water), the scale of impacts (i.e., local or regional), nor the definitions of “systemic” and “widespread.”

 Industry advocate downplays report that reignited fracking debate -  A drilling industry advocacy group on Monday downplayed a report released last week by a scientific panel that called into question a major finding that the Environmental Protection Agency had published more than a year ago concerning the lack of evidence that hydraulic fracturing has had any negative impact on drinking water supplies. On Thursday, the EPA Science Advisory Board (SAB) said the EPA had failed to provide sufficient documentation to back up its assertion that the agency had found no evidence that fracking had led to "widespread, systemic impacts on drinking water resources in the United States." The conclusion came in a 180-page report on the EPA's June 2015 draft assessment on the potential impacts of fracking on drinking water. In an email Monday, Katie Brown, a spokeswoman for pro-drilling industry group Energy In Depth, said the SAB report does not refute the EPA's original finding."The panel does not ask EPA to modify or eliminate its topline finding of 'no widespread, systemic impacts' to groundwater from fracking -- it asks EPA to provide more details or a 'quantitative analysis' of how the agency came to that conclusion," she said. Oil and gas industry advocates had seized the EPA's initial finding as proof of the industry's long-held contention that there have been no documented cases connecting underground drinking water sources to nearby fracking operations. Brown said numerous other studies on the subject support EPA's year-old conclusion.

NYC Stands Against Fracking Waste Used to Melt Ice on Roads: Wastewater from hydraulic fracturing (also known as fracking) has been spread over some New York State roads to melt ice in the winter and to control dust in the summer. It has also entered the state’s wastewater treatment facilities and landfills, which critics—including State Senator Brad Hoylman—say are not equipped to process it. On Aug. 16, New York City Council voted in favor of Intro 446-A, sponsored by Councilmember Stephen Levin, which would ban fracking waste from the city. Mayor Bill de Blasio now has 30 days to sign it into law. The city is the first municipality in the country to impose such a ban, though some New York counties have taken similar measures to keep out fracking waste, since state and federal laws have allowed its dissemination.  Although New York State has banned high-volume fracking (which typically uses 300,000 gallons or more), low-volume fracking continues and waste from these operations remains. Waste has also entered New York from surrounding states. Pennsylvania has prohibited its treatment plants from accepting the waste, and it has sent some 26,000 barrels of liquid waste to New York, according to a report by Environmental Advocates of New York. Some of the concerning materials in the waste include naturally occurring radioactive materials (NORMs) and carcinogens like benzene.

 Fracking Wastewater Ban Moves Forward in NYC · Using fracking wastewater to de-ice roads in New York City will likely soon be illegal, following a City Council vote to ban the practice. The bill now goes to Bill de Blasio. RT reports that sponsors of the bill are confident that de Blasio will sign it into law. Fracking wastewater has a high brine content, which makes it useful in salinating roads icy roads. The waste also contains benzene, which the EPA says is a human carcinogen. Under the bill, the city could issue fines as high as $25,000 for noncompliance. It would ban the use all forms of oil and natural gas waste, including that from oil and natural gas storage. New York State banned fracking in 2015, following a seven-year study that raised public health and environmental concerns. But, as RT reports, it does permit the use of conventional vertical techniques for oil and gas extraction, which creates wastewater, and the New York State Department of Environmental Conservation permits the use of wastewater for road treatment. Additionally, fracking is legal in bordering state Pennsylvania. The bill’s author, Brooklyn City Councilman Stephen Levin (D), told RT that disposing of fracking waste has been challenging for oil and gas companies. “One [method] that has been applied is using it for salivating roads, de-icing roads. That’s a significant danger because there are plenty of times, when it is a particularly bad winter, there can be shortages of salt, we don’t want there ever to be an opportunity for any of this material to get into that supply of salt on our streets,” Levin said.

 Court: Ratepayers can't be asked to finance natural gas pipelines (AP) — The highest court in Massachusetts is blocking electric utilities from passing on to ratepayers the costs of building new natural gas pipelines. The Supreme Judicial Court in its unanimous decision on Wednesday said state regulators made a mistake in approving the tariffs and authorizing utilities to sign long-term contracts for natural gas generating capacity. The decision was cheered by environmental groups including the Conservation Law Foundation, which filed suit to stop what it dubbed a “pipeline tax” on consumers. There was no immediate comment from Republican Gov. Charlie Baker’s administration, which pushed for the tariffs as a means of increasing the availability of natural gas to the region. The justices said passing those costs on to ratepayers would violate the intent of laws previously passed by the Legislature.

 "A Bridge to Nowhere": A Vision of Fracking Future in the US: To understand just how deeply our lawmakers have drunk the Kool-Aid brewed by industry groups like the American Petroleum Institute, look no further than Colorado and Virginia, two states with Democratic governors who have pretty much sold out their contituents to the oil and gas industry. John Hickenlooper and Terry McAuliffe have pushed natural gas as a "bridge fuel" so hard, they are paraded by industry (and booed by activists) as poster boys for fracking. If McAuliffe has his way, his Virginia may soon be home to two gigantic pipelines transporting fracked natural gas across the state, seizing a 900-mile corridor from Virginians and potentially doubling his state's current emissions through methane leakage alone. And Hickenlooper's Colorado has virtually been bought by the oil and gas industry; it is one of the most fracked states in the country.  As I write this, Coloradans are fighting to get initiatives on the November ballot that will allow local communities to have a say in whether they have fracking wells in their backyards or not. You might expect this kind of behavior from Republicans. But the fact is, both major US political parties are into natural gas right now. Yes, Democrats on the national stage seem to still be working out their feelings, but when you actually stop to look at the state level, natural gas is rapidly replacing coal as the source of this nation's electricity. As such, it is touted as the bridge between a dirty fossil fuel based energy system and the clean energy future, which implies that natural gas is some kind of semi-clean middle ground. The thing is, that's completely false.

Why Money in Politics Means More Fracking: A Cautionary Tale From North Carolina- North Carolina's Governor McCrory, a former Duke Employee of 28 years, has been a vocal advocate of natural gas expansion and fossil fuel extraction. He supported legislation that would legalize hydraulic fracturing (fracking) as well as legislation that eases the approval process for Duke Energy to build new gas plants. In addition, he has strong ties to groups working for the expansion of the gas industry: Duke Energy, Americans for Prosperity, Outer Continental Shelf Governors Coalitions, and Moore & VanAllen. If the connections weren't close enough, the Moore & Van Allen law firm is currently representing Duke and Piedmont in the Duke and Piedmont merger proceedings. This consolidation of power power by the state's energy monopoly would lead to more fracking and fossil fuel expansion in the state. Community members staged a wedding themed protest showing how unifying the entities would also increase the close connections between the McCrory Administration and utility interests. With the symbolic breaking apart of the mock "monopoly marriage" constituents and ratepayers issued the demand for energy choice and democratic governance. Over the last few years, we have seen a rapid expansion of this monopoly power's influence correlated with the expansion of more fossil fuels. We're seeing a national trend of investor owned utilities buying gas companies. From the Mountain West to the Southeast, utility companies are rapidly trying to gobble up as many as they can. In North Carolina, the proposed merger would not only consolidate the customer base of two utilities but also their political clout. Duke Energy is among the top campaign contributors in North Carolina, having spent more than $200,000 on legislative political campaigns in the first quarter of 2016 alone. Both companies give generously to state and national races and combined have given nearly $100,000 to this year's gubernatorial candidates over the course of their political careers. This is a prime example of why we need to get money out of and people into our democracy.

Enviro groups file suit to try and stop SE pipeline project (AP) — Environmental groups have filed a federal lawsuit to stop a 516-miles natural gas pipeline project that would travel through three Southeastern states. Groups including the Sierra Club filed the lawsuit Wednesday in the 11th U.S. Circuit Court of Appeals in Atlanta. The suit against the U.S. Army Corps of Engineers comes less than a week after the $3.2-billion Sabal Trail project received final federal approvals, including permits to discharge dredge materials into wetlands and other water bodies. The project, a joint effort by Spectra Energy, Duke Energy and Florida Power & Light, will carry natural gas from Alabama, through Georgia, into Florida. The suit says the project poses a threat to drinking water sources in the region. The Corps did not immediately respond to a request for comment on the lawsuit.

Louisiana’s Sinking Coast Is a $100 Billion Nightmare for Big Oil -  From 5,000 feet up, it’s difficult to make out where Louisiana’s coastline used to be. But follow the skeletal remains of decades-old oil canals, and you get an idea. Once, these lanes sliced through thick marshland, clearing a path for pipelines or ships. Now they’re surrounded by open water, green borders still visible as the sea swallows up the shore. The canals tell a story about the industry’s ubiquity in Louisiana history, but they also signal a grave future: $100 billion of energy infrastructure threatened by rising sea levels and erosion. As the coastline recedes, tangles of pipeline are exposed to corrosive seawater; refineries, tank farms and ports are at risk. “All of the pipelines, all of the things put in place in the ’50s and ’60s and ’70s were designed to be protected by marsh,” said Ted Falgout, an energy consultant and former director of Port Fourchon. Louisiana has an ambitious -- and expensive -- plan to protect both its backbone industry and its citizens from this threat but, with a $2 billion deficit looming next year, the cash-poor state can only do so much to shore up its sinking coasts. That means the oil and gas industry is facing new pressures to bankroll critical environmental projects -- whether by choice or by force. “The industry down there has relied on the natural environment to protect its infrastructure, and that environment is now unraveling,”

Refinery trips boost ULSD crack, make for wild day in US products: trade - Refinery outages in Texas and Louisiana and the draw on US gasoline stocks drove up refined products values Wednesday and lifted the ULSD crack against Louisiana Light Sweet crude to a nine-month high. Market-moving news landed nearly every hour from early morning into early Wednesday afternoon, keeping traders on edge. "Days like today will make you drink," a US refined products source said. Refineries in Baton Rouge, Louisiana (ExxonMobil); Convent, Louisiana (Motiva); and Port Arthur, Texas (Total) reported production problems, and a fluid catalytic cracker remained offline at the ExxonMobil plant at Baytown, Texas. California blendstock found a discount to futures, meanwhile, after market talk of refinery trouble earlier this week.The crack for Colonial Pipeline ULSD against region-dominant LLS crude rose $1.71/b to $13.25/b, and the crack for pipeline 87-unleaded against LLS rose $1.85/b to a six-day high $12.59/b. Futures cracks also rode the news upward. The front-month RBOB crack against NYMEX crude was $14.13/b, up from $12.70/b Tuesday. The RBOB crack also got support from Energy Information Administration data Wednesday showing US gasoline stocks fell 2.724 million barrels last week.

New crude oil pipeline from hubs to refineries --New pipelines to increase crude oil takeaway capacity from major producing areas like the Permian and the Bakken to oil storage and distribution hubs like Houston, TX and Cushing, OK seem to garner most of the media’s attention. Just outside the spotlight’s glare, though –– and even during the ongoing slump in oil prices –– midstream companies are building several “demand-pull” pipelines to move crude to refineries more efficiently, and to give refineries easier, cheaper access to new, desirable supplies. Today, we begin a look at these new pipeline connections, their rationales, and their effects on other pipelines, barge deliveries and crude-by-rail. Say “Keystone XL,” “Energy East” or, more recently, “Dakota Access” and you’ll grab headlines and eyeballs. But say “Diamond,” “Caddo” or “Maurepas” and you’ll probably get blank stares from folks outside the crude market. This latter group of hub-to-refinery pipelines (and others like them) are definitely second-tier (if that) in the public’s mind, and for good reason: they are generally shorter and smaller in capacity, and they are designed to move oil the last miles to where it is refined into gasoline, diesel and other petroleum products. Still, these demand-pull pipelines, whose development is typically instigated by refiners looking for an economic edge and/or better access to certain types of crude, punch above their weight, and are important elements in midstreamers’ pipeline portfolios. In this blog series, we’ll consider the tranche of hub-to-refinery pipeline projects now being built ­­ –– why they are advancing now, what benefits they will provide their refinery sponsors, and how their development is likely to affect other infrastructure (pipelines, barge and rail offloading facilities) already in place to deliver crude in the refineries’ neighborhoods.

EOG Resources Boosts Fracking Plan by 30 Percent - EOG Resources planned fracking will revise its plans upward by 30 percent in 2016, despite the price of oil falling below the US$40 per barrel mark. As reported by Oil and Gas Investor (OGI), the revised numbers from the Houston-based company indicate how strong shale companies, particularly those with the oiliest land, are surviving. Other firms have faltered en masse and have sought creditor protection in actions unseen since the wave of bankruptcies of telecom firms in the early years of this century. EOG upped the number of wells it plans to make functional this year from 270 to 350 while also boosting the number of wells to be drilled by 50 to 250. The company also announced plans to increase its backlog of premium drilling locations from its current level of 3200 to 4300. At the same time, EOG anticipates maintaining a stable budget of approximately US$2.5 billion. A company statement claimed it has become more efficient and should likely receive an after-tax rate of return of more than 30 percent on its premium wells. (Assuming oil prices stay at multi-year lows, that is).  EOG is best known for its South Texas operations in the Eagle Ford, but fracking has come under fire from critics for environmental damage as well as health problems of residents near drilling sites. The Texas Observer on 1 August mentioned the battle between oil and gas industry representatives and researchers who feel fracking has led to an increase in seismic activity in the Lone Star State.

EIA: Permian Production Should See An Increase In September - The Permian Basin, after suffering a downturn in production, is poised to rebound next month. That prediction comes from the U.S. Energy Information Administration’s Productivity Report. The Permian hung on in terms of production for about a year before experiencing a downturn similar to other areas in the country. However, the report anticipates that in September, production in the massive basin should see an increase of 3,000 barrels of oil per day to 1.977 million barrels per day next month. The report also looks at six other oil producing areas in the United States: Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, and Utica regions. From 2011 to 2013, those six regions accounted for 95 percent of crude oil and natural gas production increases. While the Permian should see a spike in production, the report says that collectively, the areas will see a decline in production next month. Altogether, production is forecasted to drop 85,000 barrels of oil per day to 4.47 million barrels for September. The Eagle Ford is expected to see the biggest decrease, with an anticipated drop of 53,000 barrels per day to 1.026 million barrels per day. For the Bakken, the EIA expects a drop of 26,000 barrels per day to 942,000. The Niobrara was anticipated to see a loss of 7,000 barrels per day, which would drop it to 370,000.

States' efforts to curb fracking-related earthquakes appear to be paying off - Stopping an earthquake before it starts? It sounds like a feat possible for only a superhero.  But policymakers in Kansas and Oklahoma are showing that insofar as humans are causing earthquakes, they can stop them, too. After restricting oil and natural gas operations in certain hot spots, Oklahoma is feeling an average of about two earthquakes a day, down from about six last summer, and Kansas is feeling about a quarter of the tremors it once did.  Using a growing body of research, along with trial and error, scientists and state regulators are getting closer to pinpointing the cause of the startling increase in earthquakes in the central and eastern parts of the country, and preventing them. The general cause, scientists have found, is not drilling, but what happens after, when operators dispose of wastewater that comes up naturally during the oil and gas extraction process. The operators inject the wastewater into disposal wells that go thousands of feet underground, which can increase fluid pressures and sometimes cause faults to move.  Since March 2015, Kansas and Oklahoma have placed new restrictions on how much wastewater each operator in certain areas can dispose of at a given time.  About 7 million people in central and eastern states are now at risk of man-made shaking powerful enough to crack walls and knock items off shelves, according to a one-year forecast released by U.S. Geological Survey in March. The report outlined the risk from man-made earthquakes for the first time, listing the states with the highest risk as Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas.

Study: A Closer Look at Urban Methane Pollution - The United States produces approximately 33 trillion cubic feet of natural gas each year. A majority of this gas is converted to electricity at power plants or used for industrial purposes, but about one third ends up making the journey from the well head, through underground pipelines, and into our homes and businesses. How much of this gas gets lost along the way—whether it’s through leaky equipment or other factors—is important because of the damaging climate impacts of methane pollution. And a new study published this week in Environmental Science and Technology is helping to expand our understanding of methane emissions in urban environments. The study—a multi-year collaboration led by Washington State University—used a variety of techniques to measure the rate at which methane is lost to the atmosphere in Indianapolis, Indiana.  This is the second paper in which EDF’s research partners have looked at methane pollution in an urban environment, and the results reveal regional variations. Last year researchers in Boston—an old city with a vast network of aging local gas pipelines—found natural gas was being emitted at a rate of about 38 kilograms per person. That’s enough natural gas to fuel about 200,000 homes each year. By contrast, in Indianapolis—which recently replaced much of its leak-prone, cast iron pipelines with tighter plastic pipes—emissions were almost 50 percent less per person. These results confirm our previous understanding that old pipes are prone to leaks. But, it also indicates that aging gas pipelines are not the only source of natural-gas derived methane emissions.

  Study: Most sources of methane hot spot are gas facilities — Most methane sources contributing to a puzzling concentration of the greenhouse gas over the Southwestern United States appear to be natural gas production facilities, scientists said Monday. Researchers identified more than 250 sources of a methane hot spot over the Four Corners region of Arizona, Colorado, New Mexico and Utah. They include gas wells, storage tanks, pipelines and processing plants. Only a handful were natural seeps from underground formations, and one was a vent from a coal mine, according to researchers at NASA’s Jet Propulsion Laboratory and the California Institute of Technology. The findings were published in the Proceedings of the National Academy of Sciences. The study said as much as two-thirds of the methane could be spewing from only about 25 locations. Methane is a key component of natural gas. The hot spot is not a local safety or a health issue, but methane does contribute to global warming. Methane is 86 times more potent for trapping heat in the short-term than carbon dioxide. Evidence of the hot spot dates as far back as 2003, and a satellite image released in 2014 showed it in vivid color. But the origin wasn’t clear. The new study identified the sources with spectrometers aboard aircraft that flew over about 1,200 square miles in the Four Corners in April 2015, at altitudes ranging from 3,300 to 9,800 feet.

NASA Study Nails Fracking as Source of Massive Methane 'Hot Spot' --  A NASA study released on Monday confirms that a methane "hot spot" in the Four Corners region of the American southwest is directly related to leaks from natural gas extraction, processing, and distribution. The 2,500-square mile plume, first detected in 2003 and confirmed by NASA satellite data in October 2014, is said to be the largest concentration of atmospheric methane in the U.S. and is more than triple a standard ground-based estimate. Methane, the primary component of natural gas, is a highly-efficient greenhouse gas—84 times more powerful than carbon dioxide, and a significant contributor to global warming. The study, published in the Proceedings of the National Academy of Sciences and funded primarily by NASA and the National Oceanic and Atmospheric Administration (NOAA), surveyed industry sources including gas processing facilities, storage tanks, pipeline leaks, and well pads, as well as a coal mine venting shaft. It found that leaks from only 10 percent of the individual methane sources are contributing to half of the emissions, confirming the scientists' suspicions that the mysterious hotspot was connected to the high level of fracking in the region. There are more than 20,000 oil and gas wells operating in the San Juan Basin, where Arizona, Colorado, New Mexico, and Utah meet. The U.S. Energy Information Administration estimates that overall annual gas production in the basin is as much as 1.3 trillion cubic feet, mostly from coal bed methane and shale formations.

 Energy-related CO2 emissions from natural gas surpass coal as fuel use patterns change - Today in Energy - U.S.  (EIA) - Energy-associated carbon dioxide (CO2) emissions from natural gas are expected to surpass those from coal for the first time since 1972. Even though natural gas is less carbon-intensive than coal, increases in natural gas consumption and decreases in coal consumption in the past decade have resulted in natural gas-related CO2 emissions surpassing those from coal. EIA's latest Short-Term Energy Outlook projects energy-related CO2 emissions from natural gas to be 10% greater than those from coal in 2016. From 1990 to about 2005, consumption of coal and natural gas in the United States was relatively similar, but their emissions were different. Coal is more carbon-intensive than natural gas. The consumption of natural gas results in about 52 million metric tons of CO2 for every quadrillion British thermal units (MMmtCO2/quad Btu), while coal's carbon intensity is about 95 MMmtCO2/quad Btu, or about 82% higher than natural gas's carbon intensity. Because coal has a higher carbon intensity, even in a year when consumption of coal and natural gas were nearly equal, such as 2005, energy-related CO2 emissions from coal were about 84% higher than those from natural gas.In 2015, natural gas consumption was 81% higher than coal consumption, and their emissions were nearly equal. Both fuels were associated with about 1.5 billion metric tons of energy-related CO2 emissions in the United States in 2015. Annual carbon intensity rates in the United States have generally been decreasing since 2005. The U.S. total carbon intensity rate reflects the relative consumption of fuels and those fuels' relative carbon intensities. Petroleum, at about 65 MMmtCO2/quad Btu, is less carbon-intensive than coal but more carbon-intensive than natural gas. Petroleum accounts for a larger share of U.S. energy-related CO2 emissions because of its high levels of consumption.

Feds, law professors say judge wrong to block fracking rules (AP) - A group of law professors and lawyers for the federal government say a U.S. judge in Wyoming was wrong to block rules for hydraulic fracturing on federal land. Judge Scott Skavdahl of Casper ruled in June that the U.S. Bureau of Land Management lacks the authority to regulate fracking - a technique of injecting materials underground to increase energy production. The Obama administration filed a brief last week with the 10th U.S. Circuit Court of Appeals in Denver, arguing the BLM may enact rules requiring companies to disclose what they're injecting. The law professors, including the author of a paper Skavdahl cited in his ruling, also told the court this week that they believe the judge was wrong. Skavdahl had ruled on a legal challenge by Wyoming and other states.

Oglala Sioux Tribe members to join pipeline protesters (AP) — Oglala Sioux Tribe members are traveling from their reservation in southwest South Dakota to join a growing protest against the construction of a four-state oil pipeline. Donna Solomon is the tribe’s legislative liaison. She says at least two buses and several cars carrying tribal members will arrive Monday evening to the site of the protest in North Dakota, just north of the Standing Rock Indian Reservation. The Standing Rock Sioux had quietly opposed the Dakota Access pipeline for months near their reservation, but protesters’ resistance heated up last week as at least 18 people were arrested. Pipeline opponents say the project would disturb sacred sites and could affect drinking water on the reservation and for people downstream. The company says the pipeline would include safeguards such as leak detection equipment.

North Dakota patrol asks motorists to avoid pipeline protest (AP) — The North Dakota Highway Patrol is asking motorists to avoid state Highway 1806 near Fort Rice because of an oil pipeline protest along the road. Troopers say traffic delays are expected on the highway that runs through the Standing Rock Sioux Reservation in southern North Dakota. Opponents of the $3.8 billion Dakota Access pipeline are protesting near a construction zone just north of the reservation. Troopers say motorists should use an alternate route, such as state Highway 6. Highway Patrol Lt. Tom Iverson says about 250 protesters were at the site on Monday. He says there are about 30 troopers monitoring the protest.

Judge tosses flag desecration charge; was pipeline protest (AP) — A flag desecration charge was dropped Monday for a man who protested a crude oil pipeline that crosses his property by hanging an American flag upside down at his home, online court records show. Homer Martz, 63, was charged Friday under a state law that makes it illegal to defile, cast contempt upon, satirize or deride a flag. That law, however, was declared unconstitutional by a federal judge in December 2014 and state prosecutors were told not to enforce it. The law, which lawmakers have not removed from the books, says law enforcement officers have a duty “to enforce the provisions of this chapter, and for failure to do so they may be removed as by law provided.” Calhoun County Attorney Tina Meth Farrington filed a motion to dismiss the charges Monday, saying that she read the 2014 federal ruling and concluded she shouldn’t pursue the charge. “The Legislature should take immediate action to repeal this law so that other citizens and law enforcement are not caught in this type of situation again,” she said. A judge approved the motion Monday afternoon. Calhoun County Sheriff William Davis said at the time Martz was arrested, he and the two arresting officers were unaware the law had been struck down.

Sioux tribe leader wants political help to halt oil pipeline(AP) — The chairman of the Standing Rock Sioux Tribe says he has contacted the White House and met with North Dakota’s senators in an effort to halt construction of a $3.8 billion, four-state oil pipeline. David Archambault II says he met Wednesday with North Dakota Sens. John Hoeven and Heidi Heitkamp to “express concerns” about the Dakota Access pipeline that will cross the Missouri River just north of the Standing Rock reservation and also travel through South Dakota and Iowa to Illinois. Archambault says he is calling for peaceful protests of the pipeline. Archambault and others have been arrested in the past week for interfering with construction in southern North Dakota. North Dakota transportation officials on Wednesday closed a several-mile stretch of Highway 1806 because of the protest along the road.

Governor signs emergency declaration for pipeline protest (AP) — Gov. Jack Dalrymple has declared an emergency to make more state resources available to manage public safety risks from an ongoing oil pipeline protest near Cannon Ball. Dalrymple said Friday the declaration allows the state to bring greater resources to bear if local officials need help addressing safety concerns. Over two dozen protesters have been arrested since last week for interfering with the construction of the $3.8 billion Dakota Access Pipeline that’s designed to carry North Dakota crude to Illinois. Developers have agreed to halt construction of the project in southern North Dakota until a federal court hearing next week. Dalrymple says the state is committed to protecting lawful assembly rights, but says unlawful acts have led to “serious public safety concerns.” The order doesn’t include activation of the North Dakota National Guard.

North Dakota pipeline construction halted until court date (AP) — Developers of a $3.8 billion, four-state oil pipeline have agreed to halt construction near an American Indian reservation in southern North Dakota until a federal court hearing next week in Washington, D.C. The Standing Rock Sioux Tribe is suing federal regulators for approving permits for the Dakota Access Pipeline that will move oil from North Dakota to Illinois. Tribal officials filed the lawsuit last month against the U.S. Army Corps of Engineers. The tribe argues the pipeline would affect drinking water for residents on the reservation and disturb sacred sites outside of it. The tribe’s request for a temporary injunction hearing is slated for Wednesday. Dallas-based Energy Transfer Partners said Thursday it will temporarily stop work near the reservation but that work continues in other parts of the state.

Clashes Halt Work on North Dakota Pipeline - WSJ: Work on a 1,154-mile pipeline that would carry oil from North Dakota to Illinois was halted this week near the Missouri River, amid growing confrontations between members of the Standing Rock Sioux tribe and police guarding a construction site. Native American groups and environmentalists have staged protests to block the Dakota Access pipeline for months from a “spirit camp” outside a pipeline construction site. The groups say the pipeline threatens sacred sites near the Standing Rock reservation and poses a risk to the tribe’s drinking-water supply. In July, environmental group Earthjustice filed a lawsuit on behalf of the tribe in U.S. District Court for the District of Columbia against the U.S. Army Corps of Engineers, which authorized the $3.7 billion project, seeking a preliminary injunction. A hearing in the case is scheduled for next week. In recent days, protesters have clashed with police and threatened company officials as they blocked access to a construction site 34 miles south of Mandan, N.D., according to a separate lawsuit filed Monday by Dakota Access LLC, the pipeline’s developer. The company is asking a judge to grant a restraining order against the tribe’s chairman, David Archambault II, and other members.  “They were preparing to throw pipe bombs at our line, M80s, fireworks, things of that nature to disrupt us,” said Morton County Sheriff Kyle Kirchmeier in a press conference this week. “That in itself makes it an unlawful protest.” “The only ‘pipes’ in this camp are peace pipes, used for prayer and expressions of love,” said a joint statement from the Indigenous Environmental Network and two other groups that have helped organize the protests. The opposition raises echoes of the battle over the Keystone XL oil pipeline that President Barack Obama rejected last year. Unlike that pipeline, Dakota Access doesn’t cross an international border and so doesn’t require permission from the State Department.

Oil Is Seeping From A North Dakota Hillside —An oil leak in North Dakota is seeping from a hillside and is thousands of gallons larger than initially reported last month, state officials say. About 504 barrels of oil or more than 20,000 gallons of the highly polluting substance have been recovered since the line leak occurred July 19, the North Dakota Department of Health said in a press release Friday. The company, Texas-based Denbury Onshore LLC, first said the equivalent of two barrels of oil had been spilled at a facility in the western town of Belfied. But state investigations found the spillage is considerably larger. Karl Rockeman, director of the Division of Water Quality, said to the Grand Forks Herald Friday that oil was seeping out of a hillside in multiple locations. The actual size of the spill is still undetermined and current figures may also be inaccurate. “It may be larger than that yet as well,” Rockeman said referring to the most recent estimates.  Misreported leak volumes often happen once companies and officials investigate accidents and discover oil seeped deeper in the ground or waterways. Indeed, revised figures are at times much larger than first reported. It is unclear whether latest oil spill has reached the groundwater. The investigation and remediation is ongoing, the state said. The Grand Forks Herald said that spills have been reported at the same Denbury site in 2006, 2010, and 2014. The cause of the most recent spill is listed as a failure of an underground flow line.

Continental Resources Announces $222 Million Sale Of Non-Strategic Assets In North Dakota And Montana --  Continental announced today that it has signed a definitive purchase and sale agreement with an undisclosed buyer to sell non-strategic properties in North Dakota and Montana for $222 million. The sale includes 68,000 net acres of leasehold primarily in western Williams County, North Dakota, and 12,000 net acres of leasehold in Roosevelt County, Montana. The sale also includes net production of approximately 2,800 barrels of oil equivalent (Boe) per day. "This is our third sale of non-strategic assets this year, with total expected proceeds of more than $600 million. We plan to apply proceeds to reduce debt and strengthen our balance sheet," said Harold Hamm, Chairman and Chief Executive Officer. In May 2016, the Company announced the sale of approximately 132,000 net acres of leasehold in the Washakie Basin in Wyoming for $110 million. On August 3, 2016, Continental announced it had signed a definitive purchase and sale agreement with an undisclosed buyer to sell approximately 29,500 net acres of non-strategic leasehold in the eastern SCOOP play in Oklahoma for $281 million. "Our guidance for the year has not changed. The combination of Continental's high quality drilling inventory, strong balance sheet and $560 million investment in drilled but uncompleted wells (DUCs) provides the Company with a robust platform for high-value future growth," Mr. Hamm said. The $560 million investment includes both operated and non-operated DUCs, approximately 80% of which are in North Dakota.   Continental currently has approximately ­­­215 gross operated DUCs in inventory, of which approximately 165 are in the Bakken. The Company expects the total to grow to approximately 240 gross operated DUCs at year-end 2016, with approximately 190 in the Bakken. The Company said its Bakken DUCs have an average estimated ultimate recovery (EUR) of 850,000 Boe per well and can be completed at an average cost of between $3.0 million to $3.5 million per well.

  Tighten Up - Dakota Access to Close Gap in Bakken Pipeline Takeaway Capacity -  The 450-Mb/d Dakota Access Pipeline (DAPL) has broken away from the pack of out-of-the-Bakken crude takeaway projects. On August 2, Enbridge Inc., through its master limited partnership Enbridge Energy Partners, agreed to take a large stake in DAPL from Energy Transfer Partners (ETP) and Sunoco Logistics Partners (SXL), a move that suggests Enbridge’s own 225-Mb/d Sandpiper Pipeline may drop out of the race soon. Joining Enbridge in the $2 billion deal is Marathon Petroleum, its former joint venture partner and anchor shipper on Sandpiper. Today, we consider these recent developments in the long-running effort to transport North Dakota crude oil to market more efficiently. The apparent demise of Sandpiper could potentially change the outlook for the future balance between Williston Basin production and takeaway/in-region refining capacity. In our recent With or Without You – Could the Bakken End Up with Too Much Pipeline Capacity?, we noted that during the run-up in Bakken production earlier in this decade a lot of new crude-by-rail capacity was built, as were incremental additions to pipelines. Midstream companies also made big plans for more takeaway capacity, but some of those plans were reconsidered after the plunge in oil prices that started two years ago. As a result of that price decline, Bakken production fell from 1.3 MMb/d in December 2014 to an estimated 998 Mb/d in July 2016, according to the Energy Information Administration’s (EIA’s) Drilling Productivity Report.  Based on our production economics analysis, it looks like the decline in production will be continuing until prices get back above $50/bbl netback to the basin.  In the meantime, some producers are taking drastic action. For example, we hear that Continental Resources will be shutting in (yes, you read that right, shutting in) about 20 Mb/d of Bakken production in September. No doubt declines in production are one reason for the pullback in new pipeline takeaway projects, leaving only about 500 Mb/d of incremental pipeline and regional refining capacity on the drawing board. But that is still a big number. If it all gets built, pipeline takeaway/refining capacity in the Bakken would total 1.35 MMb/d (excluding rail capacity). So the big question remains, is that still too much?

In The Pacific Northwest, Oil Train Derailment Highlights Potential Dangers : NPR (audio and transcript) In the Northwest, the number of trains carrying oil along the Columbia River could dramatically increase, and that's sharpened a debate over oil train safety in Washington state and Oregon. There's a plan to ship more oil from the Bakken region to a proposed oil terminal in Washington. As Conrad Wilson of Oregon Public Broadcasting reports, a recent derailment has shown the potential danger the area faces.

Does Offshore Fracking Put Endangered Species at Risk? -- Environmental groups in California are preparing to file lawsuits against federal regulators for allegedly approving the use of offshore fracking at 23 oil and gas platforms in sensitive Pacific waters without consulting wildlife officials about the potential harms to endangered species, such as sea otters and whales. The Environmental Defense Center (EDC) and the Santa Barbara Channelkeeper announced last week their intent to sue the two US Interior Department agencies that regulate offshore oil and gas production, alleging that regulators violated the Endangered Species Act when they decided to lift a moratorium on using offshore fracking and other "well stimulation techniques" in the Pacific. Another environmental group, the Center for Biological Diversity, announced on Wednesday that it would file a separate lawsuit against the agencies on similar grounds.  That decision to lift the moratorium was made in May after the regulators completed an assessment of the potential environmental impacts of offshore fracking and subsea acid washes, which are used to stimulate oil and gas production in aging offshore wells. Despite protests from environmental groups, the regulators concluded that offshore fracking is not expected to have a "significant impact" on the environment.

Moody’s: Huge debt wave approaching drillers and service firms --  Global oilfield services and drilling companies are facing a massive wave of maturing debt over the next five years that could challenge firms already reeling from low oil prices. According to a report published by Moody’s Tuesday, nearly $110 billion of debt associated with oilfield services and drilling (OFS) companies will mature over the next five years.  Speculative-grade companies will account for 65 percent of all the maturities and expirations, Moody’s said.  The ratings agency said that estimates show the maturity wall “growing dramatically to more than $21 billion” in 2018. That figure is nearly three times the sector’s total expected debt burden in 2017. The debt burden is then projected to continue climbing into 2021 when nearly $29 billion of issuance and revolvers are scheduled to come due, Moody’s said. According to the report, over 70 percent of the rated high-yield bonds and term loans that mature through 2018 are rated Caa1 or lower, and more than 90 percent are rated below B1. Those bonds and loans are in addition to about $3.1 billion of rated and unrated committed revolvers among issuers rated Caa1 or lower that are expiring through 2018, Moody’s said. Moody’s said that most of the maturing debt was issued between 2011 and 2015 as energy prices climbed and the U.S. shale drilling activity boomed.

Too Big to Frack? Oil Giants Try Again to Master Technology - The oil-and-gas well BP is drilling here in the Texas Panhandle looks ordinary enough from the surface. Yet a mile-and-a-half underground, horizontal pipes shoot off for at least a mile in three directions, like a chicken’s foot. The idea, part of an experiment by BP executive David Lawler, is to make three wells from one. It also is designed to help turn the London-based energy giant into a shale-oil innovator that can better compete with the entrepreneurial outfits that pioneered the business of hydraulic fracturing, or fracking.  Big oil companies like BP are in need of a jolt. The multibillion-dollar projects they specialize in—giant offshore oil rigs and gas-export projects—are often prohibitively expensive in a world of $45-a-barrel oil. U.S. wells are a tempting option, but major oil companies have yet to prove they can master the techniques pioneered by shale drillers, whose innovations fueled a rebirth in U.S. energy production.  London-based BP is moving into shale-oil drilling with wells such as the King Harry 1H in the Texas Panhandle, which descends 8,000 feet before splitting into three shafts.  If BP, Exxon and others can figure out how to coax enough oil out of fracked wells cheaply enough to make it profitable, it could help them maintain production levels. Failure could make it harder to replace the oil from declining older megaprojects, and leave them further behind on innovations transforming the industry.

US ethane squeezing out Canadian propane/butane in Sarnia - The availability of vast amounts of ethane from the nearby “wet” Marcellus and Utica plays is spurring a petrochemical rejuvenation in Sarnia, ON. Two years ago NOVA Chemicals stopped using naphtha as a feedstock at its 1.8 million pound/year ethylene plant in Sarnia’s Chemical Valley and now relies on a combination of ethane, propane and butane. Next year the company is planning to complete the plant’s conversion to 100% ethane and is considering the possibility of building a big polyethylene plant nearby. Today, we continue our comprehensive review of southwestern Ontario’s NGL, petchem and refining infrastructure, including Sarnia’s NGL fractionation, storage and end-use markets.   As we said in Part 1 of this series, Sarnia has been a major player in crude oil, refining and petrochemicals for well over a century. An 1858 oil well in nearby Oil Springs, ON is said to have been the first on the continent, and over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads). Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. In Part 2, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market. In today’s episode, we turn to Sarnia’s important NGL sector: the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates mixed NGLs into purity products, the NGL storage facilities, and the big ethylene plant that “cracks” ethane, propane and butane into ethylene –– a critically important petchem building block.

BC Hydro concerned over impact of fracking on dams, documents reveal:  Officials at BC Hydro have been raising concerns as early as 2009 that earthquakes caused by a controversial gas-extraction method used in the mining industry may put the province's largest hydroelectric dams at risk, internal documents reveal. Emails obtained through an access-to-information request by the Canadian Centre for Policy Alternatives show BC Hydro discussing the possible threat posed by hydraulic fracturing, or fracking, a mining technique that involves injecting high-pressure fluid deep underground in order to extract either natural gas or coal-bed methane.  Critics have slammed fracking as a poorly understood and risky industrial activity that contributes to increased seismic activity and risks contaminating nearby aquifers. In one BC Hydro email exchange dated Dec. 3, 2009, safety officer Ray Stewart expresses his unease to water rights comptroller Glen Davidson over the risks of a particular methane-extraction project near the Peace Canyon Dam.."BC Hydro believes that there are immediate and future potential risks to BC Hydro's reservoir, dam and power generation infrastructure as a result of this coal-bed methane project." He provides a list of potential impacts, including seismic activity beyond what the dam can withstand and hydrogeologic effects on the reservoir. Another email, dated March 17, 2013, from dam safety engineer Scott Gilliss to engineering scientist Desmond Hartford, discusses Gilliss' research connecting an increase in fracking to a jump in seismic activity. "In my view, the province should simply add buffer zones around any very extreme and very high consequence dams, where hydraulic fracturing cannot be undertaken without a prior full investigation into the risks, and an implemented risk management plan," Gilliss writes. "Why is this so difficult?"

B.C. Hydro concerned earthquakes from fracking could damage Peace River dams | Financial Post: Internal documents show B.C. Hydro officials have had concerns since at least 2009 that earthquakes triggered by fracking are a potential risk to its Peace River dams. The electricity-generating dams in northeastern B.C. include one of the largest earth dams in the world, the W.A.C. Bennett Dam, as well as the smaller Peace Canyon Dam, and the $9-billion Site-C dam, which is under construction. The Crown agency has not discussed the issue publicly. But as a result of its concerns, B.C. Hydro worked out an agreement, possibly as early as 2014 with the B.C. Oil and Gas Commission (BCOGC), to create five-kilometre buffer zones around dams where no new fracking and drilling rights are issued, according to a report released today from the Canadian Centre for Policy Alternatives, a left-wing think-tank.There is no ban on fracking or drilling for companies that hold existing rights, but B.C. Hydro says it will work with the BCOGC, responsible for development and regulation of the natural gas sector, to effectively manage any risk, according to the report. This is the minimum that should be done, said report author Ben Parfitt, a resource analyst for the centre for policy alternatives. “If a dam were ever to fail, it would be absolutely catastrophic,” said Parfitt. Hudson’s Hope, a community of about 1,000, and several other smaller communities, are downstream of the Peace Canyon Dam.

YP Letters: Farmers must lead the fight against fracking - Yorkshire Post: AGRICULTURE has been the primary industry of every nation since the beginning of time, a fact which highlights the importance of food production. In England it is now facing the greatest threat it has ever known, from one of the most dangerous industries ever known to mankind – fracking for shale gas. Yet, our own dictatorial government is hell bent on forcing this upon us, and will stoop to anything to get their own way. I urge all farmers to learn more about it, because being a lifelong farmer myself, I feel deeply concerned about the enormous risks involved. Our MP Kevin Hollinrake says it can take place here, because he will ensure it is done safely. What an irresponsible statement. Besides the terrible disturbance and defacing of Yorkshire, our precious pure air and water supplies will be in grave danger. Whichever commodity we produce, be it cereals, beef, milk, sheep or vegetables, it will take just one hint of contamination for our buyers to immediately reject our produce. This is not scaremongering, this is the stark reality of fracking. Our businesses will fail and our land will be worthless. Will Mr Hollinrake compensate us? The answer is no! It is quite clear that the future wellbeing of our wonderful land, of our agriculture and its allied industries and of our communities, rests entirely on our own shoulders.

Lack Of Investment, Payment Delays Hamper Venezuela Oil Output  (Reuters) - Venezuela, which holds the world's largest crude reserves, is on track to suffer its steepest annual oil output drop in 14 years as it suffers the effects of an economic crisis and years of under investment and mismanagement, according to data seen by Reuters and interviews with company sources and workers. The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country's vast oil fields. In the 12 months to June, Venezuela's crude output fell 9 percent to 2.36 million barrels per day (bpd), while the Organization of Petroleum Exploration Countries (OPEC) has boosted its output by 4 percent, according to the group's official figures. Venezuela's oil minister and PDVSA president, Eulogio Del Pino, last month confirmed a 220,000-barrel-per-day production decline -- around 8 percent -- so far this year compared with 2015. However, he said the "circumstantial fall" had been "contained." The Oil Ministry later said the country's output rebounded in July to 2.54 million bpd, without giving comparative figures. The data have not yet been reported to OPEC. PDVSA's statistics have been a matter of debate for years. Internal trade and supply data seen by Reuters show that PDVSA's crude exports, which account for 94 percent of the country's hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures. PDVSA did not respond to a request for comment on its sales to customers.

Indian government raises oil equity dues issue with Venezuela: sources -  India has raised with Venezuela the issue of past dues of $530 million-$600 million payable to its oil equity and the possibility of settling them by means of a barter deal, official sources said Friday. Indian oil minister Dharmendra Pradhan discussed the issue during a meeting with visiting Venezuelan oil minister Eulogio del Pino. Pino, part of a delegation led by Venezuelan foreign minister Delcy Rodriguez, is on a visit to India, which ends Friday. ONGC Videsh Ltd, the overseas arm of state-owned upstream major Oil and Natural Gas Corp, has a 40% stake in the San Cristobal oilfield in Venezuela. The dues included its accumulated share of oil sales.In 2008, OVL invested around $190 million in the project in which Venezuela's state-owned Petroleos de Venezuela SA holds a 51% stake. Issues of sourcing of crude and a mechanism for registering state-owned Indian oil and gas companies, the status of the two upstream projects in which Indian companies have stakes, the possibility of more oil exploration-related ties on an intergovernmental basis also figured during the discussion, an official statement by the Indian oil ministry said after the delegation-level meeting on Thursday. The possibility of settling the outstanding oil equity dues through barter deals with cash-strapped Venezuela also figured at the meeting, sources said. Pino remained non-committal on an immediate settlement of the dues issue at the meeting, they added.

Analysis: For Asian LPG buyers, it's an 'all-you-can-eat buffet' -  The acute state of oversupply in Asian LPG markets can be best described by the title of a 1966 song by The Beatles -- "Here, There and Everywhere." A steady influx of cargoes from the US, Iran's aggressive move to push cargoes at competitive prices, slower-than-expected demand growth in China on the back of a sluggish economy and Japan's inventory levels hovering at multi-year highs have all contributed to supply in Asia far outweighing demand, creating a glut not seen in recent years. "For a region that is structurally short of LPG and experiences the strongest demand growth globally, Asia is currently awash with LPG supplies," Andrew Echlin, global oil products analyst at Energy Aspects, wrote in a research report on LPG titled "Hero to Zero" published this month.Plentiful US exports, aided by VLGC rates falling to multi-year lows, have prompted gas carriers to put LPG into floating storage off Singapore. Energy Aspects said in the report that at least seven VLGCs were parked off the coast of Singapore, with some anchored for weeks. The precarious oversupply situation has pulled down prices sharply. The price of refrigerated propane on a CFR Japan basis first plunged to a record low of $271.50/mt on July 29, dragged down by a sluggish crude complex and chronic LPG oversupply. This was the lowest since Platts started publishing this assessment in October 2006. The first cycle propane price breached this level again on August 11. It has since rebounded and was assessed at $284.50/mt on August 15, underpinned by a firmer crude complex. In addition to bulging supplies and slower-than-expected Chinese demand growth, propane in Asia has come under significant downward pressure as third-quarter consumption is seasonally weak, in the absence of support from winter demand.

Cheniere's first LNG export cargoes: A contrarian indicator for U.S. natural gas prices? --  Cheniere Energy has long been my favorite contrarian indicator in the U.S. natural gas market. For those unfamiliar with the term, a contrarian indicator is an event which suggests that a broadly and firmly held view--in this case, the view that U.S. natural gas supplies will grow and remain cheap for decades--is about to begin a reversal. As the company shipped its first cargo of U.S. liquefied natural gas (LNG) for export earlier this year, the glut of cheap U.S. natural gas seem to vindicate Cheniere's plans. I, on the other hand, imagined that the shipment was not confirmation of Cheniere's assumptions, but a contrarian signal that natural gas production was about to dip and that prices were finally going to turn higher in a sustained way. I say this based on the timing of Cheniere's last scheme, a U.S. natural gas import terminal that now sits unused next to its newly built LNG export terminal in Louisiana. The import terminal received its first LNG shipment in April 2008 just two months before U.S. natural gas prices peaked around $13 per thousand cubic feet, collapsing to a low of $2.06 by September 2009. But, only months after the terminal was operational, there was no longer any reason to bring LNG into the United States. It was just too expensive to compete with cheap domestic production which continued to grow. So, Cheniere got the idea that it would reinvent itself as an LNG exporter. After all, because of the so-called shale revolution U.S. natural gas production was supposed rise for decades keeping U.S. domestic gas cheap. The rest of the world, Europe and Asia especially, would be hungry for LNG supplies and would pay dearly for them. That was then. Now, of course, LNG prices have collapsed because of worldwide overexpansion of LNG capacity and flat demand in a world struggling to grow.

Natural Gas Prices Extend Recent Rebound Rally: Natural gas futures continued to advance in today’s session, gaining 1.04% with a settlement at $2.617 per million BTU. Unlike Friday and Monday, when the contract closed well off the best levels of the day, today’s close was near the high of the session, suggesting more sustained buying interest. However, the contract still has not made a great deal of progress from the lower boundary of a downward sloping trend channel dating to the early July high, keeping the trend of the contract firmly to the downside despite the recent recovery rally. The sustainability of the recent rebound remains questionable, as volume has been light on the advance, particularly relative to the volume on the decline into the August low. In addition, open interest has experienced a very modest increase, rising just 0.48%. This is compared to an increase of more than 7% during the decline into the August low. A return by sellers, which results in a breakdown below the lower boundary of the falling trend channel, shown on the daily chart would signal an acceleration of the contract’s multi-week downtrend and call for a drop to at least the 50% retracement of the May-July advance at $2.47 per million BTU. A 61.8% retracement of the advance would put the contract down at the $2.35 level. The contract’s recent rebound rally may be merely a reaction to the fully oversold condition, which developed during the decline to the August low. Near term resistance is at the $2.62 level, representing the July 21st low. This level has been tested over the past three trading days. Failing to sustain a move above $2.62 per million BTU on a closing basis would keep the trend bias in natural gas firmly to the downside.

LNG exports impact US natural gas supply, demand and price. -  It’s been a volatile summer for U.S. natural gas.  The CME NYMEX front month contract spiked from $1.96/MMBtu in late May to $2.99 on July 1, up more than 50% in just over a month.  Since then the price has headed mostly south, closing at $2.62/MMBtu on Tuesday, down $.37/MMBtu from its summer high a few weeks ago.  As often is the case, the primary culprit has been weather.  But for the first time, a new factor is starting to have an impact: LNG exports.   During August, approximately 30 Bcf of gas will likely flow into Cheniere Energy’s Sabine Pass for now-routine LNG exports from Train 1 and the initial volumes needed for the start-up of Train 2.  The more recent decline in gas prices just happened to follow the announcement that the entire Sabine Pass LNG facility will be shut down for several weeks starting next month for maintenance and to address a design issue.   Was LNG a factor in the price decline?  Hard to say.  We may get a better sense of the market impact of LNG exports when the plant starts back up.  At that point even more gas –– up to 1.25-1.5 Bcf/d in total –– could be sucked out of the market, possibly taking a 125-Bcf bite out of supply by the end of this year.  The gas market has changed.  From here on out, you won’t be able to understand the U.S. natural gas market without a solid grasp of LNG export dynamics.    Today, we begin a two-part series on how international demand for U.S.-sourced LNG will have an increasing effect on gas supply, demand and price.

Oil Rises to Five-Week High on Freeze Optimism, Weakening Dollar - Bloomberg: Oil closed at its highest in five weeks, bolstered by a weakening dollar and speculation that OPEC talks next month could result in a crude output freeze. Futures climbed 1.8 percent in New York, extending gains following comments from Saudi Arabia’s energy minister that the country is prepared to act to stabilize markets. The dollar extended declines following mixed U.S. economic reports. A weaker dollar increases investor appetite for commodities. While government data is expected to show crude inventories rose, fuel stockpiles are forecast to shrink.  Oil has advanced about 18 percent since closing below $40 a barrel and tumbling into a bear market earlier this month. Russian Energy Minister Alexander Novak told Arabic-language newspaper Asharq Al-Awsat that the nation was open to cooperating to stabilize markets after Saudi Energy Minister Khalid Al-Falih said talks in Algiers may result in action. "The longer they can put that story out there that there’s going to be a potential production cap, the better they’ll be able to support prices," "There is no coincidence that this is happening." West Texas Intermediate for September delivery added 84 cents to settle at $46.58 a barrel on the New York Mercantile Exchange, the highest since July 12. Total volume traded Tuesday was about 4 percent above the 100-day average. Brent for October settlement rose 88 cents, or 1.8 percent, to close at $49.23 a barrel on the London-based ICE Futures Europe exchange, the highest since July 4. The global benchmark crude settled at a $2.01 premium to WTI for October delivery, the widest spread since April.

API: Drop in US Crude Oil Stocks, But Surprise Gasoline Build | U.S. crude oil inventories are down just over 1 million barrels for the week ended 12 August, according to the weekly American Petroleum Institute (API) report, but U.S. gasoline inventories are up over 2 million barrels in the biggest increase in six months. Cushing crude inventories were down 680,000 barrels. Earlier today, crude oil rallied to a one-month high, but slid back down following the release of the API data. West Texas Intermediate (WTI) for September delivery closed at US$46.58 on the New York Mercantile Exchange, but was down to US$46.41 in electronic trading at the time of writing. Analysts expectations, as carried by S&P Global Platts, were for a 200,000-barrel drawdown on U.S. crude oil inventories, with the API figures coming at roughly half that. But for gas, the API figures were unexpected. Analysts were tapping a 1.8-million-barrel drop in gasoline inventories, while the API is showing a nearly 2.2-million-barrel increase. Distillates were also up significantly over the week, with the API data showing a 2.4-million-barrel build. This should contribute to further market volatility, though Zero Hedge notes that oil is primarily tracking the dollar right now and not paying as much attention to its own fundamentals. More attention will be on the official inventory data coming tomorrow at 10:30am (EST) from the Energy Information Administration (EIA), which could contradict API data, as has been a recent trend.

Crude Tumbles After Surprise Gasoline Inventory Build (Biggest In 6 Months) - With oil largely tracking the dollar as opposed to actual fundamentals - ignoring 3 weeks of crude builds at an odd seasonal time - the surprising build in gasoline inventories (after 2 big draws) seems to have woken some traders up. While crude and Cushing inventories fell, the combination of gasoline (biggest in 6 months) and distillates builds were significant. Oil prices had surged to one-month highs ahead of the API data but quickly dropped after the print. API

  • Crude -1.007m (+950k exp)
  • Cushing -680k (+100k exp)
  • Gasoline +2.167m
  • Distillates +2.406m

After 2 big draws, gaosline had an unexpected build this week - the biggest in 6 months...Crude inventories fell following last week's 3rd build in a row - quite unprecedented for this time of year...  

WTI Oil Prices UP Year-over-year  --Oil prices were up over the last week with WTI futures at $44.57 per barrel and Brent at $46.97 per barrel.  A year ago, WTI was at $42, and Brent was at $48 - so prices are mostly unchanged year-over-year. Here is a graph from for nationwide gasoline prices. Nationally prices are at $2.12 per gallon (down about $0.55 per gallon from a year ago).This graph shows the year-over-year change in WTI based on data from the EIA.  Five times since 1987, oil prices have increased 100% or more YoY.  And several times prices have almost fallen in half YoY.  WTI oil prices are now up YoY! (Brent is still down YoY)The second graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).  According to Bloomberg, WTI is at $44.57 per barrel today, and Brent is at $46.97 Prices really collapsed at the end of 2014 - and then rebounded a little - and then collapsed again at the end of 2015 and in early 2016. Unless prices fall sharply again, oil prices - and eventually gasoline prices - will be up year-over-year and no longer a drag on CPI.

Oil Panic-Buyers Ignore US Dollar Bounce--The market remains glommed onto Saudi comments from a few days ago, choosing to ignore the real bearish fundamentals which are getting worse. This morning's USD weakness sparked some oil momentum... but once the USD started to bounce higher so oil ignored it and melted up... Oil is ignoring the usd now that the usd is rising again... As Oil surges above $46.50 ahead of tonight's API data... despite Russia denial of talks, and Nigeria and Iran saying "no deal" As Bloomberg notes, Saudi energy minister’s recent comments regarding possible action to stabilize market helped to push price “a little higher, but the reality of what they promise is a bit more unconvincing,” Harry Tchilinguirian, head of commodities strategy at BNP Paribas, says by phone, “Oil inventories remain just as high, the U.S. active rig count continues to rise. It’s quite interesting that the market chooses to ignore these more bearish fundamental developments to latch on to the potential promise of producer cooperation”

Morgan Stanley Says The Oil Squeeze Will End On August 17: Here's Why -- Following his bearish note last week, Morgan Stanley's oil analyst Adam Longson is out with a new report, in which he accurately explains that the recent oil-price jump is driven by traders covering bearish bets, even as market fundamentals are seen remaining weak in coming months. According to Longson, a “sizeable” amount of Sept. WTI put positions at $40, $45 recently came into or near the money, leading to spike in hedging by traders to cover their exposure. However, the good news for oil bears is that the effect of this action will fade once option expires Aug. 17. As we have pointed out previously, the recent comments from OPEC, and IEA helped reverse bearishness and also unleash the recent short squeeze which led to the biggest weekly jump in oil in 4 months. He then notes that he “would not be surprised to see tank top fears return in 1Q17” as he sees rising U.S. crude inventories in coming months.He list other bearish factors for oil, which include modest implied draw in global oil stockpiles in 3Q, as well as a lack of meaningful cuts to refinery run rates. A record OPEC production, albeit seasonal, with potentially higher Libyan exports and Iraqi output growth into 2017 add to bearish indicators. He notes that the draw in U.S. gasoline inventory seen deceptive as higher net exports - lower imports and more overseas shipments - could be “masking the problem.” He concludes that if global product markets remain oversupplied, ability to export on larger scale may be limited and run cuts unavoidable.

Oil Slides To $45 Handle After Saudis Set To Increase Output To Record High: Qatar Warns OPEC "Do Something" - Following last night's major build in gasoline inventories, the bullish exuberance in crude took another spill this morning as sources say Saudi Arabia is set to increase output yet again to a new record high. Furthermore, Qatar's energy minister urged OPEC and NOPEC to "do something" warnings that another failed meeting would "cause more damage than good." Saudi Arabia was “quietly telling” the market output could rise in Aug. to as high as 10.8m-10.9m b/d, Reuters reports, citing one unidentified person from outside OPEC familiar with the matter. Qatar’s Al-Attiyah Says OPEC and Non-OPEC ‘Need to Do Something’ It's "hard to say" whether OPEC will reach freeze deal w/ non-OPEC producers, Qatar’s former energy minister Abdullah Bin Hamad Al Attiyah says in phone interview. Another failed meeting would “cause more damage than good” “OPEC and non-OPEC should be very careful on holding a new meeting without proper consent and preparation” Freeze deal wouldn’t have huge impact on fundamentals but would boost mkt sentiment Mkt still oversupplied by ~1.2m b/d-1.5m b/d, may need until end-2017 to fully rebalance.

Oil Spikes After EIA Reports Significant Crude, Gasoline Draw | Oil prices began climbing shortly after the EIA published its weekly inventory report on Wednesday, which showed that crude oil inventories last week fell by 2.5 million barrels in the week to August 12, standing at 521.1 million barrels. The authority, however, added—likely to no avail to the already unsettled oil market—that inventories are still at a record-high level for this time of year. The caveat, although immediately disregarded by the market, may takes away much of the report’s potential for any longer-term stabilization of the oil market. Gasoline stockpiles were also down, by as much as 2.7 million barrels but, like crude, too high for the season. Distillate inventories were up, however, by 1.9 million barrels, yet still slightly below the upper limit for the season, which may reinforce a sense of optimism in fuels. Refineries processed 16.9 million bpd of crude last week, a weekly increase of 268,000 barrels per day from the previous week, operating at 93.5 percent of capacity. Markets were again volatile today, with traders expecting not just EIA inventory data but also the minutes of a Fed meeting that could see interest rates finally increased after much hesitation. Yesterday the American Petroleum Institute said commercial crude oil inventories had fallen by 1 million barrels, while Cushing stockpiles recorded a 680,000-barrel draw. The industry body also said that gasoline inventories were up by 2.2 million barrels in the seven days to 12 August, which was the biggest weekly jump for the last six months. Last week’s data from the EIA had crude oil inventories at 523.6 million barrels, up by 1.1 million barrels, remaining at a record-high level for this time of year.

Oil Jumps On Inventories Despite Biggest Production Increase In 15 Months -- With oil sliding after last night's surprise gasoline build from API (and headlines from the middle east), all eyes are on today's DOE data. As opposed to API, DOE reported a major drawdown in gasoline (-2.7mm) and along with draws in Crude and Cushing, oil prices jumped (despite a big build in distillates). Oil held gains despitye the biggest surge in US crude production since May 2015. DOE:

  • Crude  -2.508m (+950k exp)
  • Cushing -724k (+500k exp)
  • Gasoline -2.724m (-1.7m exp)
  • Distillates +1.939m (-600k exp)

After 3 weeks of builds, crude inventories fell this week:

Oil up fifth day on U.S. stock draws; Saudi output threatens rally | Reuters: Oil's rally extended for a fifth day on Wednesday, helped by a weaker dollar and an unexpected drawdown in U.S. crude and gasoline but traders said the run up may not last, pointing to galloping Saudi output and technical factors. Crude futures have gained as much as 13 percent since Thursday after Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation that OPEC was ready for an output freeze deal with producers outside the group. On Wednesday, Brent crude settled up 62 cents, or 1.3 percent, at $49.85 a barrel after touching five-week highs of $49.93. U.S. West Texas Intermediate (WTI) crude futures rose 21 cents, or 0.5 percent, to $46.79. Some traders and investors cautioned that crude futures, which slipped into bear market territory in early August after falling 20 percent from this year's highs in June, were looking overbought. "We've gained too much in too little a time, at least technically, and I think this rally has to stop,"

Wednesday Energy Tweets -- August 17, 2016  John Kemp:

  • commercial crude oil stocks still well above 2015 levels; no sign of inventory drawdown
  • distillate fuel oil stocks rise; well above 10-year median, but narrowing to 2015 levels
  • crude oil imports decelerated but still very high
  • US refinery throughput rose; reversing previous week's decline; in line iwht 2015; well above 10-year average
  • gasoline supplied about the same as previous week; at 9.77 million bopd
  • US midwest gasoline stocks fell significantly; now just 1.6% above 10-year average
  • US gasoline stocks falling faster than normal; approaching 10-year average
  • commercial crude oil inventories down 2.5 million bbls in week ended August 12

Close but no cigar: it looks like we won't quite hit the 10 million bopd four-week average this summer; we came close; in the report released today, the number was 9.770 million bopd compared with 9.776 the previous week, and historically, from here on out, until early next spring, the number will continue to fall.

How The East Coast Is Getting Rid Of Its Gasoline Glut -- One month ago, before the commodity trading world's attention turned to the unprecedented glut in gasoline stocks, we wrote "PADD 1 Is A Holy Mess" - Is This What Finally Drags Crude Oil Lower, in which we showed the historic excess of gasoline stocks on the US East Coast, known as the PADD 1 region. A week later, in a follow up article we explained that as a deluge of Chinese gasoline exports had flooded the world, the PADD1 glut was only getting worse,leading to a pile up of tankers in New York harbor. It got so bad, that gasoline stockpiles in PADD 1 rose to a record 72.5 million barrels in the week ended July 22. Meanwhile, as crack spreads collapsed, concerns about both gasoline and oil demand emerged, leading to a sharp selloff in oil, and the recent bear market in WTI (at least until the subsequent OPEC-meeting driven rally). After all, the key bullish narrative for the oil long case was that with a strong summer driving season, gasoline was not going to be a production bottleneck, and yet this is precisely what happened.  However, over the past three weeks, gasoline inventories finally dipped, and as we reported this morning, commercial gasoline stocks declined by another 2.7 million barrels according to the DOE, the third consecutive drop... with PADD1 gasoline inventories declining by 790,000 barrels to 70.125 million barrels. To some this seemed that the much needed inventory drawdown in gasoline had finally arrived. We thought so too, and then we read something surprising: as Bloomberg reported, "gasoline has also shifted south amid cargo diversions and deviations. A 330,000-barrel tanker usually on the Houston-to-Jacksonville, Florida, run last month moved two products cargoes to Florida from New York Harbor, according to vessel tracking data compiled by Bloomberg. Since June, at least eight foreign import cargoes originally booked to supply. New York were sent instead to the U.S. Gulf Coast and Mexican West Coast."

Crude oil and gasoline gluts beginning to shrink | Fuel Fix: The nation’s massive stockpiles of crude oil and refined gasoline are finally beginning to shrink in tandem, the Energy Department said Wednesday. Although oil and refining production levels are on the rise, the amount of oil and gasoline sitting in storage are falling. Crude inventories fell by 2.5 million barrels from last week, while motor gasoline stockpiles dipped by 2.7 million barrels. Still the Energy Department cautioned that commercial crude oil stockpiles of 521 million barrels are still at “historically high levels for this time of year,” while motor gasoline inventories of 232.7 million barrels remain “well above” average. U.S. oil prices are hovering above $46 a barrel after a few days of increases. Although crude and gasoline stockpiles are down, the nation’s overall petroleum stocks rose slightly in the last week. That’s because inventory levels rose for distillates, which are used to make diesel and heating oils, and for propane and propylene.

 Total Commercial Oil and Petroleum Inventories at Record Highs (Video) - Refiners are playing games with refinery runs to make gasoline appear in less of a glut situation year over year. Gasoline inventories are still up 20 Million Barrels versus this time last year. So Oil is much higher than this time last year with 65 Million more Barrels of Oil in storage year over year, 20 million more in gasoline inventories, 5 Million more in Distillate stocks, and overall Petroleum and Oil Inventories not only at record highs but increasing each of the last three weeks. Furthermore, we have about 10 more days of the Summer Driving Season, and demand for Petroleum products is going to weaken during the soft part of the season as well as refiners going into maintenance mode. Lots of games being played in the refinery space to move gasoline prices up 32 cents in a couple of weeks when inventories are as dismal as ever all over the globe. Throw in a potential rate hike announcement by Janet Yellen next week and the U.S. Dollar looks like an undervalued currency relative to its peers. I think the market is far too dovish on the Fed, market complacency regarding the lessening chance of rate hikes after the Fed minutes on Wednesday seems highly displaced in my opinion.

OilPrice Intelligence Report: Oil Makes Significant Gains Fueled By OPEC Talk -- West Texas Intermediate (WTI) crude futures were up $1.43, or about 3.1% percent on Thursday to $48.22 a barrel. That price brings black gold back to highs last seen in early July. Both Brent and WTI have risen more than 20 percent off of their August lows. That resurgence in price has followed news that OPEC and other key exporters may discuss freezing output levels during the OPEC meeting in Algeria in September. Freezing production at current levels may not be enough to keep prices at present levels according to some analysts. Saudi Arabia has indicated that it could boost crude oil supplies in August to a new record as the Kingdom continues its rivalry with Iran, even as it prepares to discuss output levels with other producers. That behavior would likely undermine freeze talks before they even begin. "The latest news from Saudi Arabia is not price supportive at all," Carsten Fritsch, senior oil and commodities analyst at Germany's Commerzbank, said, "This is a double whammy for the oil market. A test of the lows of early August is quite possible." Analysts at Citi also warned of the risk to the current rally given the failure of talks earlier this year on freezing crude output levels. "OPEC cooperation hopes should be treated with caution, as this is shaky ground to base a bull rally on," the bank said.

US rig count up 10 this week to 491, Texas up 8  (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by 10 this week to 491. A year ago, 885 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 406 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 eight rigs, Pennsylvania was up two and Louisiana, Oklahoma and West Virginia added one each. North Dakota declined by two and New Mexico was down one. Alaska, Arkansas, California, Colorado, Kansas, Ohio, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

US rig count rises for eighth straight week, up 10 to 406: Baker Hughes: Brent crude oil prices were lower on Friday after rising above $51 a barrel to an eight-week high that capped a rally driven by speculation producers could agree to measures to support crude. Also on Friday, oilfield services firm Baker Hughes reported the number of rigs operating in U.S. fields rose for an eighth consecutive week, increasing by 10 to a total of 406. The report marked the first time the count has exceeded 400 since February. At this time last year, the oil rig count stood at 674. International benchmark Brent crude oil futures were trading down 23 cents at $50.66 per barrel at 12:56 p.m. ET (1656 GMT). Brent earlier hit $51.22. U.S. West Texas Intermediate (WTI) crude futures fell 1 cent to $48.21 a barrel, after earlier rising as high as at $48.75. "We would argue that improved fundamentals are not a key reason for the recent price bounce," Morgan Stanley said in a note. "Crude oil demand is anemic, gasoline demand has decelerated globally, and China crude oil imports are likely to decelerate (in the second half of 2016)," the bank said, adding that supply appears set to surprise to the upside in a number of countries. Both benchmarks have risen 15 percent in the last six sessions amid comments by officials from crude-producing nations that they will discuss intervening in markets when they meet next month on the sidelines of a conference in Algeria.

Crude Shrugs As US Oil Rig Count Rises For 8th Straight Week -- Crude prices had slipped back into the red ahead of Baker Hughes rig count data (after topping $48.50 Sept 16 overnight). For the 8th straight week (and 11 of last 12) the US oil rig count rose (up 10 to 406), tracking the lagged recovery of WTI Crude prices and up 28% from cycle lows. The us oil rig count is now up 90 from the late-May lows at 316 (and based on the lagged oil price, is set to keep rising for another month). Charts: Bloomberg

Oil Prices Continue To Rise On Hollow Saudi Comments -- Last week Saudi Arabia’s Oil Minister said that the large number of short positions on crude have caused prices to fall, even though the market is already rebalancing itself. This statement immediately led to frantic covering, which pushed prices higher.This is just the latest confirmation that Saudi Arabia has taken center stage when it comes to oil. Nobody cares anymore about fundamentals, everyone listens to what Riyadh says. If Riyadh is bullish on oil, then oil prices rise, despite any production data that might contradict their words. If Riyadh decides for some reason to be bearish, the market follows. The extent of this dependency of traders on every word that comes out of Khalid al-Falih’s mouth (and other Saudi officials) becomes all the more evident in light of the latest production forecasts for Saudi Arabia. August production is expected to hit a new high of 10.8-10.9 million bpd, up from 10.67 million bpd in July. Why? Likely so Riyadh has more leverage at the upcoming unofficial OPEC meeting in Algeria. Not that it needs it, now that it is the undisputable tone-setter of the organization.And here’s another example of how far things have gone: virtually nobody expects the meeting to lead to any sort of agreement to freeze production. In the slim chance it does lead to such an agreement, the Saudi’s record output would indeed provide it with additional leverage: it will be able to continue pumping at the same level. However, the chance is so slim, it’s next to non-existent. Even so, the mere talk about the possibility of a production freeze got traders going long on crude—despite the clear lack of any sign of willingness on the part of Saudi Arabia to cut its output.Some analysts believe that Saudi officials are simply reflecting the rebalancing of the market. They argue that the market is indeed rebalancing and that next year oil fundamentals will swing into a deficit. Others, such as Goldman Sachs and Morgan Stanley, are not as bullish.

If Oil Prices Don't Rise, the Middle East Will Sink -  The ongoing collapse in oil prices that began two years ago is setting the stage for a catastrophic situation in the Middle East if it continues. That catastrophe could come in three stages of war: civil war within the boundaries of each sovereign; war between sovereign states; and most broadly, for the intra-Islamic fight between the Sunnis and Shias to devolve into a war of finality between them, with one side vanquishing, conquering and perhaps even attempting to extinguish the other.  I first addressed the potential for oil prices to be caught in a secular decline and its implications shortly after the collapse in prices began in 2014 in the column, "Oil and the Limits to Growth."  Although the process I laid out has largely occurred over the past two years, one part of that process has glaringly not occurred, and has enormous implications for what happens from this point forward.  That issue is that U.S. alternative oil producers have not been driven out of business to the extent I envisioned was probable; not even close.  As I discussed in the column, "The Biggest Current Threat to the Markets" last November, my expectation was that as the Saudis held oil prices down, the U.S. alternative producers would have to severely reduce production, loan defaults would spike, bankruptcies requiring the transfer of assets would follow, and the time it would take for all of this action to play out legally would preclude the ability of the U.S. alternative E&P industry from raising capital to restart production, even as the Saudis allowed oil prices to begin increasing again.   It would have been a temporary situation but would have provided an immediate reprieve of the fiscal issues facing all the OPEC countries, and in the process relieve the social tensions caused by the lack of economic activity in the region.  That hasn't happened and economic activity throughout the Middle East has plunged as a result.

Is Iran back in the game? -  The Chief Executive of this family business, a US-educated MBA, smiled at our puzzled expressions. “Contrary to what you all think, this country is still living under sanctions.” Of course some sanctions against Iran have come off. We watched it happen on 16th January, when—much sooner than sceptics had expected—the Iranians were commended for carrying out their commitments with regard to mothballing or reconfiguring key parts of their nuclear industry, and John Kerry, US Secretary of State, announced that his country and the European Union would “immediately lift nuclear-related sanctions.” (That focus on “nuclear-related” sanctions is all important: US terrorism- and human rights-related sanctions remain in place, meaning that most American business with and investment into Iran remains illegal.) Iran is now able to sell its oil to Europe for the first time since early 2012—as well as other commodities such as steel and petrochemicals; its banks have been reconnected to Swift, the interbank messaging service that handles cross-border payments; and some of the world’s biggest companies, from Shell to Peugeot, Airbus to Danieli, have been falling over themselves to get a piece of the world’s last big frontier market. This is the theory of what has been happening over the past four months. What the CEO in the Zagros meant when he said that Iran continues to live under sanctions is that theory and practice are so far apart as to make his life indistinguishable from pre-January days. His company remains unable to access top-of-the-range German components without long delays, and export remittances still have to come through a shell company in Dubai. The old frustrations of extra costs and compromises on quality—the Chinese are usually ready to supply what the west will not—haven’t gone away.

The Simple Reason Why OPEC Won't Strike a Deal on Oil -  After a more upbeat start to the week, oil prices fell and hovered around $42 a barrel for WTI (the main U.S. benchmark). It looks like we’re settling into another period of range-bound oil. Oil’s initial move up this week was caused by some OPECmembers calling, once again, for a cut or “freeze” in oil production. Traders, who need to literally hedge their bets on forward contracts, responded by nudging the market up. Yet there was little substance to these rumors. . Now, it’s true that every single member of OPEC is suffering from low oil prices – and some much more than others. But the truth is, Saudi Arabia has burned too many diplomatic bridges to get any deal like that off the ground… For quite some time, a number of OPEC countries have been in dire straits over low oil prices. In fact, every single member of the cartel is taking it on the chin with budget deficits, including the most solvent of them – Saudi Arabia, the United Arab Emirates, and Kuwait. But it’s the likes of Venezuela, Nigeria, Libya, and Algeria that have been hit the hardest. All are facing acute financial meltdowns, with the accompanying escalation in inflation, unemployment, shortages of food and other staples, and rising unrest. Moscow is still reeling from the meeting in Doha earlier this year, where the Russians thought they would have an agreement in principle for a cap only to find Saudi Arabia sabotaging the talks at the eleventh hour. Riyadh suddenly declared that there would be no cap if Tehran was not on board. Russia, of course, has its own central budgetary problems to worry about. But it has decided that, until there is some firm indication that OPEC will be cutting its historically high production levels, it will not do so either. We are, therefore, back to each competitor defending market share, with pricing cuts used to wrestle export markets from other producers. This was the reason for the Saudi move I discussed last week, a move directed squarely againstRussian exports to Asia.

Russia says oil market talks with Saudi developing - newspaper | Reuters: Russia, the world's top oil producer, is consulting with Saudi Arabia and other producers to achieve oil market stability, Energy Minister Alexander Novak said, adding that the door is still open for more discussions on freezing output levels if needed. In an interview published on Monday Novak also told Saudi-owned newspaper Asharq al-Awsat that a complete return of market stability is only likely in 2017. "With regard to the cooperation with Saudi Arabia, the dialogue between our two countries is developing in a tangible way, whether in the framework of a multi-party structure or on a bilateral level," Novak was quoted as saying. "We are cooperating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability," he said. "We are ready to achieve the widest possible level of coordination... and put in place joint measures to achieve oil market stability, with the condition that these measures will not be for a limited period of time." Novak's comments come only days after Saudi Arabian Energy Minister Khalid al-Falih said his country would work with OPEC and non-OPEC members to help stabilise oil markets. An informal meeting of major producing countries is scheduled in Algeria late next month.

Iran Undecided On Joining OPEC’s Production Meeting | Iran has not yet made a decision on whether or not it will join the OPEC meeting next month, and according to officials there, production levels have not reached a point at which the country can ink an output agreement.  This time around, September’s OPEC meeting is an informal one set to take place in Algiers, with a main agenda of talks surrounding the tightening of oil output. A spokeswoman for the nation’s oil ministry said that no decision has been made about attending the meeting, and that the country has not made a decision on joining an output cap. That spokeswoman said that the country would probably not reach pre-sanction production levels prior to the September meeting. The oil market fluctuated a bit in reaction to the news. US crude futures closed on Tuesday at $46.62 a barrel. Brent closed just above $48.50 per barrel. Iran was the holdout in creating a cap agreement in April, citing production levels in January that were far below historic levels.  Iran has previously said that it will not consider a cut in production until its exports increase by 1.5 million barrels per day, above the current level of 1.1 million per day. Iranian officials added that they would not support an emergency meeting unless there was a consensus on what would be done. One oil official said “If the meeting takes place and there is no agreement, it will have a negative impact on prices.” That same official said that the country might support such a meeting if the country was not asked to reduce its production. Iran is still in the process of recovering from the effects of nuclear sanctions. Iran had said that it planned to increase production by 500,000 barrels per day in short-term production, with a goal of reaching 1 million barrels per day by the end of the year.

U.S. Held Cash Until Iran Freed Prisoners - WSJ: —New details of the $400 million U.S. payment to Iran earlier this year depict a tightly scripted exchange specifically timed to the release of several American prisoners held in Iran. The picture emerged from accounts of U.S. officials and others briefed on the operation: U.S. officials wouldn’t let Iranians take control of the money until a Swiss Air Force plane carrying three freed Americans departed from Tehran on Jan. 17. Once that happened, an Iranian cargo plane was allowed to bring the cash home from a Geneva airport that day. President Barack Obama and other U.S. officials have said the payment didn’t amount to ransom, because the U.S. owed the money to Iran as part of a longstanding dispute linked to a failed arms deal from the 1970s. U.S. officials have said that the prisoner release and cash transfer took place through two separate diplomatic channels. But the handling of the payment and its connection to the Americans’ release have raised questions among lawmakers and administration critics. The use of an Iranian cargo plane to move pallets filled with $400 million brings clarity to one of the mysteries surrounding the cash delivery to Iran first reported by The Wall Street Journal this month. Administration officials have refused to publicly disclose how and when the transfer took place. Executives from Iran’s flagship carrier, Iran Air, organized the flight from Tehran to Geneva where the cash—euros and Swiss francs and other currencies—was loaded onto the aircraft, these people said.

An oil tanker carrying 900,000 litres of diesel has been hijacked and taken to Indonesia - (Reuters) - An oil tanker, which was earlier reported to have been hijacked and sailed into Indonesian waters, was believed to have been taken due to a commercial dispute, Malaysian authorities said on Wednesday. Vier Harmoni, carrying 900,000 litres of diesel, went missing after leaving the Tanjung Pelepas port on the eastern coast of Peninsular Malaysia on Tuesday before it was relocated in the waters off Batam, Indonesia. A Malaysian Maritime Enforcement Agency (MMEA) spokesman confirmed to Reuters that there was no element of terrorism involved in the tanker's disappearance. The spokesman said early investigations showed the tanker had been taken due to a disagreement between the ship's management and the crew. The ship was registered in Batam but was being leased by a Malaysian company, the spokesman said.The MMEA's southern regional chief Admiral Adon Shalan told The Star newspaper there could have been a financial dispute within the company. "We tried to contact the ship but it went unanswered," he was quoted as saying on the daily's website. "We believe the ship's captain might have turned off its tracking system as we could not trace it on our radar." Shipping data in Thomson Reuters Eikon suggests the ship's transponder has been turned off since June 20. The ship was carrying diesel with an estimated value of 1.6 million ringgit ($390,000).

Opium Rules: Afghan Oil Will Never Get Out Of The Ground - Afghanistan may have mouth-watering oil riches, but opium still rules this economy amid a lack of any real investment in getting oil and gas out of the ground. In 2011, the United States Geological Survey released a report on Afghanistan arguing that the responsible exploitation of the country’s natural resources, including oil and natural gas, could help alleviate its economic addiction to opium sales.At that time, opium production represented just under 50 percent of Afghanistan’s Gross Domestic Product. Since then, the nation has set new opium cultivation records. With an estimated 59 trillion cubic feet of natural gas resources hidden in its ground, Afghanistan does not seem to get the financial attention it deserves as a potential game-changer in the Central Asian natural gas market. American efforts to rebuild Afghanistan’s economy through the energy industry have created opportunities for Republican candidates to criticize the ability of the U.S. government—and of the Obama administration, in particular—to affect positive change in Iraq, Afghanistan and other areas in the Middle East. Case in point: the scandalous story that broke last November about a $43 million compressed natural gas station built in Afghanistan by the Task Force for Business and Stability Operations (TFBSO). A report by the Special Inspector General for Afghanistan Reconstruction (SIGAR) said the costs of the Sherberghan station appeared to exceed 140 times the amount of capital needed to build a comparable station in Pakistan.

ISIS recruits have minimal knowledge of Islam -  Islamic State recruits who joined the group in Syria knew very little about Islam, according to documents found in a former Islamic State stronghold in Syria and provided to the Associated Press. After analyzing forms that applicants had to fill out, the AP, which got the documents from a Syrian opposition site called Zaman al-Wasl, reported that 70 percent of recruits were listed as having just "basic" knowledge of Shariah, or Quranic law. That was the lowest possible choice in the forms reviewed by the AP. Just 5 percent of the applicants were deemed to be advanced students of Islam. The documents and interviews by the AP show that several young men from France were lured by a recruiter named Mourad Fares, who went bar-hopping with them even though Islam forbids alcohol. Others, from Britain, had ordered "Islam for Dummies" from Amazon before making the trip to join the Islamic State in Syria. But ignorance of Islam was not considered a negative by IS recruiters. Quite the contrary; young men ignorant of the religion could be shaped into ruthless fighters, and lured with practices that included giving them sex slaves and telling them that raping the slaves was justified under Islam

For The First Time, Russian Strategic Bombers Strike ISIS From Iran's Hamadan Air Base - Russian strategic bombers with full payloads delivered their first airstrikes on terrorist targets in Syria operating from an Iranian airbase, the Russian Defence Ministry said, after Moscow deployed Russian aircraft to an Iranian air force base to widen its campaign in Syria. The ministry said the strikes, by Tupolev-22M3 long-range bombers and Sukhoi-34 fighter bombers, were launched from Iran's Hamadan air base.  Russia's state-backed Rossiya 24 channel earlier on Tuesday broadcast uncaptioned images of at least three bombers and a Russian military transport plane apparently inside Iran, but said it was unclear how many Russian bombers had arrived there. This was the first time that Russia has struck targets inside Syria from Iran since it launched a bombing campaign to support Syrian President Bashar al-Assad in September last year. Moscow and Tehran signed a military agreement allowing Russian aircraft to station at Hamadan Airport in western Iran, and according to Iran's Natioanl Security Council the cooperation between the two countries in Syria is “strategic."  Tehran has agreed to share its military facilities and capacities with Moscow, confirming dedication to strategic cooperation in fighting against terrorism in Syria, Iran’s Secretary of Supreme National Security Council Ali Shamkhani told Islamic Republic News Agency (IRNA) in an interview on Tuesday.

Saudi Airstrike Kills 7 At Yemen Hospital Run By Doctors Without Borders -- Many have forgotten that as US and Russian forces battle the Islamic State, a few hundred kilometers away, Saudi Arabia continues to wage war in Yemen, which is where earlier today a Saudi-led coalition air strike hit a hospital run by Doctors Without Borders (MSF) in the northern Hajja province in Yemen, killing at least seven people and wounding 13. A Reuters witness cited by The Guardian at the scene of the attack in the Abs district, said medics could not immediately evacuate the wounded because war planes continued to fly over the area and first responders feared more bombings. The facility is run by aid group Medecins Sans Frontières, which confirmed on its official Twitter account that an air strike had occurred but said the number of deaths and injuries remained unclear. BREAKING: #Yemen MSF-supported hospital was hit by airstrikes at 15:45. We are assessing the situation. Number of casualties still unknown. — MSF International (@MSF) August 15, 2016 “Yes, we confirm the news. A hospital that is run by MSF was hit by a couple of airstrikes today at 3.45pm local time. Right now we don’t have more information. Medical staff are attending the wounded,” MSF spokesperson Malak Shaher told RT. MSF says it has supported the hospital since July 2015, adding that 4,611 patients have been treated at the facility.  The incident comes less than two days after MSF accused the Saudi-led coalition of killing 10 children and injuring 28 more in a strike that hit a school in the Houthi rebel stronghold of Saada in northern Yemen. The coalition denied targeting the school and claimed it hit a rebel camp where underage fighters were trained, AFP reports.

U.S.-backed, Saudi-led Coalition Bombed a Hospital in Yemen supported by Doctors Without Borders -- After the U.S.-backed, Saudi-led coalition bombed a hospital in Yemen supported by Doctors Without Borders on Monday, the U.S. State Department offered a rare condemnation of the coalition’s violence. “Of course we condemn the attack,” said Elizabeth Trudeau, a spokesman for the State Department. The State Department has previously deflected questions about coalition attacks by referring reporters to the Saudi government — even though the U.S. has supplied the coalition with billions of dollars of weapons, and has refueled Saudi planes. Trudeau also stressed that “U.S. officials regularly engage with Saudi officials” about civilian casualties — a line that spokespeople have repeated for months. Saudi Arabia has nevertheless continued to bomb civilian sites, including homes, markets, factories, and schools. “We’ve also encouraged them to do their utmost to protect entities protected by international law, such as hospitals,” said Trudeau. But for the Saudi coalition, bombing medical facilities has become business as usual. In October, the coalition bombed an MSF-supported hospital in Yemen’s Haydan district, destroying the only emergency medical facility serving 200,000 people. (Doctors Without Borders is also known as Médecins Sans Frontières, or MSF.) In December, airstrikes destroyed an MSF clinic in Taiz while doctors were treating the wounded from a nearby Saudi airstrike in a park. And in January, the coalition destroyed a hospital in Razeh district, killing five people — and killing an ambulance driver working for MSF later that month.

Exclusive: Civil war costs Yemen $14 billion in damage and economic losses - report | Reuters: The cost from damage to infrastructure and economic losses in Yemen's civil war is more than $14 billion so far, according to a confidential report seen by Reuters that highlights the effort needed to rebuild the country, where more than half the population is suffering from malnutrition. "The conflict has so far resulted in damage costs (still partial and incomplete) of almost $7 billion and economic losses (in nominal terms) of over $7.3 billion in relation to production and service delivery," said the May 6 joint report by the World Bank, United Nations, Islamic Development Bank and European Union. The internationally recognized Yemeni government of President Abd Rabbu Mansour Hadi is battling the Iran-allied Houthis in a bitter civil conflict, and is also facing the al Qaeda in the Arabian Peninsula militant group. The 16-month civil war has killed more than 6,500 people, displaced more than 2.5 million and caused a humanitarian catastrophe in a country with a per capita gross domestic product the World Bank last estimated at only $1,097 in 2013. The Preliminary Damage and Needs Assessment report is an internal working document that is not being publicly released. "These preliminary findings are not only partial, but also evolving" because the conflict is ongoing, the report said. The assessment, it said, was conducted between late 2015 and early this year. A survey by Yemen's education ministry cited by the report showed that of 1,671 schools in 20 governorates which suffered damage, 287 need major reconstruction, 544 were serving as shelters for internally displaced persons, and 33 were occupied by armed groups. Based on a sample of 143 schools, the estimated cost of the damage was $269 million.

Bin Laden’s Son Urges Overthrow Of Saudi Regime, Jihad Against US Influence -- Following several unclaimed terrorist attacks on Saudi territory over the past few months, yesterday the son of Al-Qaeda's founder Osama bin Laden urged Saudis to take discontent to the next level and to "overthrow" the kingdom's rulers in order to "free" themselves from US influence, SITE Intelligence Group reported Wednesday. In an undated audio message, Hamza bin Laden urged Saudi youth to join the Yemen-based Al-Qaeda in the Arabian Peninsula (AQAP) to "gain the necessary experience" to fight, according to SITE. In a new recording released on Wednesday by the Al-Qaeda-linked As-Sahab media outlet, the heir of Osama bin Laden urged Saudi youth to join the Yemen-based Al-Qaeda in the Arabian Peninsula (AQAP) to “gain the necessary experience” in waging “intifada” to free the country from the Al-Saud family. The undated audio message is Hamza bin Laden’s fourth speech since August 2015, as he tries to assert his influence over the global terrorist network. While Al-Qaeda has been headed by Ayman Al Zawahri since 2011, experts believe that Hamza is aiming for the top terrorist position. Furthermore, the resurgence the ‘heir’ comes amid rivalry among the notorious jihadist groups. Al-Qaida’s Syria affiliate Al-Nusra Front is a rival of the Islamic State, which itself is a former Al-Qaeda offshoot whose leader Abu Bakr al-Baghdadi in 2014 declared an Islamic caliphate across Iraq and Syria.

Senators consider vote to block US arms deal to Saudi Arabia – report  --Days after the Obama administration approved a major arms sale agreement to Saudi Arabia, Republican senator Rand Paul of Kentucky is considering blocking the move, citing objections to the country’s human rights record and a possible regional arms race.  “I will work with a bipartisan coalition to explore forcing a vote on blocking this sale,” said Paul, according to a statement provided to Foreign Policy magazine. “Saudi Arabia is an unreliable ally with a poor human rights record. We should not rush to sell them advanced arms and promote an arms race in the Middle East.” Paul’s statement comes amid a deteriorating situation in Yemen, Saudi Arabia’s neighbor to the south, where Riyadh has been involved in a US-supported intervention for more than a year. Peace talks being brokered by the United Nations and held in Kuwait fell apart last week and fighting resumed on Tuesday, as airstrikes from the Saudi-led coalition struck a food facility, killing more than a dozen people. Though    Paul, and his colleague on the Senate foreign relations committee, Democratic senator Chris Murphy, have been critics of US policy in Yemen and of providing Saudi Arabia with the logistical and military support it has asked for.

Fractured Lands: How the Arab World Came Apart - The New York Times: This is a story unlike any we have previously published. It is much longer than the typical New York Times Magazine feature story; in print, it occupies an entire issue. The product of some 18 months of reporting, it tells the story of the catastrophe that has fractured the Arab world since the invasion of Iraq 13 years ago, leading to the rise of ISIS and the global refugee crisis. The geography of this catastrophe is broad and its causes are many, but its consequences — war and uncertainty throughout the world — are familiar to us all. Scott Anderson’s story gives the reader a visceral sense of how it all unfolded, through the eyes of six characters in Egypt, Libya, Syria, Iraq and Iraqi Kurdistan. Accompanying Anderson’s text are 10 portfolios by the photographer Paolo Pellegrin, drawn from his extensive travels across the region over the last 14 years, as well as a landmark virtual-reality experience that embeds the viewer with the Iraqi fighting forces during the battle to retake Falluja.It is unprecedented for us to focus so much energy and attention on a single story, and to ask our readers to do the same. We would not do so were we not convinced that what follows is one of the most clear-eyed, powerful and human explanations of what has gone wrong in this region that you will ever read.

How the Europeans’ creation of Iraq, Syria and Libya contributed to today’s chaos - While most of the 22 nations that make up the Arab world have been buffeted to some degree by the Arab Spring, the six most profoundly affected — Egypt, Iraq, Libya, Syria, Tunisia and Yemen — are all republics, rather than monarchies. And of these six, the three that have disintegrated so completely as to raise doubt that they will ever again exist as functioning states — Iraq, Syria and Libya — are all members of that small list of Arab countries created by Western imperial powers in the early 20th century. In each, little thought was given to national coherence, and even less to tribal or sectarian divisions. Certainly, these same internal divisions exist in many of the region’s other republics, as well as in its monarchies, but it would seem undeniable that those two factors operating in concert — the lack of an intrinsic sense of national identity joined to a form of government that supplanted the traditional organizing principle of society — left Iraq, Syria and Libya especially vulnerable when the storms of change descended. The process began at the end of World War I, when two of the victorious allies, Britain and France, carved up the lands of the defeated Ottoman Empire between themselves as spoils of war. In Mesopotamia, the British joined together three largely autonomous Ottoman provinces and named it Iraq. The southernmost of these provinces was dominated by Shiite Arabs, the central by Sunni Arabs and the northernmost by non-Arab Kurds. To the west of Iraq, the European powers took the opposite approach, carving the vast lands of “greater Syria” into smaller, more manageable parcels. Falling under French rule was the smaller rump state of Syria — essentially the nation that exists today — and the coastal enclave of Lebanon, while the British took Palestine and Transjordan, a swath of southern Syria that would eventually become Israel and Jordan. Coming a bit later to the game, in 1934, Italy joined the three ancient North African regions that it had wrested from the Ottomans in 1912 to form the colony of Libya.

The Drone Presidency - On March 5, the United States used unmanned drones and manned aircraft to drop bombs on a group of what it described as al-Shabab militants at a camp about 120 miles north of Mogadishu, Somalia, killing approximately 150 of them. The administration claimed that the militants presented an imminent threat to African Union troops in the region with whom US advisers have been working, although it produced no evidence to support the claim. The news that the United States had killed 150 unnamed individuals in a country halfway around the world with which it is not at war generated barely a ripple of attention, much less any protest, here at home. Remote killing outside of war zones, it seems, has become business as usual This is a remarkable development, all the more noteworthy in that it has emerged under Barack Obama, who came to office as an antiwar president, so much so that he may be the only person to win the Nobel Peace Prize based on wishful thinking. Our Peace Prize president has now been at war longer than any other American president, and has overseen the use of military force in seven countries—Afghanistan, Iraq, Syria, Pakistan, Libya, Yemen, and Somalia. In the latter four countries, virtually all the force has come in the form of unmanned drones executing suspected terrorists said to be linked to al-Qaeda or its “associated forces.” That an antiwar president has found the drone so tempting ought to be a warning sign. Other countries are unlikely to be reticent about resort to unmanned aerial warfare to “solve” problems beyond their borders. Already, Israel, the United Kingdom, Iran, Iraq, Nigeria, and Pakistan have joined the US in deploying armed drones. China is selling them at a list price of only $1 million. In short order, most of the developed world will have them. And when other nations look for precedents, Obama’s record will be Exhibit A.

US nukes at Turkey base at risk of seizure: report (AFP) - Dozens of US nuclear weapons stored at a Turkish air base near Syria are at risk of being captured by "terrorists or other hostile forces," a Washington think tank claimed Monday. Critics have long been alarmed by America's estimated stockpile of about 50 nuclear bombs at Incirlik in southern Turkey, just 70 miles (110 kilometers) from the border with war-torn Syria. The issue took on fresh urgency last month following the attempted coup in Turkey, in which the base's Turkish commander was arrested on suspicion of complicity in the plot. "Whether the US could have maintained control of the weapons in the event of a protracted civil conflict in Turkey is an unanswerable question," said Monday's report from the Stimson Center, a nonpartisan think tank working to promote peace. Incirlik is a vital base for the US-led coalition fighting the Islamic State group in Iraq and Syria, with the strategically located facility affording drones and warplanes fast access to IS targets. But the Pentagon in March ordered families of US troops and civilian personnel stationed in southern Turkey to quit the region due to security fears. "From a security point of view, it's a roll of the dice to continue to have approximately 50 of America's nuclear weapons stationed at Incirlik Air Base in Turkey," report co-author Laicie Heeley said. "There are significant safeguards in place. ... But safeguards are just that, they don't eliminate risk. In the event of a coup, we can't say for certain that we would have been able to maintain control," she told AFP.

Why Russia values a non-nuclear Iran more than higher oil prices | Bulletin of the Atomic Scientists: One of the key questions that remain unanswered more than one year after the signing of the Joint Comprehensive Plan of Action—the Iran nuclear deal—is why Russia supported it. A failure of the talks between Iran and the P5+1 (Russia and the four other permanent members of the United Nations Security Council, plus Germany) would have at least stopped decline in the price of oil and tangibly benefited the Russian economy. As the talks edged toward completion in 2015, some Russia watchers in the West began to suspect that Russia might be looking for ways to stir up trouble, so that oil prices would go up. I see at least four reasons why Putin chose to support the deal.First, as my reading of Russia’s vital interests indicates, preventing Iran from obtaining nuclear weapons is of greater lasting value to Russia than shorter-term gains from a surge in oil and gas prices.Second, although any regional destabilization induced by the failure of the Iran nuclear talks would have had a significant effect on oil prices, the effect would have been temporary. For instance, the first Iraq war had no lasting effect on oil prices, according to a recent chart in the Economist. Third, the model of economic growth based on rising oil prices is no longer working for Russia. Even high oil prices will not restore the economic growth rates of 7 percent per year that Russia saw in the 2000s, and the Russian government knows this well. As theFourth, the lifting of the international sanctions on Iran allows Russia to increase trade with Iran, counteracting some of the losses that Russian exporters will endure from competition on the Iranian market with Western suppliers—competition that is bound to intensify as Western governments lift their own national restrictions on their companies’ trade with Tehran.

With China Crash, Saudi Arabia Hemorrhaging Cash: With China’s economic crash driving U.S. oil prices down to $42 a barrel, Saudi Arabia is the oil-exporting nation suffering the worst economic decline. The 15,000 members of the six branches of the Saudi royal family have been buying national support with massive social welfare spending. But with the oil price plunging by 60 percent, causing a massive budget deficit, the kingdom’s foreign exchange reserves could be wiped out in four years. Most analysts have focused on Russia as suffering the worst impacts of the oil price crash. The value of Russia’s oil & gas production is approximately $350 billion per year; it accounts for 20 percent of Russia’s GDP, and equals two thirds of all exports. But even at current prices, Russia will still achieve a trade surplus of about three percent of GDP. As an oil exporter, Russia’s is uniquely self-sufficient and a military exporter. Saudi Arabia’s oil and gas sector makes up 45 percent of GDP, funds about 80 of the government’s budget, and accounts for 90 percent of exports. Saudi Arabia’s 2014 budget spending was $294.3 billion, with a $14.4 billion deficit. The 2015 Saudi budget was cut down to $229.3 billion in spending, with an expected $38.6 billion deficit. But in June with the average price of oil estimated to be $60 a barrel for the year,  the IMF estimated that Saudi Arabia’s $745 billion GDP would fall to $649 billion and the nation would post a budget deficit of 20 percent of GDP, or $130 billion. With international oil prices at $49 a barrel, the Saudi deficit will jump to about $163 billion and Saudi GDP will plunge by another $80 billion, to $570 billion. The IMF also did not make any mention of the added cost of Saudi Arabia’s air campaign against the Islamic State in Syria, and its war and invasion of Yemen.

China Set to be the World's 2nd Largest Shale Gas Producer by 2040  |  Rigzone - China is poised to be the world's second largest shale gas producer after the U.S. by 2040, when it would account for more than 40 percent of the country's total natural gas production, the U.S. Energy Administration (EIA) said Monday. The Asian economic giant, who has been among the first countries outside North America to develop shale resources, has drilled more than 600 shale gas wells in the last 5 years, producing 0.5 billion cubic feet per day (Bcf/d) of shale gas as of 2015, according to EIA's International Energy Outlook 2016 (IEO2016) and Annual Energy Outlook 2016 (AEO2016). China is progressing development of its shale gas resources through joint venture with international oil and gas companies. Earlier this year, BP plc and China National Petroleum Corp. (CNPC) signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in China's Sichuan Basin. The EIA estimated that the world's natural gas production is set to grow 62 percent from 342 Bcf/d in 2015 to 554 Bcf/d by 2040 and shale gas resources are expected to be the largest component of this growth. According to the EIA, global shale gas production -- projected to increase from 42 Bcf/d in 2015 to 168 Bcf/d in 2040 -- would account for 30 percent of the world's natural gas supply by the end of the forecast period. The projection also indicated that the U.S. would remain the world's top shale gas producer. Shale gas accounted for more than half of the country's natural gas output last year and production is expected to more than double from 37 Bcf/d in 2015 to 79 Bcf/d by 2040, or equivalent to 70 percent of overall natural gas production. Apart from the U.S. and China, Canada and Argentina are the other 2 countries with commercial shale gas production. Canada's shale gas production, which reached 4.1 Bcf/d in 2015, is likely to continue growing and make up almost 30 percent of the country's overall natural gas production by 2040. Over the same period, Argentina's commercial shale gas production would rise from 0.07 Bcf/d last year to account for 75 percent of the South American country's total natural gas production by 2040.

China’s Gas Ambitions Could Have A Huge Impact On Energy Markets | China has been working on developing its shale gas resources for a few years now, with mixed success, mainly because of the difficult geology. But times are a changing and, due to developments in shale, Asia’s biggest economy is well on its way to becoming the world’s second-largest producer of natural gas. The Energy Information Administration, in its latest International Energy Outlook 2016, estimates that China, which was last year producing 500 million cubic feet of shale gas daily, is on its way to ramping this up to over 20 billion cubic feet daily by 2040. While 2040 may seem a long way off, this still represents seriously significant growth, and there is more than one reason for this new focus on shale gas. For starters, China’s oil and gas majors are suffering not just from low oil prices but also from mature fields, many of them nearing depletion. However, its energy needs are not declining, and the country is still the world’s top energy consumer, with consumption 30 percent higher than that of the U.S., according to World Finance. Second, while currently China relies predominantly on coal to satisfy these energy needs, it is also paying increasing attention to the environmental problems related to coal, the cheapest – and dirtiest – fossil fuel that helped its industrial revolution turn into the economic hothouse the world still looks to in hopes that Chinese consumption of energy and mining commodities will help the respective ailing industries. Third, China is finally moving away from heavy industry and towards a more service-focused economic model. This has been bad news for energy exporters that have counted on the Asian economy’s huge energy needs for much of their revenue, but it shouldn’t be too bad as the transition won’t be quick, and there is still India, who will replace China as Asia’s industrial hothouse.

China’s July Reserve Sales: Bigger, But Still Not That Big: The proxies for China’s foreign exchange intervention in July are now available, and they point to $20 to $30 billion of reserve sales. The PBOC’s foreign assets fell by about $23 billion (The PBOC’s foreign reserves, as reported on the PBOC’s renminbi balance sheet, fell by $29 billion; I prefer the change in the PBOC’s foreign assets though, as foreign assets catches the foreign exchange that banks hold at the PBOC as part of their reserve requirement). FX settlement with non-banks shows net sales of around $20 billion. Throw in the change in forwards in the settlement data, and total sales were maybe $25 billion. All the proxies show more variation than appeared in headline reserves, which only fell by $5 billion. I trust the proxies. The bigger story, I think, is two-fold. One is that there is still a correlation between FX sales and moves in the yuan against the dollar. In June and July the yuan slid against the dollar, and the magnitude of FX sales increased. That fits a long-standing pattern. The second, and far more important point, is that the magnitude of sales during periods when the yuan is depreciating against the dollar are significantly smaller than they were last August, or back in December and January.Why? Tighter controls? Or, more simply, has a lot of the foreign currency debt that was built up as part of the carry trade (borrow in dollars to buy yuan to pocket higher interest rates on the yuan) now been paid back, reducing corporate demand for foreign currency in periods of depreciation? Either way, if a bad month means $20-30 billion in sales, China isn’t going to run out of reserves anytime soon.

China’s Economic Slowdown - WSJ -- Fortunes have been lost predicting a blowup in the Chinese economy, but Friday’s reports on industrial output, investment and retail sales provide new evidence for the bears. China’s economy is clearly slowing down, though how much is less clear. The slowdown would be positive if it resulted from Beijing’s efforts to cut back industrial overcapacity and rein in wasteful investment at state-owned companies. Industrial production is only up 6% year on year and urban fixed asset investment grew at 8.1% for the first seven months of the year, down from 9% for the first six months. But a successful rebalancing requires consumer and private companies to drive growth, and those figures were also bad. Retail sales grew 10.2% year on year in July, down from 10.6% in June and below expectations. More alarming was a decline in private investment—growing only 2.1% in the first seven months of 2016. This suggests China is entering a period of corporate deleveraging. Real-estate developers in particular are paying down debt instead of starting new projects, and the cash holdings of Chinese firms jumped 18% last quarter. China’s growth since 2009 has been fueled by a debt blowout, and some businesses are failing to make enough profit to repay their loans. Yu Xuejun, chairman of the supervisory board for major state-owned financial institutions under the China Banking Regulatory Commission, said last month that banks face the worst bad-loan pressure since 2004, when the government recapitalized the system. Bond defaults in the first half of the year were nearly double all of 2015. Before concluding that China is heading for a crash, remember that some industries and regions are still growing strongly. The government also has the capacity to recapitalize banks, and some are already writing off loans and raising new capital.

Panic? China Is Hoarding Cash At The Fastest Pace Since Lehman -- The last few months have seen trillions of dollars of fresh credit puked into existence in China to enable goal-seeked growth numbers to creep lower (as opposed to utterly collapse). The problem is... the Chinese are hoarding that cash at the fastest pace since Lehman as liquidity concerns flood through the nation. China’s M2, a broad gauge of money supply including savings deposits, rose at the slowest pace in 15 months and trailed the government’s full-year target of +11% in July. But, as Bloomberg details, by contrast, M1, the total of cash, checks and demand deposits, rose at the quickest pace in six years...

Japanese Coast Guard Releases Video Showing Hundreds Of Chinese Ships Near Disputed Islands --One week after Japan vocally complained to China over what it alleged was a fleet of 300 Chinese vessels spotted near the disputed territory of the Senkaku Islands in the East China Sea, with Vice Foreign Minister Shinsuke Sugiyama summoning and complaining to China’s Ambassador Cheng Yonghua that the incident had infringed on Japan’s sovereignty, the Japanese coast guard released a video showing hundreds of Chinese vessels sailing in the contentious territory. The aerial footage indicates the high level of tension in the area. The video, which was shot from inside a low-flying patrol aircraft, has been released online by the Japanese Coast Guard, the Japan Times reported on Tuesday.  The footage shows 200 to 300 Chinese fishing boats accompanied by 28 Chinese patrol ships spotted in areas just outside Japanese territorial waters around the Senkakus, as well as Japanese patrol ships trying to prevent the Chinese ships from advancing into the disputed area. Toward the end of the video, the 1,500-ton Japanese patrol ship Aguni, armed with 20mm cannon, approaches a Chinese Coast Guard vessel and a fishing boat. The Aguni then flashes a warning: “Your ship has intruded into the territorial waters of our country …  passage in Japanese waters is not allowed. Get out of this area immediately,” according to Japanese captions to the video cited by the newspaper. As RT reports, the Japanese Coast Guard later claimed that seven out of 18 Chinese patrol vessels spotted around the Senkakus were equipped with what “looked like machine guns,” according to the Japan Times. “Actions by the Chinese side like this, which will escalate the situation, are not tolerable,” the Japanese Coast Guard said in a statement.

Japan Q2 GDP Misses, Unchanged From First Quarter, As Business Spending, Exports Slide -- After a flurry of disappointing GDP reports from the US and Europe, not to mention last week's uniformly poor Chinese economic data, Japan was the latest country to report that nominal economic growth in the second quarter rose a disappointing 0.2% annualized, missing expectations of a 0.7% increase, and down from the revised 2.0%  GDP growth in Q1, while on a sequential basis GDP was flat with the first quarter.  While private consumption rose 0.2% q/q; in line with estimate, there was pronounced weakness in business spending which fell 0.4% q/q; well below the consensus estimate of +0.2%, while net exports dipped -0.3% from last month's 0.1%, confirming yet again the global economic growth remains in the doldrums, and that the BOJ is in desperate need of putting more pressure on the Japanese Yen, something it has failed to do so far this year despite unleashing NIRP and doubling the pace of its ETF purchases.  Annualized GDP barely grew, rising just 0.2%, and missed expectations. On a sequential basis, GDP was unchanged, after fluctuating between contraction and growth for 4 consecutive quarters.

 Japan's economic growth weaker than forecast - BBC News: Japan's economy grew at a weaker-than-expected rate in the second quarter despite an aggressive spending policy by the government. Gross domestic product grew at an annualised rate of 0.2% in the three months to June, below market forecasts for 0.7% and a marked slowdown from the 2% rate in the first quarter. The figures come after the government launched a massive new stimulus package worth 28 trillion yen ($265bn; £200bn). Japanese stocks fell after the data. The benchmark Nikkei 225 share index dropped 0.3% on concerns that Asia's second-largest economy will continue to struggle. On top of Prime Minister Shinzo Abe's fiscal stimulus, Japan's central bank is running negative interest rates and an unprecedented asset-purchase programme. Timothy Graf, head of macro strategy at State Street Global Markets said Japan's growth figures "could have been a lot worse". There are "worries building over slowing domestic consumption, capital expenditure and the potential for weaker net exports thanks to a stronger yen," he said. "It still keeps markets focused on whether the Bank of Japan will ease policy later this year, but there may be some sense of relief that the current growth slowdown is not more aggressive."

The Numbers Behind Japan’s Sputtering Economy - Japan on Monday reported that its economy had expanded by the smallest of margins in the second quarter. The country has been struggling to ignite growth after years of slumping wages and prices. The currency has shot up this year, hurting crucial export industries. It’s the world’s third-largest economy. So what does it mean when it grows only a fraction of a percent in one quarter?Japan’s gross domestic product barely budged in the quarter to June, increasing by 0.2 percent in annualized terms. But estimated growth for the first quarter was revised upward, to a robust 2 percent, meaning output has, on the whole, been better than average so far this year.This isn’t a new feeling for Japan: The country, with a shrinking work force and declining competitiveness in industries like electronics, has grown at an average rate of less than 1 percent for the past two decades.Growth in the first three months of the year was faster than expected, with an expansion of 1.7 percent in annualized, price-adjusted terms. But in the months after that, slowing growth in China and Britain’s vote to leave the European Union weighed on the economy, and investors flocked to the Japanese currency, causing it to gain strength — and sap momentum from the Japanese economy. The data on Monday highlighted how the yen’s recent rise has pinched growth in Japan. A strong yen hurts exports, the value of which fell by 5.9 percent in the latest quarter — the biggest drag on the economy. Economists said the drop in exports was partly offset by consumer spending, which makes up the largest portion of economic activity and increased 0.6 percent. “Net trade was much weaker than expected, but domestic demand was firmer,”

Japanese Imports, Exports Crash At Worst Rate Since 2009 - For the 19th month in a row, Japanese Imports plunged - dropping 24.7% YoY (worse than expected), the biggest drop since Oct 2009. Exports were just as dismal, also missing expectations, plunging 14.1% YoY - worst since Oct 2009. The biggest driver of the collapse of Japanese trade was a 44% crash in the Chinese trade balance. There's no lipstick to put on this pig... it's a disaster.. and worse still Yen is strengthening back below 100 against the USD.

Japan's economic woes deepen as manufacturers' mood hits three-year low | Reuters: Japanese manufacturers' mood soured in August to its lowest since 2013 when the central bank embarked on aggressive monetary easing, a Reuters poll showed on Friday, highlighting the weakness in an economy facing declining exports and sluggish consumer spending. The Reuters Tankan, which tracks the Bank of Japan's quarterly tankan, came on top of recent data showing exports in July tumbled the most since the last global financial crisis, and that economic growth stalled in April-June. It underscores the challenge facing Prime Minister Shinzo Abe to boost growth as his recipe of bold monetary stimulus, fiscal spending and structural reforms - dubbed "Abenomics" - has struggled to pull the economy out of deflation and low growth. Illustrating fragility rather than strength in consumer spending, the service sector's confidence stopped falling for the first time in five months, according to the poll of 533 big and mid-sized firms on August 1-16, of which 275 responded. The yen's strength, currently close to a seven-week high of around 100 to the dollar JPY= hit exporters' profits and hurt stock prices, which in turn dampens consumer sentiment. The strong currency drives down the cost of imports and raises the risk of a return to deflation, analysts say.

BOJ Firepower Fizzles as Currency Market Dares Japan to Act - Bloomberg: Foreign-exchange traders are becoming increasingly confident that the Bank of Japan won’t stand in the way of further yen strength after the currency surpassed 100 per dollar for the second time this year. QuickTake Abenomics Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. and Morgan Stanley see the yen extending this year’s almost 20 percent gain versus the dollar, further confounding policy makers who are seeking to spur growth and inflation in the world’s third-largest economy. As the currency surged Tuesday, Japanese Vice Finance Minister Masatsugu Asakawa said he’s watching with concern to see if there are speculative moves in the foreign-exchange market.Forecasters who started 2016 predicting yen weakness have had to revisit calls predicated on Japan’s ability to use rhetoric, monetary stimulus and quantitative easing to stymie the currency’s advance. Efforts that would typically weaken the yen have proven largely ineffective this year, signaling that the BOJ may have run out of room to maneuver. At this point, the yen’s strength appears to fall short of levels where the BOJ would consider entering the market to sell yen -- a step that hasn’t happened since 2011 -- according to Mizuho Bank Ltd. More Jawboning “The verbal warnings will get stronger until something nearer 90, which might induce some form of physical intervention,” said Neil Jones, head of hedge-fund sales at Mizuho in London. “It is very unlikely that they will unilaterally intervene at current levels.” The yen touched 99.54 per dollar Tuesday, the highest since June 24, the day after the U.K. voted to leave the European Union. It slid 0.4 percent to 100.67 as of 8:12 a.m. in New York after Asakawa said Japan will have to act if there are extreme moves in the foreign-exchange market, and that it’s in close contact with other Group-of-Seven nations.

The Bank of Japan's Unstoppable Rise to Shareholder No. 1 - Bloomberg: The Bank of Japan’s controversial march to the top of shareholder rankings in the world’s third-largest equity market is picking up pace. Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings. BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month, adding to an unprecedented campaign to revitalize Japan’s stagnant economy.While bulls have cheered the tailwind from BOJ purchases, opponents say the central bank is artificially inflating equity valuations and undercutting efforts to make public companies more efficient. Traders worry that the monetary authority’s outsized presence will make some shares harder to buy and sell, a phenomenon that led to convulsions in Japan’s government bond market this year. “Only in Japan does the central bank show its face in the stock market this much,” “Investors are asking whether this is really right.” While the BOJ doesn’t acquire individual shares directly, it’s the ultimate buyer of stakes purchased through ETFs. Estimates of the central bank’s underlying holdings can be gleaned from the BOJ’s public records, regulatory filings by companies and ETF managers, and statistics from the Investment Trusts Association of Japan. Forecasts of the BOJ’s future shareholder rankings assume that other major investors keep their positions stable and that policy makers maintain the historical composition of their purchases.

Japan sinking deeper into de-facto helicopter money | Reuters: The Bank of Japan says there is no possibility of helicopter money, and by a strict definition they are correct. But as the government plans to issue more 40-year bonds, it is looking more and more like some monetization of debt is underway. The BOJ says as long as it buys Japanese government bonds (JGB) from the market, it is not directly underwriting bonds to fund government spending. However, that distinction has become blurred as investors buy bonds only to take profits by selling them immediately to the bank - a transaction coined the "BOJ trade." "The BOJ is now buying the entire 30 trillion yen ($299.1 billion) in bonds newly issued by the government annually. In a sense, it has the same effect of helicopter money," said Etsuro Honda, a former special adviser to the cabinet and a close associate to Prime Minister Shinzo Abe. The term 'helicopter money', where a central bank directly finances government spending by underwriting bonds, was coined by American economist Milton Friedman and gained prominence when former U.S. Federal Reserve Chairman Ben Bernanke cited it in a 2002 speech as a way to beat deflation. Some economists, however, fear such moves could trigger hyperinflation and uncontrollable currency devaluation.

In Surprising Twist, Global Central Banks Dump A Record $335 Billion In US Debt In Past Year -- On Sunday, when looking at the latest update of the Fed's custody holdings of Treasuries, we noted something troubling: the number dropped sharply, declining by over $17 billion, bringing the total to $2.871 trillion, the lowest amount of Treasuries held by foreigners at the Fed since 2012. We added that "while TIC data released this Monday will give us some much needed, if substantially delayed, data on reserve manager activity as of June, the hypothesis is that OPEC countries such as Saudi Arabia  are once again quietly selling Treasuries to raise cash in an environment of low oil prices and the consequent budgetary tightness." After getting the Treasury International Capital (TIC) data, we can confirm that something strange is taking place in the US Treasury market, in fact something that is the complete opposite of what one would expect by looking at the relentless Indirect bidder demand in government bond auctions. Because, based on TIC data, foreign investors - both official and private - were sellers of $32.9 billion Treasury notes and bonds in June. Narrowing the selling down to just official entities, i.e. mostly central banks, but also SWFs and reserve managers, brings the total to $33.5 billion. Contrary to our expectation that the biggest sellers would be Saudi Arabia and/or other petrodollar reliant nations, the largest sellers of Treasuries in June, based on transaction data,were China, with sales of $28.0 billion, Japan, with sales of $13.2 billion and Hong Kong, with sales of $10.8 billion. Alternatively, the largest buyer in June by far was the Cayman Islands, with purchases of $28.3 billion; this is another name for "hedge funds." The UK was a distant second, with purchases of $5.1 billion. As SMRA points out, the purchases of Treasuries by the Cayman Islands in June were much larger than the increase in holdings by investors there, suggesting that some of the buying was done on behalf of investors located in other countries. It appears we have a new "Belgium" on our hands, this time one where a sovereign player is using a hedge fund to accumulate positions instead of conventional London or Brussels-based bond clearinghouses.

Why scientists of Indian origin are leaving a better life and returning to India -- Call it the Swades 2.0. Ambitious and bright, a rash of scientists had left India for better opportunities and, over the years, gained vital exposure to the best global research labs. After years of experimenting and collaborating with some of the top scientists in the world, they have now chosen to return to their homeland. Traditionally, such homecomings are driven partly by family compulsions, but of late it is a flurry of fellowships and incentives by the government that has helped the scientists relocate to India. The main attraction now is absorption into an institute where they can be part of the permanent faculty. Says department of science and technology secretary Ashutosh Sharma: "Turning brain drain into brain gain requires creation of appropriate opportunities at certain critical stages in the progression of a scientific career." The first critical point, he adds, is right after PhD when substantial resources to train a scientist have already been committed. The second intervention is to attract the scientists who have gone abroad back to the country.RA Mashelkar, a former director-general of the Council of Scientific & Industrial Research (CSIR), says, "India is moving from brain drain to brain gain to brain circulation. An Indian scientist would love to stay in India, provided he is given a challenging job here. And I strongly believe that India is becoming a land of opportunity."India is indeed rapidly becoming a global research, design and development hub. More than 1,000 companies from around the world have set up their R&D centres in India. Over 2,00,000 scientists and engineers are working there, at least a fourth of whom have returned from overseas. Here are eight of them:

Australia's Central Bank Cut Rate to Boost Inflation, Growth - Bloomberg: Australia’s central bank said inflation would remain low and the economy could grow faster, while house-price concerns had cooled, in explaining its decision to cut interest rates for the second time in four months. “While prospects for growth were positive, there was room for stronger growth, which could be assisted by lower interest rates,” the Reserve Bank of Australia said in minutes of its Aug. 2 meeting, when the benchmark was reduced to a fresh record low of 1.5 percent. “The risks associated with rising household sector leverage and rapid gains in housing prices had diminished.” RBA Governor Glenn Stevens and his board are using easy policy and a weaker currency to encourage growth in services like tourism and education amid the winding down of a once-in-a-century mining boom. It’s been hit and miss: while the economy has grown faster than the central bank predicted and unemployment remained under 6 percent, core inflation and wage growth are both at record lows and there’s little sign of a pick-up in business investment. “There continued to be considerable uncertainty about momentum in the domestic labor market and the extent to which domestic inflationary pressures would rise over the next few years,” the central bank said.

Nigeria central bank says Skye Bank safe, no need for panic withdrawals - Nigeria's central bank is seeking to reassure Skye Bank depositors that the lender is safe and there is no need for them to rush to withdraw their funds in response to speculation that it has liquidated the bank, it said late on Wednesday. The central bank injected more than 100 billion naira ($312 mln) into Skye bank last month after sacking its top management for failing to meet minimum capital requirements. It subsequently replaced Skye's top management. Skye's non-performing loans had mounted to 13 percent of total loans at the end of last year, well above the central bank target of less than 5 percent while its capital ratio was 10.4 percent last year, compared with an industry standard of 16 percent, prompting the central bank to step in. "The attention of the Central Bank of Nigeria (CBN) has been drawn to the content of a malicious message urging customers of Skye Bank to withdraw their deposits or transfer them to other banks based on the vile allegation that Skye Bank has been liquidated by the CBN," spokesman Isaac Okorafor said in a statement. After replacing Skye's executives last month, depositors rushed to withdraw their funds. But the regulator has said Skye was able to meet its obligations and that the central bank would provide support until the new management could bring in fresh funds.

Nigeria seeks additional $21bn loan from China -- Nigeria is negotiation a $21 billion loan from China’s Eximbank as it grapples with a foreign exchange squeeze Budget minister Udo Udoma who presented the loan request, explained that the money would provide a relief to the government. The loan, explained Mr Udoma, would enable Nigeria finance its 2016 capital budget deficit. The deal The country already owes the Chinese bank more than $1.8 billion. As at December 2015, Nigeria had accumulated external debt worth more than $10.9 billion. China is reported to be in favour of the deal subject to some conditions, including agreeable repayment terms and its officials monitoring the usage of the money.Shortage of foreign exchange has forced down the value of the Nigerian currency, which now stood at N395 to one dollar as against N195 in 2015. Being an import-dependent country, Nigeria has found itself in trouble as it could no longer meet its foreign financial obligations amid rising inflation. The dip in the country’s earning from export because of the slump in the crude prices has been exacerbated by the destruction of oil facilities by militants in the Niger Delta.

Officials Spent Big on Olympics, but Rio Natives Are Paying the Price - In two days of wandering through favelas and working-class neighborhoods, I found Olympic excitement an often extinguished fire. Graffiti and signs draped across walls by labor activists document the Games’ huge cost to a wounded city. Olympic torchbearers jogged into several working-class neighborhoods and left sprinting, chased by angry residents. Outrage is not difficult to understand.Billionaire developers and media magnates have made a fortune off the Olympics; bribe and corruption investigations arising from these Games are a growth industry, with construction companies and hundreds of congressional deputies potentially in the dock. An extremely expensive subway was built to run the length of this city’s well-to-do south coast from Copacabana to the Olympic site. A forest of towers to house athletes rose on publicly owned land; afterward, the developer will turn these into luxury housing. On the route from the international airport to the south shore, Olympic organizers put up colorful walls so that visitors could not see the favelas. The International Olympic Committee’s chieftain, Thomas Bach, proclaimed the Rio Games a grand success last week. I wondered at the quality of his eyes. To write of pain is to take nothing from the Brazilians, who are gracious hosts and exuberant fans, crowding the waterfront of Copacabana for beach volleyball. Grand athletic achievement is inspiring, and these athletes, the world’s greatest, deserve applause. But the practiced I.O.C. shakedown of cities, the demands that local officials compete to construct obscenely expensive stadiums and news media centers and to guarantee that tourist zones have been swept of the desperate, has rarely looked more problematic.Rio is all but bankrupt. Teachers have gone months without pay. Retirees are months behind on pension checks. University professors gather to mop floors and empty overflowing garbage cans.

“Bread and circuses” in Brazil for the disorientation of the public --Olympic Games could be considered one of the most effective disorientation operations used by the mainstream media against the public. We can see this clearly in Brazil, where the event is being used for the cover up of significant developments concerning the constitutional coup against Dilma Rousseff.  As TeleSur reports:  A coup is happening right now in Brazil and the Rio Olympics is a smokescreen. While you are watching the games, the Brazilian Senate voted to continue the impeachment against suspended president Dilma Rousseff, despite evidence in her favor and despite scathing leaks against the people behind the impeachment. But this has largely been ignored because the media is fixated on Michael Phelps' latest win, the strange color of diving pool, and the various inspiring stories of different athletes.  You probably didn't hear, for instance, that it was revealed this week that the construction company Odebrecht, secretly paid millions of dollars to both interim president Michel Temer and interim foreign minister Jose Serra, for their 2014 and 2010 presidential campaigns. This comes after three interim ministers have already resigned, over corruption charges since May.  The final impeachment vote against Rousseff will now likely come just after the Olympics, but how much more will be missed, ignored, or deliberately obscured, while the cameras focus their lenses on the Olympic podiums?  We saw something similar this summer in France. The media literally buried the mass movement against the anti-labor bill with the help of the football European championship. As described previously, “the extension of the state of emergency for another three-months comes right when Hollande it needed. The football European championship party was over and there was nothing to distract attention from the anti-labor bill that he wants desperately

Mexico Michoacan: Police accused of executing 22 in ranch assault - BBC News: The Mexican government's human rights body has accused police of killing 22 people in extrajudicial executions in a raid on a drug cartel last year. One police officer and 42 suspects were killed in the raid on a ranch in Tanhuato, Michoacan state, on 15 May. Officers said they had returned fire in self-defence but the high death toll aroused suspicions. The National Human Rights Commission (CNDH) says police attempted a cover-up. Police dispute the findings. Human rights groups in the country have long been demanding an improvement in policing standards and an end to arbitrary killings. Previously, the government said there had been no human rights violations during the raid on the ranch. They said a war was being fought between two local drug gangs and those killed were believed to be members of one of the cartels.  Police used a Black Hawk helicopter during the operation, reportedly firing some 4,000 rounds into the ranch, known as the Rancho del Sol, during the initial assault. The helicopter itself was hit by gunfire, investigators found. In its report (in Spanish; warning: contains graphic images), the CNDH asserts that:

  • 5 suspects were killed in the helicopter attack; 22 were arbitrarily executed; 15 died in unclear circumstances
  • 2 bodies were burnt by police
  • 2 suspects were tortured in custody
  • police moved bodies and weapons to cover up arbitrary killings

In Alberta, Lower Oil Prices Bring Job Losses, Empty Office Space And Child Prostitution --In Alberta, the Oil Sands King in the North, the economy continues to be crushed by crude prices.  With the oil fallout has come massive job losses, business closings, soaring office vacancy rates and increasing crime.  None of this should be terribly surprising for a region of the world that is somewhat dependent on oil sands production.  At current oil prices most oil sands projects can't even cover their cash operating costs which are estimated to be $50 per barrel much less the estimated $90 per barrel required to start a new project.  As recently reported by the Huffington Post, Calgary is on pace to close 7,000 businesses in 2016 up from 6,337 in 2015 and 5,902 in 2014. Furthermore, a separate Huffington Post article highlights a recent report from CBRE which found that vacancy rates of commercial office space in Calgary rose to 22.2% in 2Q 2016, the highest level since 1983, and up massively vs. the 13% vacancy rate from one year prior.  The report also points out that 4mm sq. ft. of office space has come online in just the past 6 quarters alone.  And just to make things even worse, 3 new commercial buildings are wrapping up construction within the next year and which should add a additional 2.4mm sq. ft of capacity.  Seems like timing was just a little late on those projects.  

Putin-Erdogan Meeting a Dud: No Common Ground on Syria -- naked capitalism - Jerri-Lynn here:  Erdogan met Putin in Moscow last week but as Helmer explains, failed to achieve any rapprochement in its relations with Russia, despite widespread media claims to the contrary. Both countries remain completely at odds on Syria policy. Turkey continues to turn a deaf ear to wider Russian security concerns: e.g., guaranteeing free sea passage through the so-called Turkish straits, between the Black Sea, the Aegean Sea, and the Mediterranean, and blocking any expansion of NATO or enemy operations that could hinder such access. (real news network, video and transcript)

Aid and Attention Dwindling, Migrant Crisis Intensifies in Greece - As her young children played near heaps of garbage, picking through burned corn cobs and crushed plastic bottles to fashion new toys, Shiraz Madran, a 28-year-old mother of four, turned with tear-rimmed eyes to survey the desolate encampment that has become her home.This year, her family fled Syria, only to get stuck at Greece’s northern border with Macedonia in Idomeni, a town that had been the gateway to northern Europe for more than one million migrants from the Middle East and Africa seeking a haven from conflict. After Europe sealed the border in February to curb the unceasing stream, the Greek authorities relocated many of those massed in Idomeni to a camp on this wind-beaten agricultural plain in northern Greece, with promises to process their asylum bids quickly.But weeks have turned into months, and Mrs. Madran’s life has spiraled into a despondent daily routine of scrounging for food for her dust-covered children and begging the authorities for any news about their asylum application. “No one tells us anything — we have no idea what our future is going to be,” she said.“If we knew it would be like this, we would not have left Syria,” she continued. “We die a thousand deaths here every day.”

‘Sexual assaults on children’ at Greek refugee camps -- Children as young as seven have been sexually assaulted in official European refugee camps, the Observer has been told. The claims come as testimony emerges suggesting that some camps are so unsafe that youngsters are too terrified to leave their tents at night. Charities and human rights groups allege that children stranded in supposedly safe camps in Greece that were built to deal with Europe’s migration crisis – many of whom are likely to be eligible to claim asylum in the UK – have been sexually abused. In one government-run camp, in a former Softex toilet roll factory on the outskirts of Thessaloniki, aid organisations claim that the level of risk of sexual attack is so acute that women are too afraid to visit the camp toilets alone at night. Yvette Cooper MP, chairwoman of Labour’s refugee taskforce, said the revelations “should shame us all” and called for immediate action to protect vulnerable children. A series of government camps were built near Thessaloniki after the informal one at Idomeni, near the Macedonian border, was closed in May. Weeks earlier, the European commission had unveiled an extra £71m of humanitarian funding for emergency projects to help the 57,000 refugees stranded in official government camps throughout Greece. One volunteer serving at the Softex camp, which holds 1,400 mostly Syrian refugees, alleged that some young girls had been effectively groomed by male gangs. He said an Iraqi family had to be moved to emergency accommodation outside the camp after their daughter was attacked.

Serbia intercepts over 3,000 illegal migrants in a month: spokesman | Reuters: Serbia detained over 3,000 migrants illegally entering into the country in one month, a military spokesman said, suggesting many were still trying to make their way along a Balkan corridor to the European Union despite border closures. Balkan countries along the route processed hundreds of of thousands of migrants over their borders last year, but clamped down in February to stop the mass influx and many migrants now resort to people smugglers to try to reach the EU. With a steady trickle of migrants mainly from conflict- and poverty-wracked areas of Asia and the Middle East continuing, Serbia on July 16 decided to form joint police and army patrols to intercept them. "Since July 22, the Joint Force of the Serbian Army and the Ministry of Interior have uncovered 3,112 people attempting to illegally cross the state border," Defence Ministry spokesman Jovan Krivokapic said in a statement. Two people were arrested overnight in Serbia's south as they tried to slip 30 migrants across the border. After entering Serbia, most migrants become stranded as EU member Hungary to its north cut the maximum number of daily entries to 30 in June, creating a bottleneck. According to Serbia's commissariat for refugees, about 4,000 migrants were in the country on Thursday, with about three quarters of them in government-run refugee centers. The remainder either sought shelter in parks in the capital Belgrade or were awaiting entry into the EU in camps at the Horgos and Kelebija border crossings with Hungary.

 Exclusive: Monte dei Paschi CEO, former chairman under investigation - source | Reuters - The chief executive of Monte dei Paschi di Siena (BMPS.MI), Fabrizio Viola, and the Italian bank's former chairman, Alessandro Profumo, are under investigation for alleged false accounting and market manipulation, a source with knowledge of the matter said. The investigation, which started in 2015 following complaints filed by small shareholders and consumer associations, comes as the Tuscan bank prepares to launch a 5 billion euro ($6 billion) stock sale after emerging as the weakest bank in Europe in industry stress tests in July. A spokesman for Monte dei Paschi said the decision to investigate Viola and Profumo followed a proposal by two shareholders to seek damages from the two executives which was rejected by other shareholders at an April meeting. "(Under Italian law) prosecutors are bound to open an investigation when they receive a complaint," the spokesman said in an emailed comment. This comment reflects Profumo's position, a separate spokesman for Profumo said. Being placed under investigation in Italy does not imply guilt and does not automatically lead to charges being laid. The source said on Thursday prosecutors in Siena alleged the bank did not correctly book two derivatives trades known as Alexandria and Santorini between 2011 and 2014. The inquiry was transferred to prosecutors in Milan in July. They now have 18 months to decide whether to shelve the investigation or seek trial for Viola and Profumo, the source said.

Swiss Central Bank Holds $5.3 Billion in Amazon, Apple, Google, Facebook and Microsoft Stocks -- At the end of the first quarter of this year, Switzerland’s central bank held $119.7 billion in publicly traded stocks. The Swiss National Bank’s (SNB) web site indicates that it is now allocating 20 percent of its foreign currency reserves to stock investing. Twelve days ago, SNB made its quarterly filing with the U.S. Securities and Exchange Commission showing large positions in individual U.S. stocks.  In just five tech names, SNB held over $5.3 billion with $1.489 billion invested in Apple; $1.2 billion invested in Alphabet, parent of Google; $1 billion in Microsoft; $803 million in Amazon and $741.5 million in Facebook.  Both Apple and Microsoft are among the 30 stocks that make up the Dow Jones Industrial Average (DJIA), a heavily watched gauge of the U.S. economy’s health. The Swiss National Bank owns over $1 billion in two other names in the DJIA: $1.17 billion in Exxon Mobil and $1.032 billion in Johnson & Johnson. Swiss National Bank positions of $500 million or more that are components of the DJIA include: AT&T ($862 million); General Electric ($823 million); Verizon ($739.6 million); Procter & Gamble ($718 million); Pfizer ($644 million); Coca Cola ($582 million); and Chevron ($557 million). Switzerland’s central bank has invested zero dollars in two DJIA components — the two big Wall Street banks, Goldman Sachs and JPMorgan Chase. The Swiss National Bank is just one of more than a dozen central banks that are now investing in publicly traded stocks – a policy that looks like a train wreck in motion to quite a number of Wall Street veterans.

Euro zone bond yields pull away from record lows, firm stocks weigh - (Reuters) - Euro zone government bond yields pulled away from record lows on Monday as rallying equities dented the appeal of fixed income markets, even as weak economic data kept the onus on central banks to provide stimulus to support global growth. World shares traded at one-year highs, while European stocks rose to a seven-week peak on the back of firmer healthcare stocks. Economic data from around the world meanwhile continued to support the case for further monetary stimulus, with Japan's economy expanding at an annualised rate of 0.2 percent in the second quarter and at a much slower pace than forecast. Manufacturing conditions in the New York region meanwhile weakened in August, data from the New York Federal Reserve showed. Still, investors were reluctant to pushed bond yields lower given a huge rally in fixed income markets since Britain's vote to leave the European Union in June, analysts said. "We've had a decent rally in fixed income post Brexit, so there is not much more further we can go until we see some more signals from the ECB on monetary policy," said Owen Callan, an analyst at Cantor Fitzgerald. "Equity markets are also at new highs so that's weighing on bonds in a thin summer market," he said. Germany's 10-year Bund yield rose 3 basis points to minus 0.13 percent, off record lows hit last month at around minus 0.2 percent. Spain's 10-year bond yield, which hit a record low at around 0.92 percent last week, was at 0.95 percent and steady on the day. Spanish yields have fallen to record lows in the past week on signs of progress on ending a near eight-month political deadlock. Acting Prime Minister Mariano Rajoy's People's Party is due to vote on Wednesday on whether to accept a reform pact from centrist party Ciudadanos. A vote in favour would be a step closer to forming a government.

"It’s Surreal" - Negative Yielding Debt Rises To Record $13.4 Trillion -- Despite expectations that recent, better than expected global economic data (with several prominent setbacks, especially in US and Japanese GDP, as well as the recent Chinese data) which last week sent the Citi global economic surprise index to multi-year highs, would push global government yields at least modestly higher, that did not happen.  Instead, as the FT reports, the value of negative-yielding bonds - both government and corporate - swelled to $13.4 trillion this week up from $13.1 trillion last week, as negative interest rates and central bank bond buying ripple through the debt market.  About a quarter of the global economy now has negative interest rates.   “It’s surreal,” said Gregory Peters, senior investment officer at Prudential Fixed Income and Morgan Stanley's former chief global asset strategist, who two months ago was one of the very few to predict the market's reaction to Brexit when he said that the market was looking at it wrong and urging to "Buy US Assets In Case Of Brexit." Regarding negative yields he added that “It’s clear that central banks are dominating markets. There’s a race to the bottom. Central banks are the main drivers of this, it’s not fundamental." As the FT's Robin Wigglesworth adds, according to calculations by TwentyFour Asset Management, Gilts make up just 2 per cent of the world’s yield, and eurozone government bonds, despite accounting for 17 per cent of the index's volume, make up just 2 per cent of the overall yield. Japanese government bonds account for a big fat zero of the yield. The only part of the world where there is some yield left is in the US. US junk bonds, despite accounting for just 4 per cent of the multiverse index, accounts for 18 per cent of the world’s yield.

World seeing 'greatest monetary policy experiment in history' - Rothschild -- Low interest rates, negative yields on government debt and quantitative easing are part of the biggest financial experiment in world history, and the consequences are yet unknown, says RIT Capital Partners Chairman Lord Rothschild. “The six months under review have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world. We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30 percent of global government debt at negative yields, combined with quantitative easing on a massive scale,” Rothschild writes in the company's semi-annual financial report. The banker notes this policy has led to a rapid growth of stock markets - US stocks have grown threefold since 2008 - with investments growing and volatility remaining low. However, the real sector of economy didn’t enjoy such a profit, as “growth remains anemic, with weak demand and deflation in many parts of the developed world,” according to Rothschild.The billionaire underlined that many risks remain for the global economy with the deteriorating geopolitical situation. Among those risks Rothschild included Britain's vote to leave the European Union, the US presidential election, and China's slowing economic growth. Another risk is global terrorism, which Rothschild says is a consequence of the continuing conflict in the Middle East.  Another woe is negative yields on government bonds. In June, 10-year German government bonds dipped below 0 percent for the first time in history. Janus Capital has estimated that global yields are the lowest in 500 years, and the total amount of such bonds is $10 trillion. The investment group’s lead portfolio manager, Bill Gross, is calling it a “supernova that will explode one day.”

Banks Pushing Back Against Negative Interest Rates With Threat to Store Cash -- Yves Smith - We’ve taken note of how commercial banks are pushing back against negative interest rates, which are killing their profits. As we wrote in June: Central bankers are pressing onward with their failed negative interest rate experiment, oblivious to the damage that it is doing to banks and long-term investors like life insurers and pension funds.   Even more bizarre is the central bank assumption that by charging banks for reserves, they can force banks to lend. First, the very need to resort to negative interest rates results from crappy fundamentals. Entrepreneurs are not going to borrow to invest in new projects just because money is on sale. They invest because they see market opportunities; the cost of money being too high can constrain investing, but cheap money won’t produce loan demand in the absence of attractive projects. The only exception is activities where the cost of money is the biggest cost of doing business. That is the case for levered speculation. The Financial Times provides an update in its lead story today, Banks look for cheap way to store cash piles as rates go negative. The wee problem is, as the article makes clear, keeping lots of cash on hand is costly, so these initiatives look to be yet more empty protests than real threats. However, the bigger issue, as we’ve repeatedly stressed, is that banks aren’t going to run out and make more loans even with the central bank cudgel of negative rates, particularly when loan demand is weak. Key sections from the Financial Times account: Europe’s highways are not yet jammed with heavily guarded trucks transporting money to top-secret locations, but if it becomes financially sensible for banks to hoard cash as rates are cut even further, the practice could undermine central banks’ ability to use negative rates to boost growth.After the European Central Bank’s most recent rate cut in March, private-sector banks are paying what amounts to an annual levy of 0.4 per cent on most of the funds they keep at the eurozone’s 19 national central banks. This policy, which has cost banks around €2.64bn since ECB rates became negative in 2014, is intended to spark economic growth by giving banks the incentive to lend money out to businesses instead of holding on to it… Fortunately for central banks, the hoarding of cash creates a host of other costs.

 Negative Rates for the People Arrive as German Bank Gives In - Bloomberg: When the European Central Bank introduced a negative interest rate on lenders’ deposits two years ago, few thought things would ever go this far. This week, aa German cooperative savings bank in the Bavarian village of Gmund am Tegernsee -- population 5,767 -- said it’ll start charging retail customers to hold their cash. From September, for savings in excess of 100,000 euros ($111,710), the community’s Raiffeisen bank will take back 0.4 percent. That’s a direct pass through of the current level of the ECB’s negative deposit rate. “With our business clients there’s been a negative rate for quite some time, so why should it be any different for private individuals with big balances?,” Josef Paul, a board member of the bank, said by phone on Thursday. “As it looks today, charges on deposits won’t be extended to customers with lower amounts” than 100,000 euros, he said. Raiffeisen Gmund am Tegernsee may be a tiny bank that’s only introducing penalties to well-off customers -- it says fewer than 140 will be affected -- but in principle the ECB’s negative deposit rate was meant to encourage spending and investment in the euro area’s sluggish economy, not to tax thrifty Bavarians. A spokesman for the Frankfurt-based central bank declined to comment. Indeed, introducing the sub-zero policy in June 2014 with a cut to the deposit rate to minus 0.1 percent, ECB President Mario Draghi said the move was “for the banks, not for the people.” Should banks decide to transmit the reduction to savers then that’s their decision. “It’s not us,” he said.

German Postbank scraps free accounts for millions of customers | Reuters - Germany's Postbank, a unit of Deutsche Bank, is to scrap free current accounts for millions of customers in an effort to offset the burden of the European Central Bank's negative interest rates. "The market environment, especially low interest rates, make it ever harder to earn money from current accounts," Postbank board member Susanne Kloess said in a statement. From Nov. 1 customers will be charged 3.90 euros ($4.41) a month unless they have monthly inflows of 3,000 euros or more, in which case they will still have cost-free access to a premium giro account, Postbank said. The move underscores the pressure German banks are facing to find fresh sources of revenue since the ECB's money-printing policy slashed the margin between short-term borrowing and long-term lending. Banks previously used that margin to subsidise other products, such as free giro accounts for customers. A small cooperative bank in the Bavarian Alps last week also caused a stir by saying it planned to charge wealthy clients a fee for holding large deposits. "The gratis culture is changing; we've seen some moves already and there will be more," Michael Kemmer, the head of Germany's BDB banking association, said this week. A Postbank spokesman declined to specify how many customers would be required to pay for their accounts, but said it would be the "vast majority" of Postbank's 5.3 million giro account holders.

Young Germans will have to work till 69, Bundesbank warns -- Young Germans will have to work for even longer than feared to pay for their parents’ pensions, according to the Bundesbank. Calculations from the central bank counter government claims that planned increases in the retirement age are sufficient to cover the costs of the country’s ageing population.  Older workers in the eurozone’s largest economy can now retire after 45 years in employment or at 65. The government has planned to gradually increase the retirement age to 67 by 2029. But economists at the influential Bundesbank have said that is unlikely to meet the cost of financing pensions for the rising number of retirees. Instead the retirement age would, after 2029, have to rise by another two years by 2060. That means a 25-year-old entering the German labour force today would have to work four more years than the current crop of retirees — until they are 69. The Bundesbank said in its latest monthly bulletin, published on Monday: “Overall, there is evidence that a longer working life and a higher statutory retirement age should be given more consideration.” The central bank added that raising the pension age towards 69 between 2030 and 2060 would help plug the financing gap associated with the higher number of pensioners. Chancellor Angela Merkel quickly played down the Bundesbank’s claims. Steffen Seibert, Ms Merkel’s spokesman, said on Monday that the government stood by its programme to raise the retirement age to 67 by 2029.

Top steel firms' debt level totals record $150 billion: EY | Reuters: Debt in the world's top 30 steel companies totals a record $150 billion, international accountancy firm EY said on Thursday, adding governments' action to support the sector would work only if matched with more radical industry restructuring. Overcapacity and weak steel prices have piled pressure on firms such as Tata Steel, which is in merger talks with German conglomerate Thyssenkrupp. EY said in a report published on Thursday steel firms took on debt as they fought for market share, notably the Chinese steel sector has added about a billion tonnes of capacity since 2000, helping to take global excess capacity to about 700 million tonnes. The debt of the top 30 companies is dwarfed by China's steel sector debt, estimated at $500 billion. "Many steelmakers are in some form of distress with some teetering on the verge of bankruptcy," Anjani Agrawal, EY global steel leader, said, adding government efforts would only work if the industry had viable business models. Reforms are underway. Thyssenkrupp, the world's 16th largest steel producer by tonnage, has announced the sale of real estate assets as well as embarking on merger talks with Tata. At the end of June, the firm had gearing of 175 percent, versus 124 percent a year earlier, and debt of 4.77 billion euros compared with 4.39 billion the previous year.

Negative rates starting to weigh on banks’ profits -  European banks could be forced to slash costs, make riskier loans or charge fees for current accounts to offset mounting pressure from negative interest rates, according to a new report from S&P, the credit rating agency. S&P said that interest rates below zero were starting to weigh heavily on banks’ profits, especially for lenders with a large amount of customer deposits. Low or negative interest rates squeeze banks’ margins by closing the gap between what they can charge on loans and what they must pay for deposits. This pressure could push banks to increase higher-risk activities to boost income. “Negative interest rates may or can lead to other steps as banks try to cope with reduced margins,” the report said. “We remain concerned about a potential mispricing of risk that might go along with a new aggressiveness to chase higher yields,” it added. Banks could introduce or increase fees on current accounts, card issuance or transactions. So far, banks have largely refrained from passing negative rates to retail depositors. However, a Bavarian lender last week became the second German bank to say it will start charging to hold private customers’ deposits. German banks in particular have come under pressure as many of them are unable to channel all their deposits into loans. In the UK, Royal Bank of Scotland recently warned that it could pass on negative rates to business customers if the bank rate dropped below zero.

ECB hints at taking further monetary policy action in September -- The European Central Bank has hinted at taking further action next month should economic conditions in the eurozone fail to improve, with its top policymakers saying the impact of the latest wave of uncertainty to hit the global economy needed “very close monitoring”. The latest edition of the central bank’s monetary policy deliberations — for the meeting on July 21 when it decided to keep rates on hold — indicated the governing council may well act according to analysts’ expectations and keep its ultra-loose monetary policy in place for longer when it next meets on September 8.  Europe’s recovery has remained on track, but aftershocks from the UK vote to leave the EU and the poor health of the region’s banks risked its derailment. The so-called Brexit vote was expected to affect primarily the UK economy, but the unpredictability of the impact on trade meant the UK’s decision to break ties with the EU “could affect the global economy in deeper and less predictable ways than through the direct trade channel”, the minutes said. “In the current environment of heightened uncertainty, a still high level of economic slack and weak wage and price pressures, future discussions were called for regarding wage trends, inflation expectations, the medium term orientation of monetary policy and the time horizon over which the very accommodative monetary policy stance would remain warranted.”The tone of the remarks will raise hopes of an extension of the central bank’s €80bn-a-month quantitative easing programme beyond the current spring of 2017 deadline.

A split euro is the solution for Europe’s single currency - Joseph Stiglitz -- That Europe, and especially the eurozone, has not been doing well since the 2008 crisis is beyond dispute. The single currency was supposed to bring prosperity and enhance European solidarity. It has done just the opposite, with depressions in some countries greater than the Great Depression. To answer the question about what is to be done, one has to answer another: what went wrong. Some claim that policymakers made a set of mistakes — excessive austerity and poorly designed structural reforms. In other words, there is nothing wrong with the euro that could not be fixed by putting someone else in charge. I disagree. There are more fundamental problems with the structure of the eurozone, the rules and institutions that guide and constitute it. These may well be insurmountable, raising the prospect that the time has come for a more comprehensive rethinking of the single currency, even to the point of unwinding it. Put simply, the euro was flawed at birth. It was almost inevitable that taking away two key adjustment mechanisms, the interest and exchange rates, without putting anything else in their place, would make macro adjustment difficult. Add to that a central bank mandated to focus on inflation and with countries still further constrained by limits on their fiscal deficits, the result would be excessively high unemployment and gross domestic product consistently below potential output. With countries borrowing in a currency not under their remit, and with no easy mechanism for controlling trade deficits, crises too were predictable. The alternative to adjusting nominal exchange rates is adjusting real ones — having Greek prices fall relative to German prices. But there are no rules in place that could force a rise in German prices and the social and economic costs of forcing Greek prices to fall enough are enormous. One might dream of Greek productivity growing faster than that of Germany as an alternative way of “adjusting,” but no one has figured out how to do it. So too for Spain and Portugal. In the absence of a grand strategy, the troika of international institutions has flailed around, putting in place new rules for defining fresh milk or the size of loaves of bread. Whether these are desirable can be debated; that they are not going to achieve the desired adjustment in real exchange rates cannot.

Annual inflation up to 0.2% in the euro area and the EU -- Euro area annual inflation was 0.2% in July 2016, up from 0.1% in June. In July 2015 the rate was 0.2%. European Union annual inflation was also 0.2% in July 2016, up from 0.1% in June. A year earlier the rate was 0.2%. These figures come from Eurostat, the statistical office of the European Union. In July 2016, negative annual rates were observed in twelve Member States. The lowest annual rates were registered in Bulgaria and Croatia (both -1.1%) and Slovakia (-0.9%). The highest annual rates were recorded in Belgium (2.0%), Sweden (1.1%) and Malta (0.9%). Compared with June 2016, annual inflation fell in nine Member States, remained stable in seven and rose in twelve. The largest upward impacts to euro area annual inflation came from restaurants & cafés (+0.11 percentage points), vegetables (+0.09 pp) and fruit (+0.08 pp), while fuels for transport (-0.46 pp), heating oil (-0.15 pp) and gas (-0.12 pp) had the biggest downward impacts. The euro area consists of Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. The annual rate measures the change of the Harmonised Indices of Consumer Prices (HICP) between a month and the same month of the previous year, and the monthly rate compares the indices between the two latest months.

George Soros Hacked, Over 2,500 Internal Docs Released Online -- Last Thursday, as Bloomberg was gingerly setting the stage, and the preemptive damage control for what was about to be a historic leak, it did everything in its power to deflect attention from the key topic, namely that prominent liberal billionaire and Hillary supporter, George Soros had been hacked and countless documents were about to be leaked, and instead focus on the alleged identity of the hackers, the so-called DCLeaks, which - like all other "experts" - it positioned as yet another Russian government-sponsored operation.  To this we had one retort: "Far more important than the inane speculation on the hackers' identity, is the now official disclosure - and warning - that Soros himself was hacked. Bloomberg writes that Open Society Foundations, the Soros group, reported the breach to the Federal Bureau of Investigation in June, according to spokeswoman Laura Silber, who added that an investigation by a security firm found the intrusion was limited to an intranet system used by board members, staff and foundation partners."  And, sure enough, over the weekend that is precisely what DCLeaks revealed as it disclosed over two thousand internal documents from groups run by George Soros were leaked online Saturday after hackers infiltrated the groups. The 2,576 files were released by DCLeaks, a website which claims to be “launched by the American hacktivists who respect and appreciate freedom of speech, human rights and government of the people.”

Soros Hack Reveals Plot Behind Europe's Refugee Crisis; Media Funding And Manipulation; Cash For "Social Justice" -- In the two days since the Soros Open Society Foundation hack by the DCLeaks collective, several notable revelations have emerged among the data dump of over 2,500 documents exposing the internal strategy of the organization, which expose some of Soros' tactics to influence and benefit from Europe's refugee crisis, the opportunistic funding and influence of media organizations, providing cash for assorted "pro-democracy" groups including the infamous La Raza, Soros' funding of various "social justice" organizations while paying to track unfavorable media coverage including that of Pamela Geller. One particular leaked memo, profiled earlier by the Daily Caller, argues that Europe’s refugee crisis should be accepted as a “new normal,” and that the refugee crisis means “new opportunities” for Soros’ organization to influence immigration policies on a global scale. OSF program officer Anna Crowley and program specialist Katin Rosin co-authored the May 12 memo, titled “Migration Governance and Enforcement Portfolio Review.”  The nine-page review makes three key points: OSF has been successful at influencing global immigration policy; Europe’s refugee crisis presents “new opportunities” for the organization to influence global immigration policy; and the refugee crisis is the “new normal.”

Islamic Islamophobia: When Muslims Are Not Muslim Enough, What Does It Promise For The Rest Of Us?

  • Mr Shah's murderer was a Sunni Muslim, Tanveer Ahmed, who had travelled to Glasgow to kill Mr Shah because he believed Mr Shah had "disrespected the Prophet Mohammed." At this point the comfortable narratives of modern Britain began to fray.
  • If Mr Shah's murderer had been a non-Muslim, there would be a concerted effort by the entirety of the media and political class to find out what inspirations and associations the murderer had. Specifically, they would want to know if there was anybody -- especially any figure of authority -- who had ever called for the murder of Muslim shopkeepers. Yet when a British Muslim kills another British Muslim for alleged "apostasy" and local religious authorities are found to have praised or mourned the killers of people accused of "apostasy," the same people cannot bother to stir themselves.

Earlier this year there was a murder that shocked Britain. Just before Easter, a 40-year old shopkeeper in Glasgow, Asad Shah, was repeatedly stabbed in his shop; he died in the road outside. The news immediately went out that this was a religiously-motivated attack. But the type of religiously motivated attack it was came as a surprise to most of Britain. There is so much attention paid to the idea of "Islamophobia" in the country that many people -- including some Muslim groups -- immediately assumed that the killing of Asad Shah was an "Islamophobic" murder. It turned out, however, that the man who had been detained by police -- and this week sentenced to a minimum of 27 years in prison for the murder -- was also a Muslim.

Scotland has become a money-laundering factory for Soviet criminal gun-runners’ -  INTERNATIONAL gun-runners are using Scotland to launder their profits, Mafia watchers in the former Soviet Union have said. Organised criminals are increasingly exploiting secretive and obscure Scottish shell firms as fronts for everything from cyber-scams to the wholesale looting of banks.  Last month one Scottish company was accused by Ukraine’s elite anti-corruption bureau of skimming profits from state arms exports to the Middle East. Another, despite being officially dissolved, won a bid to hire armed men in the war zone of eastern Ukraine.  The Scottish Government has become so alarmed about such shell firms – usually limited partnerships or SLPs advertised as “zero-tax offshore companies” across eastern Europe – that the Sunday Herald can reveal that last week Finance Secretary Derek Mackay wrote to his UK counterparts urging a crackdown.  Now Mafia monitoring group CRiME has warned that Scotland has become a money-laundering factory for criminal gun-runners hiding behind SLPs.  Journalist Andriy Lavryk, who heads CRiME, said: “For some reason the interests of arms dealers from Ukraine, Russia and the Middle East – and their customers – are concentrated in Scotland.”Lavryk stressed how hard it is to get infallible information on Scottish arms links but confirmed that corrupt officials and businessmen from across the former Soviet Union – not just the so-called “arms Mafia” – use SLPs and other British “offshore structures”. He cites a source as saying: “All the arms dealers gather in Scotland. Arms billionaires live there.” Some law enforcement and political sources in Scotland have long been concerned that SLPs – which often exist only on paper – were putting this country on the radar of very serious international criminals. 

Bank Of Ireland, Royal Bank Of Scotland Start Charging Select Clients For Holding Cash -- Last weekend, when we reported that Germany's Raiffeisenbank Gmund am Tegernsee - a community bank in southern Germany - said it would start charging retail clients a fee of 0.4% on deposits of more than €100,000 we said that "now that a German banks has finally breached the retail depositor NIRP barrier, expect many more banks to follow." Not even a week later, not one but two large banks have done just that.  Overnight, the Irish Times reported that Bank of Ireland is set to become the first domestic financial institution to pass on the ECB's negative rates to customers for placing their money on deposit with the bank. The newspaper has learned that Bank of Ireland, which is 14% owned by the State, has informed its large corporate and institutional customers that it plans to charge them a negative rate of -0.1% for deposits of €10 million or more starting in October. As with all other banks, initially only a small group of customers will be affected by the charge and while the bank has indicated that it has no plans to levy a negative interest rate on either personal or SME customers, increasingly more banks are lowering the threshold of eligibility (for example, the German community bank is now charging those with only €100,000 in the bank: low long until the minimum required balance is €10,000 or lower). However, as the Irish Times notes, this will be the first time an Irish-owned institution has applied a negative interest rate on deposits, breaking the long-held tradition of a bank paying customers to hold their money. A spokesman for Bank of Ireland said its policy was not to comment on its pricing but “we keep all our rates under review”. Ulster Bank, which is owned by UK lender Royal Bank of Scotland, has already quietly introduced negative interest rates for a small number of large corporate clients. Ulster Bank has products priced off the back of Euribor, a European interbank lending rate, which is at an all-time low and turned negative last year. This charge by the bank does not apply to SMEs or personal customers. Additionally, as Bloomberg reports, Royal Bank of Scotland, Britain’s largest taxpayer-owned lender, said some of its biggest trading clients must pay interest on collateral as a consequence of low central bank interest rates. Some of the bank’s institutional clients will need to pay interest on funds pledged as collateral when trading futures contracts, the bank said in an e-mailed statement on Friday. The changes for sterling and euro futures and options trading will probably affect about 60 large clients, a person with knowledge of the matter said earlier Friday.

 Norway's PM softens stance on Britain joining EFTA | Reuters: Norwegian Prime Minister Erna Solberg said she saw some advantages if Britain joined the four-nation European Free Trade Association (EFTA) after quitting the EU, qualifying past doubts about British membership. Solberg also said in an interview with Reuters that Britain's 65 million people would radically change EFTA, which now comprises Norway, Switzerland, Iceland and Liechtenstein with a combined population of just 14 million. Prime Minister Theresa May is undecided about her country's future role in Europe after Britons voted to leave the European Union in a June referendum. One option could be to join EFTA, which Britain helped found but quit to enter the EU in 1973, though it is far from clear that is a path that Britain wants to follow. "It's easy to see some advantages of British membership. It's a big country with a big economy," Solberg said. But that benefit of more clout also means Britain might demand conditions that would mainly help it - rather than its putative EFTA partners - when negotiating trade deals. "Some countries will probably think it's fine to have a free trade deal with us (EFTA), but won't necessarily think that it's equally simple to have a free trade deal with Britain," she said. EFTA has about 30 free trade deals with nations including Canada, Chile, Morocco and Singapore.

Prices of UK homes for sale see biggest fall in 9 months in August - Rightmove | Reuters: The price of homes for sale in England and Wales fell in August, posting the biggest drop since November, as the summer lull added to uncertainty surrounding Britain's decision to leave the European Union, property website Rightmove said on Monday. Asking prices fell by a monthly 1.2 percent, according to a survey by Rightmove that covers properties put on sale between July 10 and Aug. 6, after shedding 0.9 percent in July. The biggest drop was in London and the South East, with asking prices falling by 2.6 percent and 2.0 percent respectively. "Many prospective buyers take a summer break from home-hunting, and those who come to market at this quieter time of year tend to price more aggressively," Miles Shipside, Rightmove director and housing market analyst, said. "This summer is also affected by both Brexit uncertainty and the aftermath of the buy-to-let rush in March to beat the stamp duty deadline." Britain voted to leave the European Union in a referendum on June 23 - a decision many economists think could tip the economy into recession and which prompted the Bank of England to cut interest rates for the first time since 2009 earlier this month. Official data covering the period after the referendum has been scarce, but there are patchy signs that consumer spending held up, while data on the housing market following the vote has been mixed.

There's a 'Negative Feedback Loop' Bedevilling U.K. Pension Funds -  U.K. pension funds and life insurers could be hit with a double whammy of pain as ultra-low government bond yields intensify funding shortfalls and spur investors to match their ballooning liabilities with longer-dated assets, creating further demand for sovereign debt and pushing yields even lower. U.K. pension funds and life insurers have been under siege for years as low government bond yields — typically the favored source of income for such funds — have generated significant funding headwinds while pension liabilities have risen. Now, the Bank of England's quantitative easing program and a shrinking pool of longer-dated assets are leading bond prices ever higher, further challenging the ability of investors to finance long-term obligations to beneficiaries. A failed Bank of England reverse auction last week, for example, caused longer-dated securities to abruptly fall to new record lows, with the yield on 10-year gilts currently hovering at 0.53 percent. But there's another market dynamic that could exert more downward pressure on interest rates and further challenge returns for long-term investors: asset-liability matching. Put simply, large funds with fixed-income liabilities, such as pension and insurance funds, need to grab more long-term U.K. government bonds to hedge growing liability risks just as prices rise. That's because as U.K. rates fall under current market conditions, such investors — faced with the need to hedge their increased liability costs by rebalancing the duration exposure of their portfolios — are being forced to grab yet-more longer-dated gilts, which will lower yields ever-further

Why the Bank of England’s stimulus bazooka won’t be enough to save the economy:  As far as the economic consequences of the Brexit vote are concerned, the Bank of England has seen enough. Having held fire at its meeting in July in the immediate aftermath of the EU referendum, the Bank’s Monetary Policy Committee voted unanimously on 3 August to fire a three-barrelled stimulus bazooka.  When it comes to Brexit, we should be worrying less about institutions such as the Bank and more about institutions such as the EBI.  But to begin with the Bank: the first barrel of its new bazooka is aimed at households and businesses. The Bank cut its overnight interest rate from 0.5 per cent to 0.25 per cent – an all-time low – and high-street banks were urged to pass the reduction on to mortgage borrowers without delay.The second barrel is trained on institutional investors. The Bank expanded its programme of quantitative easing (QE), its bond-buying blitz that aims to encourage pension funds and insurance companies to sell their holdings of safe-haven government and corporate bonds and lend to the kinds of business that drive growth instead.The third barrel targets banks. The Funding for Lending scheme will become the Term Funding Scheme, in which the Bank of England will lend directly and cheaply to the high-street banks, as long as they step up their lending in turn.Will it work? It depends on what you mean by “work”. It’s important to understand the limits of monetary policy as a tool of economic management. A collapse in business and consumer confidence of the sort suggested by the surveys is a shock to demand. If companies and households believe that there are harder times ahead, they are likely to rein in spending and present less demand for goods and services. The Bank’s actions are designed to address this by making credit more freely available. To simplify it only slightly, the idea is that, with lower monthly mortgage payments, households will spend more and so generate more jobs.

UK to avoid recession and world economy to ‘stabilise’ as Brexit shock passes - but US poses biggest risk to global growth: Britain’s economy will slow down but should not go anywhere close to a recession, according to economists at credit ratings agency Moody’s, while growth in the rest of the world is also “stabilising.” Although markets dived on the referendum result in June, stock prices have recovered and now economists also believe the impact of the vote will be relatively modest, compared with some early fears. The lower pound should support economic growth in the UK, Moody’s said, while the government is expected to loosen the purse strings to shore up GDP. Moody’s economists predict growth of 1.5pc this year and 1.2pc in 2017. “Uncertainty around the future of the economy outside the common market will continue to dampen business investment and consumer spending, as businesses hold back on hiring and making long-term investments, and as consumers postpone large spending decisions,” said senior analyst Madhavi Bokil. “However, the fall in the sterling will mitigate some of the negative effect in the short term by providing a boost to exports. Our baseline growth forecasts also incorporate the assumption that some fiscal loosening and monetary policy accommodation will support the economy, eurozone limiting the slowdown in growth.”

We won't trigger Article 50 until after 2017 – and that means Brexit may never happen at all - The Independent: It is now eight weeks since we voted to leave the EU but it may be at least eight years before the UK is fully and totally out of Europe – if we finally leave at all. After a post-truth Brexit campaign, now the era of truth is dawning in Downing Street and they are discovering there was never any work completed by the Brexit team on what the costs of leaving the EU would be and how precisely it would be done. The new Prime Minister, Theresa May, who is coldly pragmatic, has given the three Musketeers of Brexit – Boris Johnson, Liam Fox and David Davis – the task of getting us out of Europe as painlessly and quickly as possible. They are finding out that their two decades of demagogic condemnation of the EU and all its works is no preparation at all for turning Brexit into reality. Instead, there is the surreal sight of Liam Fox writing a letter saying that half the Foreign Office staff and responsibilities should be placed under his control. Ever since it was set up after Britain lost America at the end of the 18th century, the Foreign Office has been seeing off raids on its territory like these. Having been told that leaving the EU would reduce bureaucracy and costs, there is the bizarre sight of Whitehall recruiters hiring lawyers expert in EU law on £5,000 a day and consultants from KPMG and Ernst and Young on £1,000 a day. The extra cost of negotiating Brexit is reckoned to cost £5bn – which taxpayers will have to pay for.

Brexit could be delayed to late-2019 as government not ready: Sunday Times | Reuters: Britain's exit from the European Union could be delayed until at least late 2019 because the government was too "chaotic" to start the two-year process early next year, the Sunday Times reported, citing sources it said were briefed by ministers. Britain voted to leave the EU on June 23, but views differ over when it should invoke "Article 50", which sets the clock ticking on a two-year deadline to leave the bloc, with some senior politicians calling for a quick departure. Prime Minister Theresa May, who campaigned for Britain to remain in the EU and leads a cabinet of ministers from either side of the debate, has said she will not trigger Brexit talks this year as Britain needs time to prepare. But British government ministers have warned senior figures in the City of London, London's financial district, that Article 50 was unlikely to be triggered early in 2017 because the situation in government was "chaotic", the Sunday Times reported on Sunday. "Ministers are now thinking the [Article 50] trigger could be delayed until autumn 2017," one source, who had spoken to two senior ministers, told the newspaper. "They don't have the infrastructure for the people they need to hire. They say they don't even know the right questions to ask when they finally begin bargaining with Europe."

Brexit May Be Delayed Until Late 2019, Sunday Times Says - Bloomberg: Britain’s exit from the European Union could be delayed until late 2019 as new departments set up for the transition may not be ready to start negotiations as early as predicted, the Sunday Times reported. The Brexit and international trade ministries are still recruiting staff, making it unlikely Britain will invoke Article 50 –- after which the country has two years to leave the bloc -- until late next year, the Sunday Times said, citing people it didn’t name. The potential delay comes amid tensions between International trade secretary Liam Fox and Foreign Minister Boris Johnson over control of certain aspects of policy, according to the Sunday Telegraph. Prime Minister Theresa May had been expected to formally start Britain’s exit in early 2017 amid political pressure to deliver on the vote and to salve divisions inflicted on her ruling Conservative Party by the June referendum. With tensions already emerging in her cabinet, and elections in Europe leaving in doubt who will negotiate with the U.K., there is increasing speculation the process faces significant delays.  Brexit minister David Davis has recruited less than half the 250 staff he needs, and Fox currently employs fewer than 100 of the 1,000 trade policy experts he needs, according to the Sunday Times. This makes it unlikely the departments will be ready before French elections in May 2017 and German elections the following September. Meanwhile, Fox has written to Johnson stating Foreign Office policy should focus on diplomacy and security, saying trade with other countries wouldn’t “flourish” if the responsibility remained with the ministry, the Telegraph reported, citing the letter.

Brexit Delusion Rises Even Further: City Pumping for Presumptuous, Nightmarish to Negotiate “Swiss Plus” Plan -- Yves Smith - It’s astonishing to see what passes for leadership in the UK retreat into its own echo chamber and ignore the clear and consistent messages sent by EU officials, the even clearer signals of their actions in recent trade matters, the content of the various precedents that serve as points of reference for a possible Brexit deal, and the difficulties of negotiating any particular deal. The only logic I can see behind the City pumping for a wildly unrealistic and unworkable “Swiss plus” deal, aside from sheer arrogance and stupidity, which has been on display in abundance, is that it might be a cynical ploy. Depict a plan that is destined to go nowhere as eminently fair, reasonable and achievable when it isn’t but the UK media will broadcast otherwise, then blame those evil controlling Eurocrats as the problem, as opposed to the unreasonable UK expectations.  The big problem with this charitable interpretation is how British officials get European officials to trash the UK fantasy without pulling the Article 50 trigger. As to why the City’s plan is wildly off base, let’s start with the overview from the Financial TimesThe City of London has given up hope of universal access to the EU single market and is now seeking a bespoke deal for its different sectors to trade with Europe, with similar but stronger ties than Switzerland…  Mr Browne cited Switzerland’s trade deals with the EU that give some sectors, such as life insurance, full two-way access to the single market via a so-called passporting deal in return for keeping its regulation at an equivalent level to that in the bloc. Swiss banks do not benefit from any such trade deal, meaning they must do most of their EU capital markets business from their London subsidiaries.  But the City, which was overwhelmingly in favour of remaining in the bloc before the June 23 referendum, will argue that because the UK is the biggest export market for the rest of the EU it should be able to negotiate a beefed-up version of Switzerland’s arrangement… 

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