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

Saturday, September 10, 2016

week ending Sep 10

 Fed Watch: Rate Hike Hopes Fading Fast - The next FOMC meeting is just two weeks away. Fed hawks had hoped that this was their moment in the sun. I suspect they will need to wait another three months before their next opportunity to act. Signs of a second half rebound are likely too tentative for the doves to tolerate a rate hike. I don't think they will roll over as easily as they did last December. The August employment report was not terrible. Not by any measure. On the positive side, labor supply is reacting to both demographic changes and stronger demand: The demographic shift - essentially, the aging of the Millennials toward their prime age working years - is I believe a powerful secular force supporting the economy. That said, the Fed needs to ensure cyclical forces do not undermine the economy. And that is where the story becomes tricky. Is the economy slowing sufficiently on its own that the Fed should refrain from rate hikes? Or is the slowing still insufficient to quell the inflationary pressures Fed hawks in particular believe to be building? On first take, the slowing in payroll growth is modest: And arguably sufficient to place additional downward pressure on the unemployment rate. Cleveland Federal Reserve President Loretta Mester recently repeated this view, which is widely held within the FOMC. Via Reuters: Mester, a voting member on the Fed's policy-setting committee, had earlier in the day told a philanthropy conference that the U.S. economy probably needs to generate between 75,000 and 150,000 jobs per month to keep the jobless rate stable. Hiring has been stronger than that this year and the U.S. jobless rate is currently at 4.9 percent. "The economy is basically at full employment," Mester said. This "full employment" view is also evident in the Fed's estimate of the natural rate of unemployment: This, not inflation directly, seems to be driving Fed hawks toward a rate hike. See former Federal Reserve President Narayana Kocherlakota here.  It is the perceived threat of inflation, not the actual, realized threat of inflation.

Has Another Interest-Rate-Hike Forecast Bit The Dust? - Hawkish commentary from Fed officials in recent weeks has fueled speculation that the central bank may be poised to raise rates for a second time. Maybe so, but the newly retired governor of India’s central bank warns that the low- and negative-interest-rate regimen that’s become a staple in monetary policies around the world since 2008 won’t be easily reversed. “Often when monetary policy is really easy, it becomes the residual policy of choice,” Raghuram Rajan tells The New York Times. The observation resonates in the US in the wake of last week’s hefty slowdown in job growth. Private-sector employment increased by 126,000 in August, the softest monthly advance since the workforce posted a small contraction in May. The downshift has pared expectations that the Federal Reserve will raise interest rates at the Sep. 21-22 Federal Open Market Committee Meeting (FOMC). The probability of a rate hike for this month’s confab is just 21%, according to Fed funds futures via CME data at last week’s close. But some analysts haven’t thrown in the towel on expecting tighter policy for this month. “The speech by Chair Yellen at Jackson Hole suggested a relatively low bar” for employment growth, Goldman Sachs outlined in a note to clients over the weekend. “Back in the spring, the committee was ready to go in June or July, but then the weak May payroll report and the Brexit vote interfered. Now both of these worries have dissipated.” But Dennis Gartman, who pens a widely read newsletter, begs to differ, CNBC reports: Gartman said the one-tenth decline in hours worked from 34.4 hours to 34.3 hours was “the rough equivalent of actually losing at least 200,000 non-farm payroll workers in the period in question.”  The work week decline, reported in the last monthly payrolls release before the Federal Open Market Committee meeting on Sept. 20-21, effectively scotched a rate hike, he said.

Fed's Williams says U.S. economy in good shape, wants rate hike | Reuters: A top Federal Reserve official on Tuesday repeated his call for gradual interest rate hikes, evidently unfazed by a slowdown in U.S. job gains and sluggishness in the services sector that now has traders betting against any rate hike at all this year. It "makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later," San Francisco Fed President John Williams said in remarks prepared for delivery to the Hayek Group. In his prepared remarks Williams did not address the release of data on Tuesday that showed activity in the U.S. services sector had hit a six-and-a-half-year low, or government data last Friday that showed U.S. employers added fewer jobs than expected in August. Williams said the economy was in "good shape," and he forecast unemployment, now at 4.9 percent, to fall to 4.5 percent in the coming year and inflation to rise to the Fed's 2 percent target in the next year or two. Longer-term, however, Williams made it clear he is far from comfortable with the Fed's current approach to monetary policy. Targeting low inflation, as the Fed and many other central banks currently do, simply will not work well in a world where economic growth and interest rates are likely to be persistently lower than they were in the era before the Great Recession, he said. A low inflation target, he said, gives the Fed too small a buffer to fend off future shocks. The Fed could raise its 2 percent inflation target to 3 percent or even 4 percent, or shift away from inflation targeting altogether and instead target a nominal level of national economic output, Williams said.

 Fed Watch: Is Pushing Unemployment Lower A Risky Strategy? -- The unemployment is closing in on the Fed's estimate of the natural rate of unemployment: Consequently, Fed hawks are pushing for a rate hike sooner than later in an effort to prevent the economy from "overheating." This overheating is argued to set the stage for the next recession. For instance, see San Francisco Federal Reserve President John WilliamsHistory teaches us that an economy that runs too hot for too long can generate imbalances, potentially leading to excessive inflation, asset market bubbles, and ultimately economic correction and recession. A gradual process of raising rates reduces the risks of such an outcome. In his Bloomberg View column, former Minneapolis Federal Reserve President Narayana Kocherlakota questions whether there is much theory behind this contention: Some Fed officials worry that “overheating” could trigger a recession. Kocherlakota was specifically referring to the risks of undershooting the natural rate of unemployment. New York Federal Reserve President William Dudley summarized his perception of that risk in January of this year:  A particular risk of late and fast is that the unemployment rate could significantly undershoot the level consistent with price stability. If this occurred, then inflation would likely rise above our objective. At that point, history shows it is very difficult to push the unemployment rate back up just a little bit in order to contain inflation pressures.I don't know that there is an economic mechanism at work here. I don't know that there is a law of economics where the unemployment can never be nudged up a few fractions of a percentage point. But I do think there is a policy mechanism at play. During the mature and late phase of the business cycle, the Fed tends to overemphasize the importance of lagging data such as inflation and wages and discount the lags in their own policy process. Essentially, the Fed ignores the warning signs of recession, ultimately over tightening time and time again.

The Fed’s complacency about its current toolbox is unwarranted: Larry Summers:-As I argued in the first blog in this series last week, I was disappointed in what came out of Jackson Hole for three reasons. The first reason, developed in that blog, was that the Fed should have signaled a desire to exceed its two percent inflation target during periods of protracted recovery and low unemployment and in this context to signal that a rate increase was off the table for September and quite likely the rest of the year. Friday’s employment report further strengthens the case for delay both by adding to the evidence on the absence of inflation pressures and by suggesting a less robust economy than most expected. Even apart from the desirability of allowing inflation to rise above two percent in a happy economic scenario GDP, labor market and inflation expectations data all make a compelling case against a rate increase. Private sector GDP growth for the last year has averaged 1.3 percent a level that has since the 1960s always presaged recession. Total work hours have over the last 6 months grown at nearly their slowest rate since early 2010. And both market and survey measures of inflation expectations continue to decline.My second reason for disappointment in Jackson Hole was that Chair Yellen, while very thoughtful and analytic, was too complacent to conclude that “even if average interest rates remain lower than in the past, I believe that monetary policy will, under most conditions, be able to respond effectively”. This statement may rank with Ben Bernanke’s unfortunate observation that subprime problems would be easily contained.Rather I believe that countering the next recession is the major monetary policy challenge before the Fed. I have argued repeatedly that (i) it is more than 50 percent likely that we will have a recession in the next 3 years. (ii) countering recessions requires 400 or 500 basis points of monetary easing. (iii) we are very unlikely to have anything like that much room for easing when the next recession comes. ... [explains in detail] ... On balance, I think the Fed’s complacency about its current toolbox is unwarranted. If I am wrong in either exaggerating the risks of recession or understating the efficacy of policy, the costs of taking out insurance against a recession that cannot be met with monetary policy are relatively low. If I my fears are justified, the costs of complacency could be very high. The right policy in the near term should be tilting as hard as possible against recession as argued in the first blog in this series. For the longer term the Fed will have to reconsider its broad policy approach. This will be subject of my next entry.

The Fed’s slow march into collateral intermediation --The Fed sure seems to be getting comfortable with the idea of acting as a centralised counterparty for collateral transactions. It's unclear whether the market's quite as enamored with the idea.  This year's Jackson Hole conference was on monetary policy implementation, which often serves as a shorthand for the following questions: how should the Fed control interest rates, and how big of a role should it play in financial markets?  While the topic seems arcane, it's important to understand how thoroughly the Fed has changed its approach to controlling interest rates (and through that, its relationship with markets). The topic isn't just for technocrats -- the debate now is over whether that change should be a permanent one.A background refresher:

  • 1) The Fed’s QE purchases created trillions of dollars’ worth of bank reserves, which are structurally similar to interest-bearing central-bank securities. That was a closed ecosystem that only the banks could access — until a new facility was introduced that gave money-market funds and government-sponsored enterprises short-term access to the Fed’s balance sheet as a source of collateral.
  • 2) When it hiked rates last year, the Fed targeted a “corridor” between 0.25 per cent and 0.5 per cent. To keep US policy supported at the upper target, the Fed decided to pay banks interest on their excess reserves (IOER).
  • 3) To keep rates above the lower target, it introduced the new facility mentioned above which pays banks, money-market funds and government-sponsored enterprises 0.25 per cent to take as much as $30 billion in Treasuries overnight from its balance sheet. Money managers say that the reverse repurchase (RRP) agreements work well to keep rates in line, because they shouldn’t earn a lower rate for taking quality collateral from a private counterparty (which has a risk of default) than they would for collateral from the Fed (which doesn’t).

The RRP is the most interesting of the mechanisms the Fed uses to control rates. That’s because it makes the Fed a source of about $2.5 trillion of quality short-term collateral, and gives the central bank a bigger group of trading partners than it’s had ever before.

Fed Vice-Chairman Admits Fed Sponsors Wealth Inequality - Federal Reserve Vice-Chairman Stanley Fischer made a couple of controversial statements this week regarding negative interest rates. Fisher stated negative rates “seem to work” while admitting they are bad for savers but they “typically they go along with quite decent equity prices.” There are two problems in play. The first is an explicit admission that the Fed sponsors wealth inequality. The second problem is Fisher does not understand how markets even work. John Hussman takes Fisher to task on how markets work Failed Transmission – Evidence on the Futility of Activist Fed Policy. A financial security is nothing but a claim to some future set of cash flows. The actual “wealth” is embodied in those future cash flows and the value-added production that generates them. Every security that is issued has to be held by someone until that security is retired. So elevating the current price that investors pay for a given set of future cash flows simply brings forward investment returns that would have otherwise been earned later, leaving little but poorly-compensated risk on the table for the future (see QE and the Iron Laws for an illustration of this process). In this context, the following statement last week by Federal Reserve Vice-Chairman Stanley Fischer last week (Bloomberg) displayed a strikingly narrow understanding of the investment process: “Well, clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices. But we consider all that and we have to make trade-offs in economics all the time, and the idea is the lower the interest rate, the better it is for investors.” To be fair, there’s a kernel of truth in Fischer’s view that lower interest rates are “better” for investors. In recent years, low interest rates have certainly encouraged speculation, stretching reliable measures of equity market valuation to the third most offensive level in U.S. history next to 1929 and 2000. But Fischer’s statement is also incomplete. A clear understanding of how financial securities are priced suddenly turns Fed policy from something that seems quite generous to investors into something that’s actually terrifically hostile. See, the lower the interest rate, the better it is for investors, but only provided that investors wholly ignore the future. The US does not have negative rates, but it certainly has had amazingly low rates. What Fisher said about negative rates applies equally well to low rates. By holding rates too low too long the Greenspan Fed created a huge property bubble. Who benefited? It certainly was not the saver. The beneficiary of the bubble was the equity holders and bank CEOs. Not only did financial insiders make a fortune in stock options in the runup, the Fed bailed out the banks after the crash as well.

Inflation on the Rise? Not Lately. -- The Federal Reserve is moving, albeit cautiously, toward raising interest rates, arguing that the U.S. is near full employment and that inflation should rise back to its 2% target over the medium term. There are reasons to suspect that inflation will rise: survey-based measures of long-term inflation expectations, though lower than they’ve been for decades, are still above 2%; wages are picking up; and, as Fed Vice Chair Stanley Fischer recently noted, the “inflation rate this year is higher than last year’s. It’s still not up to 2%. But it’s been growing.” The Fed’s favorite gauge for inflation, the price index for personal consumption expenditures (PCE), has been rising at an annual pace of about 1.6%, up from 1.3% to 1.4% in 2015. Recent inflation data, however, don’t show much of an increase. Headline inflation has dipped since January, and core PCE–excluding volatile food and energy prices–is about where it was (marginally lower, actually). For one to argue, as Boston Fed President Eric Rosengren has, that the U.S. has had “gradual increases,” one must measure inflation in years, not quarters. Even then, core inflation has not budged much since early 2013, despite record-busting monetary stimulus and very low interest rates. Other measures, such as the familiar consumer price index and the Dallas Fed’s rate of “Trimmed Mean PCE,” tell a similar story. Since the start of the year, headline consumer-price-index numbers have dropped from a year-over-year 1.4% to 0.8%, and core CPI inflation in July was the same as it was in January. And at 1.62, the year-over-year Dallas Fed Trimmed Mean is lower than its January value of 1.70. The bottom line: The inflation rate is higher now than it was in 2015. But over the course of 2016 we’ve seen no apparent progress toward the 2% inflation target. If anything, the inflation rate in January was closer to the Fed’s goal than in July. So it’s increasingly difficult for Fed officials to rely on current inflation numbers as a justification for raising rates. Higher inflation might be just around the corner, but we haven’t seen it yet.

Message to the Fed: We’re not in Kansas Anymore - Roger Farmer --In a recent post, I argued that the Fed should raise the interest rate to return inflation to positive territory. This post is about the possible cost of that action on the nascent recovery and how that cost can be mitigated, or avoided. My views are based on the theory expounded in my academic papers and in my book, Prosperity for All, that will be available from your favorite bookseller in a couple of weeks. I will argue that a rate rise may have negative consequences on output and employment. But those negative consequences can be mitigated in two ways. First, by raising the interest rate paid on excess reserves (IOR) at the same time as operating in the repo market to raise the Federal Funds Rate (FFR). And second, by operating in the asset markets to offset a potential market crash by standing ready to buy and sell an exchange traded fund in the stock market. There is a lasting and stable connection in data between changes in the interest rate and changes in the unemployment rate. Past data suggest, that if the Fed were to raise the interest rate at its next meeting, unemployment would increase and output growth would slow. It is fear of that outcome that causes central bank doves to be reluctant to raise the interest rate. But although an interest rate increase has preceded a slowdown by approximately three months in past data, there is a connection at longer horizons between inflation and the T-bill rate. That connection, sometimes called the Fisher relationship after the American economist Irving Fisher, arises from the fact that, risk-adjusted, T-bills and equities should pay the same rate of return. The one-year real return on a T-bill is the difference between the interest rate and the expected one-year inflation rate. The one-year real return on holding the S&P 500 is the gain you can expect to make from buying the market today and selling it one year later. Economic theory suggests that the gap between those two expected returns arises from the fact that equities are riskier than T-bills, and importantly, the gap cannot be too big.Therein lies the policy maker’s conundrum. To hit an inflation target of 2%, the T-bill rate must be 2% higher than the underlying risk adjusted real rate: policy makers call this rate r*. There is some evidence that r* is currently very low currently, possibly zero or even negative.  But if the Fed were to raise the policy rate to 2% at the next meeting, they are terrified that they might trigger a recession.  Let’s examine that argument.

The Case Against Cash - Kenneth Rogoff - The world is awash in paper currency, with major country central banks pumping out hundreds of billions of dollars’ worth each year, mainly in very large denomination notes such as the $100 bill. The $100 bill accounts for almost 80% of the US’s stunning $4,200 per capita cash supply. The ¥10,000 note (about $100) accounts for roughly 90% of all Japan’s currency, where per capita cash holdings are almost $7,000. And, as I have been arguing for two decades, all this cash is facilitating growth mainly in the underground economy, not the legal one.  I am not advocating a cashless society, which will be neither feasible nor desirable anytime soon. But a less-cash society would be a fairer and safer place.  With the growth of debit cards, electronic transfers, and mobile payments, the use of cash has long been declining in the legal economy, especially for medium and large-size transactions. Central bank surveys show that only a small percentage of large-denomination notes are being held and used by ordinary people or businesses.  Cash facilitates crime because it is anonymous, and big bills are especially problematic because they are so easy to carry and conceal. A million dollars in $100 notes fits into a briefcase, a million dollars in €500 notes (each worth about $565) fits into a purse.  Sure, there are plenty of ways to bribe officials, engage in financial crime, and evade taxes without paper currency. But most involve very high transaction costs (for example, uncut diamonds), or risk of detection (say, bank transfers or credit card payments).  Yes, new-age crypto-currencies such as Bitcoin, if not completely invulnerable to detection, are almost so. But their value sharply fluctuates, and governments have many tools with which they can restrict their use – for example, by preventing them from being tendered at banks or retail stores. Cash is unique in its liquidity and near-universal acceptance.  The costs of tax evasion alone are staggering, perhaps $700 billion per year in the United States (including federal, state, and local taxes), and even more in high-tax Europe. Crime and corruption, though difficult to quantify, almost surely generate even greater costs. Think not just of illegal drugs and racketeering, but also of human trafficking, terrorism, and extortion.

Negative Interest Rates and the War on Cash (3) - This is part 3 of a 4-part series by Nicole Foss entitled “Negative Interest Rates and the War on Cash”.

Here is Nicole:   Bitcoin and other electronic platforms have paved the way psychologically for a shift away from cash, although they have done so by emphasising decentralisation and anonymity rather than the much greater central control which would be inherent in a mainstream electronic currency. The loss of privacy would no doubt be glossed over in any media campaign, as would the risks of cyber-attack and the lack of a fallback for providing liquidity to the economy in the event of a systems crash. Electronic currency is much favoured by techno-optimists, but not so much by those concerned about the risks of absolute structural dependency on technological complexity. The argument regarding greatly reduced socioeconomic resilience is particularly noteworthy, given the vulnerability and potential fragility of electronic systems. There is an important distinction to be made between official electronic currency – allowing everyone to hold an account with the central bank — and private electronic currency. It would be official currency which would provide the central control sought by governments and central banks, but if individuals saw central bank accounts as less risky than commercial institutions, which seems highly likely, the extent of the potential funds transfer could crash the existing banking system, causing a bank run in a similar manner as large-scale cash withdrawals would. As the power of money creation is of the highest significance, and that power is currently in private hands, any attempt to threaten that power would almost certainly be met with considerable resistance from powerful parties. Private digital currency would be more compatible with the existing framework, but would not confer all of the control that governments would prefer: People would convert a very large share of their current bank deposits into official digital money, in effect taking them out of the private banking system. Why might this be a problem? If it’s an acute rush for safety in a crisis, the risk is that private banks may not have enough reserves to honour all the withdrawals. But that is exactly the same risk as with physical cash: it’s often forgotten that it’s central bank reserves, not the much larger quantity of deposits, that banks can convert into cash with the central bank. Both with cash and official e-cash, the way to meet a more severe bank run is for the bank to borrow more reserves from the central bank, posting its various assets as security.

Fed's Beige Book: "Upward wage pressures increased and were moderate on balance" --- Fed's Beige Book "Prepared at the Federal Reserve Bank of San Francisco and based on information collected on or before August 29, 2016."  Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest pace on balance during the reporting period of July through late August. Most Districts reported a "modest" or "moderate" pace of overall growth. However, Kansas City and New York reported no change in activity, and Philadelphia and Richmond noted that, while still expanding, activity slowed from the previous period. ...  Labor market conditions remained tight in most Districts, with moderate payroll growth noted in general. Upward wage pressures increased further and were moderate on balance, with more rapid gains reported for workers with selected specialized skill sets. Price increases remained slight overall.  And on real estate:  Activity in residential real estate markets expanded further in most Districts. Growth in residential construction activity was moderate across many Districts but robust in San Francisco, where contacts reported that contractors are bumping up against capacity constraints for new projects. In Minneapolis, strong growth in the construction of single-family units was offset somewhat by a slowdown in the construction of multifamily units. Contacts in Dallas reported that demand for low- to mid-priced homes remained strong, while demand for higher priced homes softened in Dallas and New York, and was flat in Chicago. By contrast, sales in Cleveland were equally skewed toward the entry-level and high-end segments of the market. Commercial real estate activity expanded further in most Districts. Construction and sales rose only slightly in Boston, Kansas City, and St. Louis but grew at a faster clip in Cleveland and Dallas. In the Atlanta District, construction activity expanded moderately, but contractors reported tight supply conditions, with construction backlogs of one to two years. Contacts in Richmond and New York noted strong growth in industrial construction, and vacancy rates for industrial space fell to 10-year lows in the latter District. Commercial leasing activity strengthened in New York, Richmond, and San Francisco, but grew at a softer pace in Philadelphia, where contacts described the market as in a "lull, not a retreat."

US recession jitters stoke fears of impotent Fed and fiscal paralysis - An ominous paper by the US Federal Reserve has become the hottest document in high finance.  It was intended to reassure us that the world's hegemonic central bank still has ample firepower to overcome the next downturn. But the author was too honest. He has instead set off an agitated debate, and rattled a lot of nerves.  David Reifschneider's analysis - 'Gauging the Ability of the FOMC to Respond to Future Recessions' - more or less concedes that the Fed has run out of heavy ammunition. The Federal Open Market Committee had to cut interest rates by an average of 550 basis points over the last nine recessions in order to break the fall and stabilize the economy. It could not possibly do so right now, or next year, or the year after. Quantitative easing (QE) in its current form cannot compensate, and nor can forward guidance. They are largely exhausted in any case. "One cannot rule out the possibility that there could be circumstances in the future in which the ability of the FOMC to provide the desired degree of accommodation using these tools would be strained," he wrote.  This admission is painfully topical as a plethora of data suggest that the US economy may have hit a brick wall in August. The ISM gauge of manufacturing plunged below the boom-bust line to 49.4, and the services index dropped to a six-year low, with new orders crashing nine points.  My own tentative view is that these ISM readings are rogue surveys. The Atlanta Fed's 'GDPNow' tracker points to robust US growth of 3.6pc in the third quarter. The New York Fed version is coming in at 2.8pc.   Yet the US expansion is already long in the tooth after 87 months, and late-cycle chemistry is notoriously unpredictable. Warning signs certainly abound. Corporate profits have been slipping for six quarters, the typical precursor to an abrupt slump in business spending. "The only thing keeping the US out of recession is the US consumer. If consumption stalls then we really are in trouble," says Albert Edwards from Societe Generale. I am willing to bet against him for now. The M1 money supply - often a good leading indicator - has picked up after a weak patch earlier this year and is now surging at a rate of 10.1pc. This pace would normally signal burst of torrid growth a few months later. It is in stark contrast to the monetary contraction before the Lehman crisis

Real GDP Projected At 3.6% Annual Rate In Third Quarter - The St. Louis Fed's Economic News Index predicts that real GDP will increase at a 3.6 percent annual rate in the third quarter, according to data through Sept. 2.If realized, this would be substantially stronger than the 1.1 percent annual rate of increase registered in the second quarter, as can be seen in the figure below.  But if real GDP advances at a 3.5 percent rate in the third quarter, the economy's four-quarter growth rate will remain around 1.5 percent. This is about 0.5 percentage points less than its average growth rate registered during the current economic expansion since the second quarter of 2009.  For information on index, see the blog post "St. Louis Fed Index Forecasts Bounce Back in Real GDP Growth." This data series will eventually be available through the Federal Reserve Economic Data(FRED) database.

 GDPNow -- 3Q16 At 3.3% In Latest Forecast -- Friday, September 9, 2016 -- From the Altanta Fed: GDPNow  Latest forecast: 3.3 percent — September 9, 2016 The GDPNow model forecast for real GDP growth in the third quarter of 2016 is 3.3 percent on September 9, down from 3.5 percent on September 2.  The forecasts of third-quarter real consumer spending growth and real equipment investment growth declined from 3.5 percent to 3.4 percent and from 3.3 percent to 2.0 percent, respectively, on Tuesday after the motor vehicle sales release from the U.S. Bureau of Economic Analysis and the Non-Manufacturing ISM Report On Business.  The forecast of the contribution of inventory investment to third-quarter real GDP growth decreased from 0.62 percentage points to 0.57 percentage points after this morning's wholesale trade report from the U.S. Census Bureau.

Why So Few Economists Are Prepared to Say Recession Risks Are Fading - By many key measures, the economy has looked fine in recent months. After gradually sliding for most of 2015, industrial production has bounced up. Consumer spending has done well. The economy added 151,000 jobs last month. Initial jobless claims are near a four-decade low.Yet most economists, when asked to assess the odds of a recession in the next year, have continued to place the odds at about one in five. Not a prediction of imminent doom, but double the odds of a year ago.Why are those odds still elevated, in light of economic improvement? Asked about them, Gregory Daco, chief U.S. economist for Oxford Economics, put it succinctly: “A lot weighing on upcoming elections.”Nobody is ready to sound the all-clear with an election—especially this election—just two months away. Not only must forecasters assess the policies proposed by the candidates, they must keep in mind the potential for a divided Congress that could stymie either candidate. Business investment has been slumping this year, and a leading suspect is this election.While Hillary Clinton has largely embraced familiar policies for Democratic candidates, Donald Trump has broken with large swaths of his own party on several major economic issues, including trade, immigration and arguably deficit reduction. Underscoring the extent of the difference between Mr. Trump and previous Republican presidents, not one former member of the White House Council of Economic Advisers has come forward in support of Mr. Trump’s campaign.

 What the U.S. economy needs to get out of its rut - Our major political parties don’t agree on much these days, but the 2016 Republican and Democratic platforms both include prominent planks calling for the federal government to address the sorry state of America’s infrastructure. The question is: Can the parties resolve their differences on fiscal policy to find the necessary federal funding to address this urgent need? They can — if the next administration and Congress keep in mind two basic principles. First, infrastructure spending generates a range of productivity gains that augment long-term economic activity and thereby increase tax revenue. Second, in an economy where, since the start of this century, productivity and income growth have been well below the trend of the previous “American century,” a well-designed program of new infrastructure spending can be just the catalyst the U.S. economy needs to get out of its rut.The persistent shorting of funds for infrastructure modernization and repair has left us with a huge hole to fill: The American Society of Civil Engineers estimates that the federal government needs to spend an additional $140 billion a year for the next 10 years to fill the gap. The problem is that any program involving such a dramatic increase in spending will inevitably get bogged down in legitimate concerns about the trajectory of budget deficits and the already dramatic, relatively recent increase in the size of the federal debt as a percentage of gross domestic product. Given the parlous state of America’s infrastructure, a solution cannot await some “grand bargain” that brings all aspects of the federal budget into long-term balance. Debt financing is not only needed but appropriate.

  Hillary Clinton’s National Security Advisers Are a “Who’s Who” of the Warfare State -- Hillary Clinton is meeting on Friday with a new national security “working group” that is filled with an elite “who’s who” of the military-industrial complex and the security deep state. The list of key advisers — which includes the general who executed the troop surge in Iraq and a former Bush homeland security chief turned terror profiteer — is a strong indicator that Clinton’s national security policy will not threaten the post-9/11 national-security status quo that includes active use of military power abroad and heightened security measures at home. It’s a story we’ve seen before in President Obama’s early appointments. Obama’s most fateful decision may have been choosing former National Counterterrorism Center Director John Brennan to be national security adviser, despite Brennan’s support of Bush’s torture program. Brennan would go on to run the president’s drone program, lead the CIA, fight the Senate’s torture investigation, and then lie about searching Senate computers.  That backdrop is what makes Clinton’s new list of advisers so significant.  It includes Gen. David Petraeus, the major architect of the 2007 Iraq War troop surge, which brought 30,000 more troops to Iraq. Picking him indicates at partiality to combative ideology. It also represents a return to good standing for the general after he pled guilty to leaking notebooks full of classified information to his lover, Paula Broadwell, and got off with two years of probation and a fine. Petraeus currently works at the investment firm KKR & Co. Another notable member of Clinton’s group is Michael Chertoff, a hardliner who served as President George W. Bush’s last secretary of the Department of Homeland Security, and who since leaving government in 2009 has helmed a corporate consulting firm called the Chertoff Group that promotes security-industry priorities. Many others on the list are open advocates of military escalation overseas. Mike Morell, the former acting director of the CIA, endorsed Clinton last month in a New York Times opinion piece that accused Trump of being an “unwitting agent of the Russian Federation.” The Times was criticized for not disclosing his current employment by Beacon Global Strategies, a politically powerful national-security consulting firm with strong links to Clinton. Three days later, Morell told Charlie Rose in a PBS interview that the CIA should actively assassinate Russians and Iranians in Syria.

 Report: The US’s new $13 billion aircraft carrier is ‘premature’ with ‘unproven technologies’ -- Three months before the delivery of the Navy's first-in-class, $13 billion Ford class carrier, the USS Gerald R. Ford, an independent review ordered by the Pentagon's top weapons buyer has revealed some serious problems with the program.  “With the benefit of hindsight, it was clearly premature to include so many unproven technologies” Frank Kendall said in an August 23 memo to Navy Secretary Ray Mabus, as reported by Anthony Capaccio of Bloomberg News.  The Navy has been looking forward to the Ford class, originally promised to be delivered in 2014, to slowly start replacing the Nimitz class carriers that were originally introduced in 1975.  The Ford class promises several improvements on the aging Nimitzs, from improved launching and landing gear, radars, and ship design, all the way down to the nuclear core that powers the ship and it's power-generation capabilities.   But aircraft carriers already constitute some of the largest and most complicated machines ever built by man, and the independent review suggests the program may be buckling under the weight of it's own complexity.  “The USS Ford, like every first-of-class ship ever built, has and will continue to face challenges,” Commander Mike Kafka, a Navy spokesman told Bloomberg News.

The Secret Threat That Makes Corporations More Powerful Than Countries -  A foreign gold-mining company was preparing to gouge out a massive pit from the mountain that had sustained these farmers and fishermen for generations. To protect their way of life, the villagers planned to hike to the summit and refuse to leave. Newcrest Mining had won the right to explore this mineral-rich area during the 30-year rule of Suharto, Indonesia’s military dictator. But when mass protests swept Suharto from power, the new parliament outlawed the environmentally devastating open-pit mining method in certain areas like this one, where it could endanger the water supply. Newcrest, however, was proceeding as if the new law didn’t apply — because, effectively, it didn’t. The Australian company had found a way to trap Indonesia in the deals of the deposed dictator and, in the process, reap huge profits. The weapon that Newcrest and other powerful foreign mining companies wielded was a threat. A highly specialized legal threat: They warned they might haul Indonesia before a sort of private global super court. Though most people have never heard of it, this justice system has the power to make entire nations fork over hundreds of millions or even billions of dollars to companies that say their business was unfairly hampered. Known as investor-state dispute settlement, or ISDS, this legal system is written into a vast network of treaties that set the rules for international trade and investment. It is as striking for its power as for its secrecy, with its proceedings — and in many cases its decisions — kept from public view. Of all the ways in which ISDS is used, the most deeply hidden are the threats, uttered in private meetings or ominous letters, that invoke those courts. The threats are so powerful they often eliminate the need to actually bring a lawsuit. Just the knowledge that it could happen is enough.

Inside The Global “Club” That Helps Executives Escape Their Crimes - The BuzzFeed News investigation explores four different aspects of ISDS. In coming days, it will show how the mere threat of an ISDS case can intimidate a nation into gutting its own laws, how some financial firms have transformed what was intended to be a system of justice into an engine of profit, and how America is surprisingly vulnerable to suits from foreign companies. The series starts today with perhaps the least known and most jarring revelation: Companies and executives accused or even convicted of crimes have escaped punishment by turning to this special forum. Based on exclusive reporting from the Middle East, Central America, and Asia, BuzzFeed News has found the following:

  • A Dubai real estate mogul and former business partner of Donald Trump was sentenced to prison for collaborating on a deal that would swindle the Egyptian people out of millions of dollars — but then he turned to ISDS and got his prison sentence wiped away.
  • In El Salvador, a court found that a factory had poisoned a village — including dozens of children — with lead, failing for years to take government-ordered steps to prevent the toxic metal from seeping out. But the factory owners’ lawyers used ISDS to help the company dodge a criminal conviction and the responsibility for cleaning up the area and providing needed medical care.
  • Two financiers convicted of embezzling more than $300 million from an Indonesian bank used an ISDS finding to fend off Interpol, shield their assets, and effectively nullify their punishment.

When the US Congress votes on whether to give final approval to the sprawling Trans-Pacific Partnership, which President Barack Obama staunchly supports, it will be deciding on a massive expansion of ISDS. Donald Trump and Hillary Clinton oppose the overall treaty, but they have focused mainly on what they say would be the loss of American jobs. Clinton’s running mate, Tim Kaine, has voiced concern about ISDS in particular, and Sen. Elizabeth Warren has lambasted it. Last year, members of both houses of Congress tried to keep it out of the Pacific trade deal. They failed.

Warren Slams ISDS Provision in Trans-Pacific Partnership Trade Deal -- Sen. Elizabeth Warren on Wednesday said that the investor-state dispute settlement provision in the Trans-Pacific Partnership trade deal would allow corporations to challenge foreign laws before private arbitration panels outside of the traditional legal system. “It allows companies to challenge foreign laws they don’t like and potentially win millions or even billions of dollars from taxpayers,” Warren (D-Mass.) told reporters on a conference call, which was hosted by left-leaning advocacy group Public Citizen and included economist Jeffrey Sachs and law professors Cruz Reynoso and Alan Morrison.   Warren, who did not take questions from reporters, has been a vocal critic of TPP, which emerged as a contentious issue on the presidential campaign trail. President Obama has called for a lame-duck vote on the 12-nation trade agreement, but some Democrats — from progressives like Warren to presidential nominee Hillary Clinton — have split from the president on the issue, and congressional leaders have thrown cold water on the possibility of holding a vote this year. Warren said the investor-state dispute settlement provision would prompt nations to shy away from tough regulations and give foreign investors an advantage.  “Giving foreign corporations special rights to challenge laws outside of the legal system is a bad deal for everyone except those corporations,” she said. “That’s why I oppose ISDS, why Secretary Clinton and Sen. Kaine oppose ISDS.” “Our trade negotiators claim they fixed some of the problems with ISDS, but the changes they’ve made are window dressing,” she said.

  In Attempted Hit Piece, NYT Makes Putin Hero of Defeating TPP – Marcy Wheeler - In an remarkable hit piece NYT spent over 5,000 words yesterday trying to prove that all of WikiLeaks’ leaks are motivated from a desire to benefit Russia.  That of course took some doing. It required ignoring the evidence of the other potential source of motivation for Julian Assange — such as that Hillary participated in an aggressive, and potentially illegal, prosecution of Assange for being a publisher and Chelsea Manning for being his source — even as it repeatedly presented evidence that that was Assange’s motivation. Putin, who clashed repeatedly with Mrs. Clinton when she was secretary of state, [snip] In late November 2010, United States officials announced an investigation of WikiLeaks; Mrs. Clinton, whose State Department was scrambled by what became known as “Cablegate,” vowed to take “aggressive” steps to hold those responsible to account. [snip] Another person who collaborated with WikiLeaks in the past added: “He views everything through the prism of how he’s treated. America and Hillary Clinton have caused him trouble, and Russia never has.” It also required dismissing some of the most interesting counterexamples to the NYT’s thesis:

How Hillary Clinton's Social Policies Could Raise Effective Marginal Tax Rates for the Middle Class – Ed Dolan -  Discussions of by both supporters and critics have characterized Hillary Clinton’s tax policies as progressive.  According to an analysis by the Tax Policy Center, her proposals would increase revenue by $1.1 trillion over the next decade, with nearly all of the tax increases falling on the top 1 percent. However, the conclusion that Clinton’s policies would have little effect on middle-class families is based on a narrow view of taxes—one that takes into account only the money that taxpayers hand over to the IRS. Economists have long favored a broader concept called the effective marginal tax rate (EMTR), which includes reductions in government benefits that occur as income rises as well as increases in taxes paid. Some little-noticed features of Clinton’s education and healthcare policies would have the unintended consequence of raising effective marginal tax rates on middle-class families to levels far above those that top earners would face.  In a recent post on poverty policy and work incentives, I used the example of a household that receives food stamps, subject to a benefit reduction rate of 24 percent; receives housing benefits, subject to a benefit reduction rate of 30 percent; and pays a 7 percent payroll tax on earned income. The EMTR for that household would be 24+30+7=61 percent, meaning that its net income, after benefit reductions and taxes, would rise by just $39 for each $100 earned. What is new about Clinton’s policy proposals is the way that they would push high benefit reduction rates far on up the income scale, into the middle class and above. Consider, for example, her proposal for child care. Costs of day care vary widely according to location and age of the child, but, drawing on information from, we can use $10,000 per year as a working estimate. Under Clinton’s plan, then, a family with one child and an income of $50,000, approximately the US median, would have to pay $5,000 for day care and would receive a subsidy of $5,000 in the form of tax credits. A family with income of $60,000 would get a subsidy of $4,000 and so on, with the subsidy finally phasing out at a family of income of $100,000. That would mean a benefit reduction rate of 10 percent. According to the Tax Policy Center’s analysis, under Clinton’s tax plan, families in the third and fourth income quartiles—$45,000 to $142,000 annual income—would pay a marginal tax rate of about 33 percent for combined federal income and payroll taxes. Adding  a 10 percent benefit reduction rate for child care would put their effective marginal tax rate up to 43 percent. Similar reasoning applies to Clinton’s college tuition plan, which promises free tuition, at a state school, for families earning less than $125,000. According to the The College Board, tuition at state universities ranges from about $5,000 to $15,000 per year, averaging just under $10,000. Again, her campaign has not released details, but it is reasonable to assume that families would not abruptly lose the entire benefit if their income went from $125,000 to $125,001. If the benefit were phased out at a 10 percent rate, as for childcare, benefit reductions would continue up to $225,000 for families with one child in college in a state with average tuition, and $325,000 for a family with two children in college.

Senate Ron Wyden's Proposal on Roth IRAs - ataxingmatter by Linda Beale - Senator Wyden (D-Oregon) has been interested in reforming retirement account tax treatment for some time.  Back in the fall of 2014, he and Senator Orrin Hatch held hearings on the need for retirement account reform, focused on the idea that too much of the retirement tax breaks go to people who don't need them (much like the mortgage interest deduction provides a substantial tax break to wealthier Americans).  See, e.g., Congress Targets Retirement Tax Breaks, Forbes (Sept. 16,  2014). Consistent with this earlier effort to get Congress to focus retirement tax breaks more appropriately, Senator Wyden today released a draft bill--The Retirement Improvements and Savings Act of 2016--that would perhaps start to make a dent in the excessive tax breaks Congress has provided in the Internal Revenue Code for the wealthy while providing some reasonable changes to support  retirement savings and planning for ordinary taxpayers with shallower pockets.  The proposal would cap the total value of a Roth IRA or individual retirement account at $5 million and require distributions of any amounts in excess of that ceiling.  Roth conversions from regular IRAs or employer-sponsored plans would no longer be allowed.  The proposal would also cut back on some of the estate planning gimmicks--like so-called "stretch IRAs"--that wealthy people can currently use to avoid even the puny estate tax that decades of slashing taxes for the wealthy have left us with.   The bill would provide a credit (up to $500) payable into a retirement account for certain contributions to retirement savings: for joint return filers, the credit would be available for those with incomes  up to $85,000, with the amount of the credit phasing out between $65,000 and $85,0000.  (See proposed section 6433 and amendment to section 25B (a)-(f).)  Some of the provisions proposed are intended to reflect the longer life expectancy retirees now enjoy compared to when the minimum distribution and other requirements were put into place.  The bill would repeal the maximum age for making contributions to traditional IRA accounts, and it would gradually increase the age at which the first minimum distribution must be taken, while also allowing relatively small accounts ($150,000 or less) to continue accruing value in retirement accounts without requiring minimum distributions to be made. Here is the table of contents for the draft bill:

Elizabeth Warren: What Apple Teaches Us About Taxes - Elizabeth Warren — APPLE got a big surprise last week when the European Commission ordered Ireland to collect more than $14 billion in back taxes from the company. The global giant had been attributing billions of dollars in profits to a phantom head office, allowing it to pay a tax rate of 1 percent or lower.Both Apple and Ireland are appealing the decision, but the commission’s announcement was the latest sign that multinational corporations are running out of places to hide from paying taxes. The door is now open for Congress to fix our own corporate tax code, which has allowed the biggest multinationals to shirk their obligations for decades.The Apple ruling is big, but it is only the latest international effort to end the deals that American multinationals have used to pay near-zero tax rates. The European Commission is investigating Luxembourg’s tax arrangements for Amazon and McDonald’s, and last year the European Court of Justice struck down tax advantages to companies and their subsidiaries selling e-books throughout Europe. Also last year, Britain enacted a new tax to target profits siphoned off by international companies — nicknamed, without much subtlety, the “Google tax.”It’s not just Europe. The Organization for Economic Cooperation and Development and the Group of 20 nations are coordinating on a global effort to end the cross-border games that allow companies to avoid taxation by moving money among various subsidiaries. Multinational corporations are especially worried about losing access to Cayman Island-style tax rates in European countries where they can also get rule of law, political stability and an educated professional class of attorneys and consultants.The Treasury Department has pushed back against the European Commission over the Apple case, concerned about the impact on the Internal Revenue Service’s authority. But Treasury has also finalized new country-by-country reporting requirements that could help expose the jaw-dropping variety of tax-dodging schemes multinational companies employ.

 The Bahamas’ Giant, Fist-Pumping Screw-You to the Civilized World - Certain stories that get virtually no traction nevertheless involve phenomena that are quite important in understanding the way the world operates.  One instance is the network of secrecy jurisdictions (“tax havens”), which play a huge role in the global economy by providing back channels used by a substantial fraction of the world’s wealth.  For those interested in the details, one good place to start is Nicholas Shaxson’s 2010 book Treasure Islands.The Tax Justice Network in the piece below suggests that the Bahamas is now angling for a position at the head of the secrecy jurisdiction line, “loudly advertising its desire to take criminal money.”  Update: as it happens, The Economist has just published an excellent story about the Bahamas, subtitled The Bahamas Cocks a Snook at the War on Tax Dodgers. (Our only beef with that subtitle is that this is about so much more than just tax.) We’ve periodically remarked on the Bahamas as a secrecy jurisdiction of great concern. Like Panama, it’s generally had a greater tolerance of dirty money than most modern offshore centres: more of a willingness to turn a blind eye and to overlook noncompliance by Bahamas-based actors of its own rules and laws. The purpose of this blog is to flag up the Bahamas in a more pointed way: as a major wrecking-ball threatening global efforts to clamp down on cross-border financial secrecy.The Bahamas has hosted an offshore centre for crime and tax evasion for decades, and it has historically had a higher tolerance for dirty money than most tax havens. Its secrecy score of 79 in our Financial Secrecy Index is one of the world’s highest.

 Deutsche Bank and a $10Bn Money Laundering Nightmare: More Context Than You Can Shake a Stick at -- naked capitalism by Richard Smith - Philip Burwell…set up many offshore companies for a customer called International Offshore Services Group (IOS)… There is no Sandford Road in Dublin, Virginia. The Organised Crime and Corruption Reporting Project In its recent long read, The New Yorker chronicles the management failures behind Deutsche Bank’s money laundering of around $10Bn via its Moscow office. This wheeze operated via so-called mirror trades: buy stock in DB Moscow for roubles; sell the same stock in London for dollars. One result is lots of nice dollars, not in Russia any more, but in London. This seems to have gone on for years without anyone really noticing, except for bank analysts Oliver Harvey and Robin Winkler:  There is strong evidence that a considerable chunk of the UK’s £133bn of hidden capital inflows is related to Russian capital flight. In a nice stroke of dramatic irony, those analysts work for Deutsche Bank. Readers will observe the massive difference between $10Bn and £133Bn, and wonder how the rest of the money makes it to London. I imagine Deutsche Bank execs will be hoping fervently that the answer doesn’t turn out to be “also via Deutsche Bank”. So far, nobody really knows, one way or the other. Some details of the Deutsche Bank £10Bn story are still pretty hazy, though. For instance, Matt Levine asks an interesting question: where’s the stock?…if you do the accounting it would seem that they’d also be building up a large stock position in Russia and an offsetting short position in London. I’m a little curious how they closed out their short positions in London. Did they, like, fly bags of stock certificates from Moscow? Doing the mirror trades solves the problem of moving cash from Moscow to London, but would seem to leave a residual problem of moving stock. Is that a glimpse of another titanic oversight failure? I daresay that will all come out in due course, but for the moment, only Matt Levine cares about the stock. Another neglected aspect of the Deutsche Bank story is the shell companies involved. Many writers have covered their spectacular back story before, including me, but, since no-one’s spotted the wider connections of the Deutsche story, they clearly still don’t have the exposure they need. So here’s another shot. The back story will bring us to a connection to the US presidential election, to cockups by a journalist and a blogger that muff key leads, to a vista of global money laundering-related horror, to more US connections, including a spot of torture, the DC lobby, and a dead lobbiyist, and to a whole other set of oversight failures, in the UK this time.

It Appears Deutsche Bank Is Prepping for an Avalanche of Fraud Charges Including It's Gold Derivative Products? - We have forensically picked apart Deutsche Bank in a way that no other entity ever has, likely including Deutsche Bank itself. While we may not know all of its secrets, we likely now know more than almost everybody else. We will publish our findings to Veritaseum Knowledge clients early this week, but in the meantime we will put little teasers out to the public for the sake of conversation. "Why?", you may ask. Well, everybody already knows that Deutsche Bank is a basket case, but we are showing our clients that the real short opportunities and true systemic risks lie within DB's counterparties, whom have identified and are in the process of putting share price targets on. The first forensic report on the most proximal counterparty with an elevated share price is done, and the first counterparty share price target will be published to European Bank Contagion Assessment, Forensic Analysis & Valuation subscribers within 48 hours. There are several more to follow. In the meantime and in between time, let's discuss Deutsche in detail that you will find nowhere else on the web or on Wall Street. Last week we illustrated what appears to be a slam dunk finding of Deutsche Bank fraud under the UK Fraud Act of 2006, reference "Veritaseum Knowledge Exposes Frightening Counterparty Risk At Deutsche Bank for "Gold Investors"". In said piece, we tracked down DB's alleged failure to deliver physical gold upon demand redemption of one of it's subsidiary's gold derivative instruments and superimposed it against DB's counterparty risk and blatant contradictions between it's marketing material (ie. website) and it's prospectus (which itself actually had material and confusing contradictions) - as excerpted:

Wells Fargo fined $185M for employee bonus scam - (UPI) -- Federal regulators on Thursday fined Wells Fargo Bank nearly $200 million for a widespread scam run by some employees to open millions of bogus accounts to meet quotas and generate sales bonuses, officials said. The federal Consumer Financial Protection Bureau announced the penalties against the bank after an investigation uncovered rampant illegal activity by thousands of employees. According to regulators, employees at Wells Fargo opened more than 2 million fake deposit accounts in real customers' names and even transferred money in and out of them, without authorization, from those unsuspecting customers. "This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank's sales goals," the CFPB said. Wells Fargo then charged some of those customers for insufficient funds or overdraft fees because the money had been removed from the original account, regulators said.   The employees also applied for credit cards on behalf of more than a half-million existing customers without their knowledge or consent, the CFPB said, enrolled them in banking services they did not ask for, and activated debit cards -- in some cases "going so far as to create [new] PINs without telling consumers." As a result of the investigation, Wells Fargo fired more than 5,000 employees who were in on the scam, CNN Money reported.

Wells Fargo Fires 5,300 For Engaging In Massive Fraud, Creating Over 2 Million Fake Accounts - For years we have wondered why Wells Fargo, America's largest mortgage lender, is also Warren Buffett's favorite bank. Now we know why. On Thursday, Wells Fargo was fined $185 million, (including a $100 million penalty from the Consumer Financial Protection Bureau, the largest penalty the agency has ever issued) for engaging in pervasive fraud over the years which included opening credit cards secretly without a customer’s consent, creating fake email accounts to sign up customers for online banking services, and forcing customers to accumulate late fees on accounts they never even knew they had. Regulators said such illegal sales practices had been going on since at least 2011. In all, Wells opened 1.5 million bank accounts and "applied" for 565,000 credit cards that were not authorized by their customers.  Wells Fargo told to CNN that it had fired 5,300 employees related to the shady behavior over the last few years. The firings represent about 1% of its workforce and took place over several years.  The fired workers went to far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said. How Wells perpetrated fraud is that its employees moved funds from customers' existing accounts into newly-created accounts without their knowledge or consent, regulators say. The CFPB described this practice as "widespread" and led to customers being charged for insufficient funds or overdraft fees, because the money was not in their original accounts. Additionally, Wells Fargo employees also submitted applications for 565,443 credit card accounts without their knowledge or consent, the CFPB said the analysis found. Many customers who had unauthorized credit cards opened in their names were hit by annual fees, interest charges and other fees.  According to the NYT, regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies that rewarded them for drumming up new business. Many current and former Wells employees told regulators they had felt extreme pressure to expand the number of new accounts at the bank.  And, since it is US government policy never to send a banker to prison, they thought that engaging in criminal behavior was not such a bad idea.

 Wells Fargo Fined $185 Million for Opening Phony Customer Accounts, Charging Fees Without Consent; Executives Go Scot Free -- Yves Smith - The Consumer Financial Services Protection Bureau, the Los Angeles City Attorney, and Office of the Comptroller of the Currency fined Well Fargo a total of $185 million for opening unauthorized customer accounts, which the bank then used to charge fees. The bank has also agreed to make restitution to the defrauded customers. As the New York Times reports: Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference. The bank has 40 million retail customers. This was an astonishingly brazen, large-scale effort, clearly a systematic, institutionalized campaign. It is virtually impossible for senior executives not to have known what was going on. …traditional banks, and above all retail banking operations, are extremely routinized. Customer-facing staff have virtually no discretion. For decades, bank branches have been operated as retail stores, with employees offering standard products. Similarly, the activities of call center staff are similarly highly circumscribed, set forth in clearly defined routines, which includes strict scripting for some interactions.  In other words, there is no way to defend the lack of punishment of executives in a fraud of this scale that extended over five years. Either they were in on it, or somehow lower level employees cooked this up and were able to hide it from the top brass. The latter would represent a massive control failure. Under Sarbanes Oxley, the CEO and CFO are required to certify the adequacy of financial and operational controls. There is no way the Wells Fargo’s can have it both ways. Either they were in on the ripoff or they were not even remotely on top of what was happening.  Even worse, regulators are allowing Wells to obscure the level of managers that were sanctioned, when even the weasel-wording of public statements makes it clear that it was only low-level supervisory staff that were booted. And to add insult to injury, Wells is getting away with bogus accounting by stating it fired 5,300 employees as part of rooting out this misconduct. The wee problem with this claim? The terminations in question took place over five years. Yet the timelines presented in media reports suggest that the heat on Wells didn’t get serious until 2015, when the Los Angeles city attorney filed suit against the bank. But it is too easy for casual readers to miss the significance of this section from the Wall Street Journal’s reportThe bank, the nation’s largest by market value, would not comment on the “levels of leadership” involved in the firings, but bank spokeswoman Mary Eshet said “both managers and team members were affected.” She said the firings should be seen in the context of the bank’s size—it had 268,000 employees at the end of June—and that they happened over five years.

Workers tell Wells Fargo horror stories - Wells Fargo has been accused by federal regulators of illegal activity on a stunning level. Authorities say employees at the bank secretly created millions of unauthorized bank and credit card accounts between 2011 and July 2015, allowing the bank to make more money in fees and meet internal sales targets. Wells Fargo agreed to pay penalties of $185 million and fired 5,300 employees over the last few years related to this illegal activity. The news is rocking the industry and rippling across Wells Fargo's millions of customers nationwide. Former employees tell CNNMoney that they felt incredible demands from managers to meet sales quotas. The same managers turned a blind eye when ethical and even legal lines were crossed. "I had managers in my face yelling at me," Sabrina Bertrand, who worked as a licensed personal banker for Wells Fargo in Houston in 2013, told CNNMoney. "They wanted you to open up dual checking accounts for people that couldn't even manage their original checking account." Currently a middle school teacher, Bertrand said she believes the sales targets were set by managers who were higher up: "The sales pressure from management was unbearable." The pressure cooker environment is also described in a lawsuit filed by Los Angeles against Wells Fargo in May 2015. The lawsuit says that Wells Fargo's district managers discussed daily sales for each branch and employee "four times a day, at 11 am, 1 pm, 3 pm and 5 pm." It all stems from Wells Fargo's internal goal of selling at least eight financial products per customer. It's what Wells Fargo calls the "Gr-eight initiative." Currently, Wells Fargo boasts an average of about six financial products per customer. In pursuit of this goal, Wells Fargo employees engaged in all kinds of sordid practices. One of them was internally called "pinning," where the bank issued ATM cards and assigned PIN numbers without customer authorization. The customer, meanwhile, remained completely unaware of the unauthorized activity.

Why Aren't Exec Heads Rolling at Wells Fargo? | American Banker: It's become an all-too-familiar story – a big bank is caught doing something bad, it pays a fine, some lower-level employees are let go while higher-level executives appear to get off scot-free and no criminal charges are assessed. Wells Fargo became the latest example of that cycle this week, when it paid $190 million in fines and restitution after some 5,300 employees were caught opening more than 2 million unauthorized bank and credit card accounts. Despite the large fine and the bank's termination of involved employees, consumer advocates, industry stakeholders and even many in the public at large were left fuming because no criminal charges were filed and higher-level executives escaped seemingly unscathed. Though Wells insisted the problems were not systemic, others were not convinced. "We'd like to see a full investigation at the top of Wells Fargo given these systemic and illegal practices," said Paulina Gonzalez, the executive director of the California Reinvestment Coalition in San Francisco, who said the lower-level employees that were fired were being "scapegoated." "This is something that we believe doesn't happen at the low end of the worker level; it often comes from the top and pressure from the top for sales," she said. That was a sentiment widely shared on social media, particularly on Twitter, where consumers and others were skeptical that more than 5,000 employees – located across the country – engaged in similar behavior without higher-level executives being responsible for it. "They need a change in leadership, a change in the board of directors and a change in accounting firms," said activist investor Gerald R. Armstrong , who has prodded Wells for a decade to separate its chairman and CEO positions. "The acid test has been completed now and they have failed."

Why It’s Unlikely Anyone Will Go to Jail Over Wells Fargo’s Massive Fraud Scheme - In the last few years, a bunch of Wells Fargo employees committed serious crimes. That’s the clear takeaway from the Consumer Finance Protection Bureau’s announcement that it is levying its largest-ever fine against the bank. Wells Fargo will have to pay out $100 million to the CFPB, plus $85 million to other authorities, for a pattern of fraud, dating back to 2011, in which its employees opened up a vast number of new checking and credit accounts without account holders’ consent or knowledge. The employees, about 5,300 of whom have since been fired, were hoping to rack up incentives the bank provided to employees for roping customers into new accounts. Naturally, those 1.5 million checking accounts and half a million credit cards caused giant headaches for the consumers who didn’t sign up for them: In addition to the fact that they were charged overdraft and maintenance fees, some customers also dealt with — and, surely, are currently dealing with — significant hits to their credit scores as a result of not staying current on accounts they didn’t even know they had. They’ll likely have difficulty securing home and car loans at reasonable rates for years to come, simply because their bank decided to defraud them. This was criminal activity on a massive scale, and it is going to have lingering effects on innocent people’s abilities to live their lives. It’s worth asking: Will anyone go to jail for this? The fine, after all, makes for a good headline but is actually something of a pittance: $185 million is just 3.3 percent of the $5.6 billion in net income Wells Fargo pulled in in the second quarter of this year. And whatever monetary penalties were assessed, there’s a strong case to be made, here as anywhere else, that individuals who engage in fraud should, well, be prosecuted for committing fraud. That’s sort of the point of the legal system. The depressing answer is that it’s quite unlikely anyone will face criminal sanctions for Wells Fargo’s scheme. While the CFPB has left that door open, the Department of Justice is very unlikely, if recent history is any guide, to walk through it. (The DoJ is the agency that matters here, since the CPFD itself doesn’t have the power to launch criminal investigations)

Hoisted From Comments: First Cut at Perps in Massive Wells Fargo Consumer Fraud -- naked capitalism Yves here. Reader It’s about time identified some senior executives at Wells Fargo who had significant responsibility for the policies and operations at the heart of a fraud that led to over 2 million accounts being created with no customer consent. As both media accounts and comments on our post yesterday stressed, a hyper-aggressive cross selling culture, with insufficient quality and compliance controls was one of the big causes.   No doubt other executives played a meaningful roles in an abuse that Wells claimed led to the firing of 5,300 employees. But the public information that It’s about time cited does give good reason to believe that these two officials were important figures. Needless to say, the speed with which members of the NC commentariat were able to identify leads at Wells Fargo confirms that the failure to name and fine any executives was a gross dereliction of regulatory duty. By reader It’s about time: This has been going on for some time across the Wells Fargo Bank (and Norwest) footprint. Many in the banking industry have heard the stories from former employees of Wells Fargo. If you are looking for the people to be held accountable, the nearest to this is Carrie Tolstedt who until her announced retirement 7/13/2016 (effective 7/31/2016) was Senior EVP of Community Banking for Wells Fargo Bank. In that capacity she oversaw 6,200 branches (“stores”) and 105,000 employees. A profile of her can be found here However, the real culprit has been safely retired from Wells Fargo Bank for some years now. It is former senior Citibank executive Dick Kovacevich who came up with the bumper sticker performance metric for his bank – “The Great Eight”. Eight cross sells per customer.What a horribly failed metric he chose as a proxy for “success” in banking. Unfortunately, the fawning attention from the media and people like Buffett ensured that the banking industry would be swept up in his love for cramming product down the throats of customers. Let’s hope Kovacevich (Theranos board of directors) gets deeply linked to this scandal and the cult around him goes the way of Welch and Greenspan.

Close the Wall Street CEO Bonus Loophole: Over 9 million American families lost their homes in the aftermath of the 2008 financial crisis and millions watched their retirement savings evaporate. Meanwhile, the Wall Street banks that caused the crash were doling out executive stock options that would generate huge windfalls once bailout funds had pushed up their stock prices. Then, thanks to a perverse loophole in the tax code, the banks could write off the entire cost of these options and other bonuses, leaving ordinary taxpayers to make up the difference. The origin of this loophole is a President Bill Clinton reform in 1993. After campaigning against the abuses of excessive CEO pay, he pushed Congress to cap the deductibility of pay at $1 million. But he included a huge loophole for so-called "performance-based" pay. So what did companies do? They kept salaries around $1 million and labeled the rest "pay for performance."This loophole applies to all companies, but it has been particularly obscene and even dangerous when it comes to the financial industry. In the run-up to the crash, the loophole helped fuel the "take the money and run" CEO pay practices on Wall Street. In the eight years before their firms collapsed, executives at Lehman Brothers and Bear Stearns cashed out a combined $2.4 billion in bonuses and stock, most of it fully deductible "performance based" pay. After the economic meltdown, Wall Street bailout recipients such as JPMorgan Chase, Bank of America, PNC Financial and SunTrust lost the privilege of deducting lucrative executive pay and bonus plans from their corporate taxes. But these banks rushed to escape from public bailout pay controls, some by borrowing in the private market to pay back Uncle Sam.

Database Reveals U.S. as Financial House of Horrors Since Repeal of Glass-Steagall Act -  Pam Martens - The Consumer Financial Protection Bureau (CFPB) has set up an online database of financial horror stories that shows what happens when an average American interacts with one of the financial supermarkets (a/k/a universal banks) that grew out of the repeal of the investor protection legislation known as the Glass-Steagall Act. The complaints are concentrated against the biggest Wall Street banks. If you are one of the lucky Americans who has not already been mugged in the shopping aisles of the financial supermarkets, you should carefully browse through the database to see what awaits the unwary. Just go to the complaint archive, and place the name of any bank you want to examine in the upper right-hand search box. Searching under the name Citibank (part of the Wall Street behemoth Citigroup) will bring up 29,000 rows of complaints. A search under Chase, part of the mega Wall Street bank, JPMorgan Chase, brings up 37,000 rows of complaints. After years of being charged by Federal regulators for abusing their customers and the public trust, both U.S. banks became felons on May 20 of last year when they admitted to felony charges related to rigging foreign currency markets. Wall Street banks are intended to function as efficient allocators of capital to grow new businesses and industries in America. But since the Glass-Steagall Act was repealed in 1999 under pressure from Citigroup, Wall Street’s biggest banks increasingly function as legalized loan sharking operations – targeting the poor, minorities and financially unsophisticated. In what has become a highly efficient, wealth transfer mechanism, billions of dollars each month move from the pockets of those least able to protect themselves from financial abuse to the coffers of the one percent in America who sit in the executive offices of these banks.

How Ransomware Became a Billion-Dollar Nightmare for Businesses - In recent months, a proliferation of ransomware attacks has affected everyone from personal-computer and smart-phone owners to hospitals and police departments. An attack works like this: A virus arrives and encrypts a company’s data; then a message appears demanding a fee of hundreds or thousands of dollars. If the ransom is paid in time, the information is restored. “At the heart of this new business model for cybercrime is the fact that individuals and businesses, not retailers and banks, are the ones footing the bill for data breaches,” Josephine Wolff noted in The Atlantic back in June.  According to an FBI tally, ransomware attacks cost their victims a total of $209 million in the first three months of 2016, a stunning surge upward from $24 million in all of 2015. However, that figure was based only on the complaints that victims reported to the bureau. In a new report, Datto, a Connecticut-based cybersecurity company, offers an alarmingly higher estimate that accounts for unreported incidents and lost productivity, which costs businesses far more than paying ransoms does. The company’s survey of 1,100 IT professionals found that nearly 92 percent had clients that suffered ransomware attacks in the last year, including 40 percent whose clients had sustained at least six attacks. The report found that “less than 1 in 4 ransomware incidents are reported to the authorities.” Factoring in the cost and average amount of time lost to infections—an overwhelming majority of small businesses hit by ransomware face at least two days of downtime—as well as the number of businesses affected by them, Datto suggests that the financial impact of this brand of cybercrime starts in the range of $75 billion each year. The company arrived at this figure based on an estimate from the Aberdeen Group, a consultancy, that an hour of inactivity costs small companies an average of $8,581 per hour. By comparison, Datto’s survey indicated that about three-quarters of the IT professionals said the ransoms paid were somewhere between $100 and $2,000. Overall, Datto estimates that $375 million has been paid out in ransoms in the past year, making lost productivity the much bigger concern.

 Law Enforcement Losing War on White Collar Crime -- naked capitalism by Jerri-lynn Scofield - It’s always a reliable sign that things have spun too far out of control when the New York Times Dealbook column gets around to highlighting them. And so it’s now the turn of white collar crime. From yesterday’s NYT– note in particular the use of the waffly quotation marks enclosing ‘not winning’ in the headline, Law Enforcement ‘Not Winning’ War on White Collar CrimeThe record of combating economic crime is so woeful that governments need a new approach. That was the view of many at a gathering of about 1,600 delegates from academia and the legal and compliance profession here on Monday. Delegates from over 90 countries convened for the week-long Thirty-Fourth International Symposium on Economic Crime at Jesus College of the University of Cambridge beginning on September 4. Since 2001, PricewaterhouseCooper’s (PwC) has conducted a global survey of economic crime. During that time PwC has seen “no significant decrease in the prevalence of fraud. Regulatory regimes have been tightened and billions of pounds have been spent, but economic crime is as tough to tackle as it has ever been.” Instead, in its most recent 2016 survey, Old Dogs, New Tricks, PwC concludes that “UK economic crime figures show both fraudsters and fraud schemes are maturing”.  In particular, PwC reports that over half of UK organizations– 55%– have experienced economic crime. Cybercrime is becoming more significant, with 44% of respondents who had experienced economic crime in the last two years also reporting they had experienced cybercrime. PwC found that 18% of fraud is now committed by senior management.  The Dealbook reporter, Anita Raghavan, quotes stateside practitioner John H. Moscow, the former chief of the frauds bureau and the deputy chief of the investigations division at the New York County district attorney’s office on the prevalence of the problem in the United States:

FBI’s Records on Financial Crisis Requested by U.S. Lawmaker – Bloomberg - Democrat Bill Pascrell asked FBI Director James Comey for witness interview transcripts, notes, reports and memos from the agency’s probes into the crisis, according to a letter dated Tuesday. Pascrell said the Federal Bureau of Investigation initiated criminal inquiries into at least 14 companies as part of its investigation into the origins of the crisis, which was ignited when prices of subprime-mortgage bonds plummeted after home-loan defaults soared. "Here we are eight years later -- do you think the public knows how this happened? Do you think the public knows all of the recommendations made to the Justice Department?" Pascrell said Wednesday in an interview. "Why are Hillary Clinton’s e-mails any more important?" The FBI earlier this month released a summary investigation and interview with Clinton to provide context on its recommendation that the Justice Department not prosecute Clinton or her aides for using a private e-mail system. The Democratic presidential nominee was interviewed by FBI agents and federal prosecutors for 3 1/2 hours on July 2 in Washington.

Junk Debt Getting Crowded - WSJ: High-yield corporate bonds have been a hot investment in 2016. Now, some investors are fretting that the debt may have gotten too popular. Drawn by higher yields than on safer bonds and lower valuations than on stocks, portfolio managers and individuals alike have poured money into junk bonds this year. In 2016, more than a net $6.4 billion had flowed into high-yield mutual funds through the end of August, according to data from Thomson Reuters Lipper. Over the prior three years, $47.7 billion flowed out of the funds. The tide of money has pushed up prices and returns, attracting additional funds from investors. In 2016, the iShares iBoxx High Yield Corporate Bond fund has returned 12%, beating the 7.8% total return by the S&P 500, according to FactSet. Bond yields fall when prices rise, so spreads—the amount by which yields on junk debt outstrip those on Treasury debt—have fallen to their lowest levels in more than a year, according to Bloomberg Barclays data.Some investors worry that surging prices and lower spreads are eroding one of junk bonds’ strongest selling points: their tendency to generate positive returns even as rising rates hammer the value of safer bonds. In a refrain all too familiar to investors in the age of low yields and crowded trades, the higher prices could point to more volatility when the Federal Reserve next raises interest rates. That is an outcome a few analysts, including Janus Capital Group Inc. JNS -0.20 % bond guru Bill Gross, have pegged for this month. “When spreads get very tight as they are now, you’re not getting paid as much for taking on credit risk,” said Kathleen Gaffney, who manages the Eaton Vance EV -0.92 % Multisector Income Fund. “That means your bond becomes much more interest-rate sensitive.”

"Everyone's On The Same Side Of The Boat Again" - Hedge Funds Have Never Been More "All-In" -- Since February, "nothing else matters" but the $200 billion or so per month of central bank money printing and asset purchasing. Correlations across asset classes are at or near record highs (putting risk parity funds in grave danger) with global bond yields at record lows and stock prices at record highs. However, as one veteran trader exclaimed, "they all on the same side of the boat again," pointing to the record speculative long positioning in US equities and record speculative shorts in VIX... a situation, he says, "can only end in catastrophe." Everyone's "all-in" on the fear of not conforming to the norm... Buy Everything Stupid... And the momentum chasing is just getting worse... As stocks go higher and vol goes lower, leverage speculative positioning is just chasing that trend adding to already record extreme positioning... Interestingly - despite record low bond yields - speculators have swung back to an aggregate short Treasury Futures positioning... So to clarify - the "all-in"-ness of the speculative traders has never, ever been so high across asset classes - record short VIX futures (an implicity leveraged long trade), record longs in Dow and Nasdaq futures, and surging shorts across the Treasury complex (implicitly a long stock trade if 'norm' correlations revert) What could possibly go wrong?

Alarms Sound on Headlong Rush Into Fringes of Emerging Junk -  Investors scooping up the riskiest emerging-nation corporate bonds in an indiscriminate rush for yield are facing a growing clamor of warnings. While a 13.6 percent return this quarter on company debt rated eight levels below investment grade rewarded those who pushed into the fringes of the debt market, sub-investment grade defaults have reached a six-year high. Societe Generale SA and Bank of America Corp. are predicting a correction and on Thursday Hermes Investment Management said it’s time to "increase vigilance and move up in quality," echoing BlackRock Inc.’s earlier call to be more selective. “There’s a danger that people get complacent after a rally like this,”  “You have to be more careful when yields are low. You have less room when things go wrong.” Emerging-market companies will be put to the test over the next three years as they come up against a 40 percent increase in maturing debt to $340 billion that will need to be refinanced. S&P Global Ratings had about 33 percent of issuers in developing countries on negative outlook at the end of the second quarter compared with a historical average of 19 percent. The market value of the Bloomberg High-Yield Emerging-Market Corporate Bond Index has swelled 30 percent to $260 billion in the past two years as investment-grade companies from Brazil to Russia joined its ranks amid a plunge in oil prices. Junk-bond yields have fallen to a two-year low of 7.3 percent as a delay in the Federal Reserve’s cycle of interest-rate hikes boosted demand for riskier assets. That compares to 1.6 percent on 10-Year U.S. Treasuries. The surge in appetite has pulled about 30 dollar bonds that were trading below 60 cents on the dollar at the beginning of the year out of distressed territory, according to a Bloomberg corporate bond index.

 Why This $1.6 Billion Hedge Fund Is 50% In Cash "The whole world is wrongly positioned," warns Norwegian hedge fund firm Sector Asset Management's founder Peter Andersland, "the common denominator for everything is the long duration -- real estate, stocks, bonds. Everything is much more rate sensitive now." As Bloomberg reports, Andersland's $1.6 billion holds as much as 50 percent in cash in one of its funds, because holding cash is the best protection against bond and stock markets inflated by record monetary stimulus. “What can kill us now?,” Peter Andersland, the 55-year-old founder of Sector, said in an interview on Tuesday at his office overlooking the Oslo fjord. “It’s the correlation between stocks and bonds that will be induced by higher rates. That’s the biggest risk in the capital markets today, not geopolitics or Trump.” Massive central bank stimulus with below zero rates and quantitative easing has led to increasingly dysfunctional markets, with even the negative correlation between stocks and bonds breaking down. As we have noted previously, they are now largely moving in the same direction as markets have become more driven by central banks, leaving investors with no place to hide.

Deutsche Bank: Bond Investors Are About to Get Crushed as a New Global Cycle Kicks Off - Bloomberg: Weak growth, higher inflation, and stagnant productivity in developed countries will roil bond investors in the decades to come, as the benign global forces that have buoyed returns on financial assets for the past 35 years stage a sharp reversal. That's the big-picture call from Deutsche Bank AG analysts who predict an oncoming lurch towards trade and financial protectionism — combined with aging populations and weak worker output — will intensify financial repression as a new multi-decade-long economic cycle kicks off this year. "In our opinion we're getting closer to a binary outcome for the global economy and financial markets," the strategists, led by Jim Reid, wrote in a report on Thursday. Now, there's an inflection point in the global economy that is poised to create a perfect storm for bond investors: higher inflation, and strengthening political incentives to erode high debt burdens by hitting bond holders with effective haircuts, the bank argues. The strategists paint two scenarios for bond holders going forward:
Scenario 1 – The best case. Put bluntly the best realistic scenario for financial stability in the new era is that bond holders around the world see a slow real adjusted haircut over several years, probably over at least a couple of decades. The best example of this through history was the post WWII period where government debt was at similar levels to that currently seen. Over the next 35 years this debt was successfully eroded by a long period where nominal GDP was notably above bond yields. So bond holders took a large real haircut.
Scenario 2 – The hard break. Rather than an artificial reflation and slow successful non-systemic deleveraging, there is a genuine risk of a more binary outcome where a major country (countries) see(s) a hard default on its debt taking a lot of other debt with it domestically and possibly internationally. This is probably most likely to happen via politics – especially in Europe if a country decides to leave the single currency. Under this scenario, non-core government bond markets could see huge losses as the central bank backstop bid is removed.

 Stock Market Drops After North Korea Nuclear Test  – U.S. stocks dropped on Friday, giving the S&P 500 its worst day since June, as investors grew nervous following a nuclear test by North Korea and comments by Federal Reserve officials that hinted at a U.S. interest rate hike.The Dow Jones industrial average fell 394.46 points, or 2.13 percent, to 18,085.45, the S&P 500 lost 53.49 points, or 2.45 percent, to 2,127.81 and the Nasdaq Composite dropped 133.58 points, or 2.54 percent, to 5,125.91.The three major indexes posted their largest weekly declines in months.

House Passes Bill to Roll Back Private Equity Reporting Requirements -- The House on Friday passed a bill that would lift some reporting requirements for private equity firms, part of Majority Leader Kevin McCarthy (R-Calif.)’s initiative to support small business innovation. Lawmakers passed H.R. 5424 in a 261-145 vote, attracting support from 35 Democrats, even though the White House issued a veto threat. “The exemptions that this bill provides would enable private fund advisers to slip back into the shadows. H.R.5424 unnecessarily puts working and middle-class families at risk while benefitting Wall Street and other narrow special interests,” the White House said in a statement Tuesday.Rep. Robert Hurt (R-Va.) introduced the measure in June.“We know small businesses across the country are struggling to find the investments and financing options that enable them to open their doors, hire workers and to succeed,” Financial Services Committee Chairman Jeb Hensarling (R-Texas) said in a statement after today’s vote. “In order for our economy to grow and for our small business owners to create the jobs that Americans need, we need to remove unnecessary regulations that tie up private capital and cause economic uncertainty.”Industry groups praised the bill’s passage, saying the legislation would provide regulatory relief to private equity investors and boost the economy. “This is a welcome step for midsize private capital providers who help bolster the U.S. economy by investing in small and midsize American businesses that employ more than 15 million Americans,” Gary A. LaBranche, president and chief executive of the Association for Corporate Growth, said today in a statement. “The bill’s thoughtful and modest reforms that maintain important investor protections while modernizing the regulatory framework for advisers.”

License to defraud -- By a vote of 261-145, the House of Representatives today approved H.R. 5424 – the Investment Advisers Modernization Act. This little-noticed and cryptically named piece of legislation would be a huge gift to the $4 trillion private equity fund industry, but one that would put the rest of us at risk. It would “modernize” the private equity world by rolling back the clock and eliminating important elements of fund oversight and fraud protection.  H.R. 5424 would reduce the amount of information that private equity and hedge fund managers have to disclose either to investors or to the Securities and Exchange Commission (SEC). They don’t disclose enough information as it is. But thanks to some modest requirements imposed on them by the Dodd-Frank Act, we know more now than we used to, and nothing we’ve learned so far has been reassuring. Two years ago, in a first round of post-Dodd-Frank scrutiny, the SEC found “violations of law or material weaknesses in controls” in how more than half of all fund managers handled fees and expenses. The SEC has since brought more than ten enforcement actions against private equity funds, reaching settlements totaling more than $150 million. The deceptions in which various funds have been implicated include charging 10 years of fees for "monitoring” a company that a fund owned only for a few years (that was Apollo, an industry giant that has agreed to pay $52.7 million in penalties for various shady practices); sticking investors with the cost of a senior partner’s personal expenses (Apollo again); and failing to disclose conflicts of interests and payments to companies owned by firm principals (Fenway Partners).  It is hard to imagine why anyone not directly employed in the private fund industry would want to let it become even more slippery and opaque than it already is. Yet H.R. 5424 would do just that by, for example, eliminating the SEC’s ability to apply anti-fraud protection to sales materials distributed by funds; and allowing ads to include cherry-picked testimonials or recommendations – a practice long associated with dishonesty.

The Shell Game Behind a $43 Billion Market - There, in Wilmington, Delaware, several giants of American finance have established powerful outposts. Inside 1209 North Orange are little more than drop boxes. But the likes of Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley have all gone there lately for the same reason: to work around guidelines involving byzantine investments known as structured notes. It’s a shrewd maneuver -- and perfectly legal. After Lehman Brothers, federal authorities wanted to make banks simpler and safer. As part of that effort, they’re going to restrict banks’ ability to sell structured notes out of their parent holding companies starting in 2019. But, as usual, the banks are two steps ahead. Several have already created Delaware subsidiaries that will enable them to keep selling billions of dollars’ worth of these securities, rules or no rules. Others are likely to follow suit. And so it is that in this lucrative -- and sometimes controversial -- corner of Wall Street, banks and regulators have together embraced something of a charade. As before, bankers at the home office design and market these notes. But legally, the drop-box subsidiaries actually issue them. The proceeds are then whisked to the mother ship or still other affiliates. Structured notes raise funds for banks and earn fees that some investors have long complained are less than straightforward. The notes mature like bonds but, thanks to derivatives, are linked to other assets like stocks, currencies and commodities. Banks employ hundreds, even thousands of individual subsidiaries for a wide range of purposes. And, for them, the arrangement at 1209 North Orange is a win-win. Representatives for Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley declined to comment. The Federal Reserve seems to be fine with the set-up. A Fed notice last November essentially OK’d the arrangements. A spokesman declined to comment.

   Bank Groups Weigh Legal Challenge to Fed Stress Tests - WSJ: Bank trade groups and industry advisers are debating the possibility of legally challenging the Federal Reserve in an attempt to force changes to annual “stress tests” of the biggest U.S. lenders, people familiar with the talks said. Even if banks ultimately decide against action, serious contemplation of such a challenge is somewhat extraordinary. It shows growing frustration among big financial firms with the tests, which have become even more of a burden with superlow interest rates weighing on profits. The discussions are at an early stage and big banks are divided over whether the talks should continue, the people familiar with the matter said. Over the past several months, industry advisers and representatives from some big U.S. banks have been involved in several calls discussing the possibilities, with the latest occurring a few weeks ago, the people said. That said, there hasn’t been a formal presentation or meeting yet involving top bank executives. The discussions have centered on legal strategies that would allow a challenge to the stress tests, with much of the focus on their opacity and how the Fed changes certain aspects of the exams each year. Additionally, participants in the talks have weighed how the Fed and tests could be influenced by the outcome of the presidential election and whether that would argue for a more cautious course of action. A Fed spokesman declined to comment on the potential suit.

Fed Tells Congress To Restrict Banks From Buying Stocks, Commodities -- What is The Fed suddenly worried about? In a somewhat shocking report from The Federal Reserve, Janet Yellen and her motley crew of private bankers are urging Congress to make some significant changes to banking regulation. As Bloomberg highlights:

  • Fed urges Congress to repeal section of the Bank Holding Act that allows Wall Street firms to make investments in non-financial companies, report says
  • Prohibiting merchant banking would prevent Wall Street from “becoming exposed to the risk of legal liability for the operations of a portfolio company,” Fed says
  • Merchant-banking ban would also “help address potential safety and soundness concerns and maintain the basic tenet of separation of banking and commerce,” Fed says
  • Fed also advises Congress to restrict bank ownership of physical commodities
  • Fed separately advises Congress to force industrial loan companies to operate within the “regulatory and supervisory framework applicable to other corporate owners of insured depository institutions”
  • Fed, FDIC and OCC report to Congress on bank practices required under Dodd-Frank Act

The two that caught our eyes most were:

    • 1) the ban on 'investing in non-financial companies', which is highly ironic given that other central banks are directly buying massive stakes in the world's corporate entities; and
    • 2) restrictions on physical ownership of commodities, which raises eyebrows on both oil manipulation and the hoarding of precious metals ahead of The Fed losing control.

CECL Will Inflate Credit Booms and Worsen Downturns | Bank Think: This summer, the business of providing and investing in credit was hit with a headwind that could eventually make lending more volatile and almost certainly more confusing. This time, no subprime predators or cowboy bankers were in sight. This time it was the accountants. The Financial Accounting Standards Board's new approach to measuring forward-looking credit was described by the American Bankers Association as the biggest bank accounting change in 40 years. It stands to make the highs in the credit markets higher and the lows lower, and it risks putting a cloud of uncertainty around credit reporting. Credit consequently may become easier to get when borrowers need it least, and harder to get when borrowers need it most. And cloudy credit reporting could lead lenders to compensate by charging higher interest rates. The new rules try to fix a problem that accountants, regulators and investors saw in the aftermath of the 2008 financial crisis. Banks, insurers and others with risk on the books could only report losses either when they occurred or were highly probable. But the crash of the U.S. housing market made it clear for almost everyone to foresee that years of likely losses – while not registered under the previous accounting rules – were in banks' future. Investors and especially regulators wanted to know what those ultimate losses might be. But the accounting rules left no place for lenders and insurers to report those distant expected losses and set aside reserves. Banks had to wait until losses rolled more immediately into view.In June, after working on a solution since December 2012, FASB published a new and final set of accounting rules for credit risk called the Current Expected Credit Loss model, or CECL. The intent of the new standard is good. Everyone wants to see good estimates of future risk. But the potential for unintended consequences is large depending on how the rules are interpreted. The new rules require lenders to estimate losses expected over the life of a loan and then subtract those losses from current income on the day the loan is booked. But the income that lenders get for taking risk on the loan – income that could far exceed the projected loss – only shows up on the books over years. That's a big mismatch. The cost of providing credit under the new rules gets loaded all upfront, but the return only gets captured over time. Therein lies the problem. If every loan that a lender makes comes with a hit to today's income, then lenders will find it easier to makes loans when income is strong and harder to make loans when income is weak. When home prices are rising and defaults go down, for instance, surging income will make it easier for lenders to make even more mortgage loans. And when home prices are falling, lenders will find it harder. The riskier the loan, the steeper the rollercoaster ride.

How For-Profit Colleges Could Spark the Next Financial Crisis by Rana Foroohar -- With the closing of for-profit college chain ITT Technical Institutes, as well as the pay-to-play suspicions hanging over Donald Trump with allegations that he violated Florida bribery laws in order to try and protect Trump University against class action lawsuits, and even revelations that the Clintons have made millions of dollars in the scandal-plagued for-profit education sector, I’m thinking that education, and for-profit education in particular, is ground zero for the next financial crisis. This isn’t a crisis like Lehman Brothers. Student lending is a far smaller part of the credit market than housing, after all. But it has many aspects of the subprime scandal, including an asset bubble, huge amounts of debt ($1.2 trillion, to be exact), vulnerable borrowers, fraud, conflict of interest, and money politics.  For-profits make up only 12% of enrollment in the higher education sector, but they take 25% of all federal aid and represent half of all student defaults. This is the student debt problem, right here. And like so many troubled areas of our economy, education, (and for-profit education in particular) has been financialized. Over the last two decades, for-profit colleges have become darlings of Wall Street, with companies like University of Phoenix owner Apollo going public and many others cutting deals with private equity firms. These schools often act more like rapacious businesses than educators, taking huge, double digit profit margins and spending more on marketing than instruction. (Apollo recently spent more on its marketing budget than Apple, one of the world’s largest and most profitable companies.)  They spend this money to bring in more students, who become stable, annuity-like investments, paying off a clear return year after year. No wonder the Street has favored these companies. Between 2000 and 2003, for-profit stocks were on a major run, outperforming every other sector of the market. Since then, of course, they’ve crashed and burned. But most still get 80% of their revenues from federal subsidies, thanks to major lobbying efforts to roll back regulation and lawsuits that rival those that the big banks waged post-2008. It’s a huge irony, especially given the neoliberal “market knows best” arguments so often used to support for-profit schools, that most of them wouldn’t even exist if not for federal funds.

Why State-by-State Fintech Oversight Doesn't Work - The Office of the Comptroller of the Currency is considering allowing financial technology (or fintech) firms to become special purpose banks. This new status would allow them to largely avoid the state-by-state regulation that currently applies to them, but not to their bank competitors. Unsurprisingly, this prospect is not popular with state regulators, as reported in a recent American Banker story. They argue that such a move would weaken consumer protection and increase risk. Much of the promise of "fintech" is that it allows firms to profitably serve groups that have had difficulty accessing financial products and services in the past. Technology offers new efficiencies that lower costs for companies and the consumers they serve. For example, because fintech lenders don't have physical branches, they are able to match capital to borrowers nationwide with a lower cost structure. This may give them the extra margin necessary to make otherwise unprofitable loans. Likewise, new money transmission services like Circle, which don't rely on traditional agent networks, may be able to offer less expensive payments. State-by-state regulation imposes heavy burdens that reverse the cost savings and expanded reach available through fintech. Here's how: First, complying with state-by-state regulation is expensive, difficult and time consuming. For example, getting lending licenses from all of the states can cost in excess of half a million dollars and take up to a year. Both of these consequences can be a massive disadvantage to young companies trying to compete with incumbents. Second, the many inconsistencies across state laws take an otherwise national market for lending or payments and artificially chop it into silos. This fracturing hampers firms' ability to provide a consistent product nationwide, depriving them of economies of scale. Finally, fintech companies have to monitor any rule changes by all of the states and the federal government. Rather than dealing with the hassle and expense, some firms just give up. Consumers end up paying more or missing out on products and services altogether. The inefficiency and expense are bad enough, but they are compounded by an unfair regulatory landscape. Banks enjoy a different and far more consistent set of rules. This wasn't always the case. Prior to 1980, state-chartered banks were not able to export interest rates across state lines like their nationally chartered competitors. Concerns about competitive equity caused Congress to provide state banks with equal powers. As the late Sen. Dale Bumpers, D-Ark., a supporter of the effort, said, "Institutions offering similar products should be subject to similar rules."

You've Heard of Fintech, Get Ready for 'Regtech' | Bank Think: How can banks better manage one of the costliest and most troublesome activities – complying with regulations? Increasingly, banks may benefit from working with "regtech" firms. Consumer financial services products are being transformed by the fintech revolution, but automation, data innovation and other technological efficiencies can also benefit banks' efforts to comply with a growing regulatory burden and improve their internal governance controls. Given the high stakes, however, banks should gain a better understanding of their regtech options and make a careful assessment of which high-priority objectives they are trying to accomplish in partnering with a regtech firm. They will need to bring regulators into the conversation before committing to such a partnership. And they must ensure that combining third-party technology and services with their internal processes does not create more system complexity. Bain & Co. has identified more than 80 emerging regtechs. The rise of these firms should be welcome. Banks have been reducing their cost base for several years now. Many of the efficiency gains, however, have been offset by resources required to meet expanded regulatory requirements and to settle fines. We estimate that governance, risk and compliance (GRC) costs account for 15% to 20% of the total "run the bank" cost base of most major banks. GRC demand drives roughly 40% of costs for "change the bank" projects underway. Banks have struggled to devise a robust and efficient approach to compliance by using their own legacy systems and GRC organization. Typically, the required data resides in different bank systems and is hard to extract in the appropriate structure or level of quality because that requires modern technology.

Data Mining and the 'Creepy' Factor | American Banker: Netflix knows what its subscribers want to watch next, airlines know when their passengers arrive at the airport and Facebook knows, well, everything. But are customers — who don't seem at all bothered by Amazon suggesting their next purchase — similarly comfortable with banks using their data the same way? Banks know a tremendous amount of personal information about their customers — what better insight is there than how people spend their money? — but given the amount of trust that is assumed in a banking relationship, they have to be especially careful about showing their customers they know them without creeping them out. Essentially, banks are held to a higher standard, so in looking to use data analytics to help their cross-selling efforts, better time pitches and show customers they know them, they have to do it in a way that feels convenient and comfortable, not like they are overstepping. "We have a premium on trust," said Theresa McLaughlin, global chief marketing officer of TD Bank Group. "That trust gives us an advantage, but it is pretty sacred, so whenever we look at using that data we ask ourselves 'Why did our customers give it to us?'" Research shows a majority of customers don't mind if their bank uses their data in a way that adds value to their lives. But the challenge is finding the right way to do it. Customers know banks have personal data and "as long as we are using it for their benefit, they are comfortable with that," said Sandra Nudelman, the head of customer and marketing analytics on the retail side of JPMorgan Chase. "There are a lot of things that we could do with the data. But we have a strong set of rules and governance around how we use it, and we don't ever cross that line.

Why Small Banks Need Big Data | American Banker: More than ever, banking is as much an information business as it is a financial business. With the vast amount of data banks have on customers and transactions and spending habits, those that aren't effectively mining this data risk falling into irrelevance. For some small banks, investing in data analytics remains a tough call. Margins are already thin from the operating environment. Tech budgets are consumed with bridging the gap between running legacy technology and offering digital products. Perhaps rightly so, they are afraid to sink money into a solution without fully understanding the problem they are trying to solve. But it is a jump they must take in order to maintain their edge with customers. "The reason [small banks] need to budget for this is because bigger banks are absolutely budgeting for this," said Karan Bhalla, managing director at IQR Consulting, which provides analytics and statistical modeling consulting services. "The rate of data being gathered now is huge and knowing things like how often customers log in to mobile banking … is redefining what loyalty is. If you don't understand that, then some other institution will and will take away customers.Data analytics has become the Swiss Army knife of banking. From customer marketing to regulatory compliance, from fraud detection to cybersecurity, data plays an integral role in banks' daily operations.

 Actual Change in De Novo Policy Proving Hard for FDIC - From the founding of the first American banks there has never been a slower period of new bank formation than this one. Since 2010, only three new banks have been chartered, one of which has yet to open its doors. Federal Deposit Insurance Corp. Chairman Martin Gruenberg says that this is all about to change, and he and his agency have been making aggressive statements to show that they are serious. In the summer 2016 edition of the FDIC's online publication Supervisory Insights, the agency voiced its latest assurance that the door is open, the welcome mat is out and FDIC officials are waving prospects to come on in. The article said the next step will be a roadshow for FDIC officials to explain to potential new bank organizers how to get started. The article, "De Novo Banks: Economic Trends and Supervisory Framework," displayed the new attitude by the agency toward new banks. The article first cites a November 2014 series of answers to frequently asked questions to "provide additional transparency to the application process." That was followed by a March 2015 meeting with state banking regulators to explain application procedures, and then an interagency training conference "to promote coordination" in bank chartering. In perhaps its most tangible step to date, the FDIC announced in April that it was reducing to three years the period of enhanced supervision applied to de novo banks. (The agency had increased that period to seven years in 2009.) Also, in April, the agency augmented the Q&A publication, addressing issues related to business plans of startup banks.  All of this is very promising. In fact, the activity and effort add up to a very public commitment at the top of the agency to new bank chartering.  With the agency's more recent support for new banks, what could get in the way? The FDIC points to the Federal Reserve's near-zero interest rate policies. With loans tied to interest rate margins, keeping rates squeezed reduces the appeal of the lending business. But some barriers may still remain inside the FDIC. It can be a challenging process for new policy priorities established by top leadership to find their way into agency culture. There may be a regulatory cultural barrier to overcome here but regulators need to recognize that they can christen new banking ships without insisting that they all be unsinkable. Our financial commerce needs new banking entrants, a point that Chairman Gruenberg has frequently made himself.

Wall Street's Latest Retail Fleecing Product Exposed – Structured CDs  - Ms. Bailey, the Citizens Bank customer in Massachusetts, had sold a condo in Maine in 2013, a year after the death of her husband, who she says had handled their finances. She went to a Citizens branch in Arlington, a suburb of Boston, to deposit the money. She says bank employees pressured her not to just park the money in a savings account. She says she was directed to Citizens broker Andrew Jurkunas, who steered her to a CD called the GS Momentum Builder Multi-Asset 5 ER Index-Linked Certificate of Deposit Due 2021. It is one of a series of CDs based on a Goldman Sachs-designed index that tracks the performance of up to 14 exchange-traded funds and a cash-like holding. The index aggregates the performance of different combinations of some or all of the underlying funds, relying on a complex formula designed to smooth volatility.  When Ms. Bailey received her first statement showing that the value of her CD had dropped by more than $4,000, she complained to Massachusetts state securities regulators. This January, the office filed civil charges against the bank alleging that Mr. Jurkunas, who wasn’t named or accused of wrongdoing, didn’t adequately disclose the risks of the market-linked CD.– From yesterday’s excellent Wall Street Journal article: Wall Street Re-Engineers the CD—and Returns SufferWall Street is an industry that should have been allowed to go down in flames back in 2008. Bailing out these career criminals and sociopaths was one of the gravest errors in American history. An error that we as a nation continue to suffer from to this day.As an example, yesterday’s Wall Street Journal reported on the industry’s latest scheme to pocket the hard earned savings of those dwindling Americans who still have a few pennies left — structured CDs. What follows are some key excerpts from this must read article, Wall Street Re-Engineers the CD—and Returns Suffer:

CFPB Consumer Complaint Narratives: What They Say About Bankruptcy -- Credit Slips - The Consumer Financial Protection Bureau's consumer complaint database has contained narratives for over a year now. Each month, the CFPB publishes a report that summarizes the complaints received over the previous three months, and that focuses on a specific product and geographic area. (The latest report was published on August 31.) The higher-level summary offered by these reports is interesting and I have referenced them in class on occasion. The consumer complaint narratives tell as interesting, but often different stories. However, they are harder to sort through systematically. In preparation for a symposium, I recently took a random sample of complaints with narratives published in the year period between May 2015 and April 2016. Having now read thousands of narratives, one trend stood out to me rather quickly -- narratives that talked about the consumer's prior bankruptcy or a relative's bankruptcy. About 5% of the narratives discuss bankruptcy.Though not a huge percentage, this database is aimed toward people's complaints about financial products and services. Perhaps unsurprisingly, the most referenced product in conjunction with bankruptcy is credit reporting. But complaints about credit reporting companies amount to less than 1/3 of the complaints referencing bankruptcy. The rest primarily are about companies trying to collect on supposedly discharged debts: payday loans, various consumer loans, and debt collectors. All of which leads me to question -- to what extent are companies violating the discharge injunction; to what extent do consumers not understand which of their debts were discharged; and to what extent does having filed bankruptcy, and thus having taken legal action, predispose people to lodge a complaint in the CFPB database about their post-bankruptcy experiences?

 9th Circuit Shuts Down FTC’s Consumer Protection Authority Over Common Carriers -- naked capitalism by Jerri-lynn Scofield - A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit issued a sweeping decision, Federal Trade Commission v AT&T, on Monday that drastically restricts the Federal Trade Commission’s (FTC) consumer protection authority over companies that offer “common carrier” services (e.g., telephone services, mobile data, and internet services) whether or not these services comprise their core business. Moreover, since no other federal agency currently has the necessary scope of regulatory authority over this area, if this decision stands, significant activities of such companies would be essentially unregulated. As the Washington Post reports: The ruling could wind up giving Google and Facebook — not to mention other companies across the United States — the ability to escape all consumer-protection actions from the FTC, and possibly from the rest of government, too, critics claim, unless Congress intervenes. The FTC had brought an action against AT&T over the adequacy of the company’s disclosures regarding its data throttling plan, under which AT&T intentionally and substantially reduced the data speed of customers to whom it had sold unlimited mobile data plans.It’s worth quoting from the opinion at length; the court clearly understood what type of behaviour AT&T had engaged in: In 2007, AT&T began offering iPhone customers an “unlimited” mobile data plan, allowing users access to an unlimited amount of data for a fixed monthly rate. Starting in June 2010, however, AT&T stopped offering unlimited mobile data plans to new customers. Since then, it has required new customers to select one of various “tiered” data plans, under which a customer has a set data allowance per month for a fixed monthly rate and incurs additional charges for any data usage in excess of the set data allowance. Customers with preexisting unlimited data plans were grandfathered into the new system to avoid encouraging them to switch to a different service provider. In July 2011, AT&T decided to begin reducing the speed at which unlimited data plan users receive data on their smartphones. Under AT&Ts data throttling program, unlimited data plan customers are throttled for the remainder of a billing cycle once their data usage during that cycle exceeds a certain threshold. Although AT&T attempts to justify this program as necessary to prevent harm to the network, AT&T’s throttling program is not actually tethered to real-time network congestion. Instead, customers are subject to throttling even if AT&T’s network is capable of carrying the customers’ data. AT&T does not regularly throttle its tiered plan customers, no matter how much data those customers use.  So, it seems that what AT&T was providing– a “throttled” service– was by no stretch of the imagination “unlimited”. Instead, what we see here is a textbook example of a crapification of a service, once the initial contract was entered into, with AT&T opting to provide a less crappy service– the so-called tiered plans– to subsequent customers, under new contracts, and for whom it could charge more for the pleasure. And AT&T neglected to inform those original customers– the ones who thought they’d purchased and continued paying for an unlimited plan– that they weren’t getting what they paid for.

Deutsche Bank nearing settlement with U.S. authorities on mortgages: sources | Reuters - Deutsche Bank  is nearing a settlement with U.S. authorities on past misspelling of mortgage-backed securities, two people close to the matter said. The case is of many over the past decade which have tarnished the reputation of the banking sector and cost banks billions in fines. While the price for the Deutsche settlement has not yet been decided, the payment "will not overburden" the bank, one of the people said. German monthly manager magazine earlier reported that Deutsche Bank is expected to receive a demand for more than $2.4 billion from U.S. authorities in settlement of an investigation into past misspelling of mortgage-backed securities. Deutsche Bank declined to comment. Its shares had risen 5.2 percent by 1121 GMT in a flat German market, with traders citing relief that Deutsche Bank could be close to concluding the long-running investigation. "A $2.4 billion U.S. mortgages settlement would be clearly below the 3 billion euros ($3.4 billion) that I expected, so this is clearly positive news," The U.S. Department of Justice (DoJ) is expected to send Deutsche Bank a statement of facts stretching to about 100 pages early next week, specifying how much Deutsche will be asked to pay to settle the case, the magazine said. Deutsche Bank declined to comment.

Leading Index for Commercial Real Estate shows gain in August  - This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.  From Dodge Data & Analytics: Dodge Momentum Index Continues Ascent in August: The Dodge Momentum Index grew 1.3% in August to 134.9 (2000=100), from its revised July reading of 133.2. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The move higher in August was the result of a 1.7% increase from July for institutional planning as well as a 1.0% gain for commercial planning. August is the fifth consecutive month that the Momentum Index has increased, marking the longest such streak since the end of 2012 into 2013. The Momentum Index is currently 16% above the same month a year ago, reflecting this growth by major sector – institutional planning up 22% and commercial planning up 11%. That both sectors are showing such improvement suggests that developers are shrugging off sluggish economic data and the uncertainty surrounding the November elections, and moving ahead with plans for new projects.

 Louisiana Flooding Affects $1.1B of CMBS Loans - There are more than 300 Louisiana properties affected by floods included in commercial mortgage-backed securities, according to Morningstar Credit Ratings.The 302 properties in question have a balance of $1.1 billion and back 214 CMBS loans, Morningstar said. While the loans are spread out across 20 Louisiana parishes that were declared major disaster areas by the Federal Emergency Management Agency, the bulk, mortgages with a balance of $1.01 billion, are located in the Livingston and East Baton Rouge parishes that suffered the most damage.Most of the CMBS exposure was to multifamily properties. There are loans backing 52 multifamily properties with a $710 million balance. Beyond outright physical damage, other concerns include mold, new regulations and a lack of flood insurance coverage, Morningstar said."We see the potential for physical and monetary damage for many of the properties in affected areas," Morningstar wrote. "The undamaged multifamily and hotel properties may see an uptick in demand in the short term, as thousands of homeowners seek out both temporary and permanent residence."Morningstar called the leasing agents for the 10 largest properties in the area and said it got confirmation of flood damage at a multifamily property backing a $27.6 million loan in one CMBS transaction. The leasing agent told Morningstar that the property will have no available units for the next six to 12 months, but Morningstar said it was not clear whether this was due to flood damage or increased demand due to displaced homeowners in the region.

 Secondary Market Seeks Balance Between Private and Public Capital: The "father of the mortgage-backed security," Lewis Ranieri, acknowledges private securitization has contributed to market upheaval at least twice in the last 40 years, but he thinks government domination is problematic, too. So long as government-backed entities are guaranteeing 90% of originations, competition that could result in greater mortgage options for borrowers is being stifled. But a return of private capital to the market, possibly through securitization, could fix that. "The housing market as I understand it is broken," said Ranieri, who today is the chairman of Ranieri Strategies, a group of investment and asset management companies in New York. Lending without regard to borrowers' ability to repay in the previous decade was bad for housing, he said. But so is having the homeownership rate fall while the government is subsidizing the bulk of home lending. "We have fewer homeowners now than we had in 1976, and now we've guaranteed almost the entire market," said Ranieri, one of the authors of a recent government-sponsored enterprise reform proposal to merge Fannie Mae and Freddie Mac and have them reinsure only catastrophic risk. While this type of GSE reform could help decrease the government's involvement in the mortgage market, Ranieri wonders how likely it is to become a reality in the near-term, given that there has been resistance to doing something simple like lowering Fannie and Freddie's loan limits.

Policy Shifts Reflect Servicing s Post-Crisis Priorities: Mortgage servicing has undergone a dramatic transformation in response to the housing crisis. The business practices and new regulations shaping this transformation fundamentally changed how servicers interact with borrowers by requiring extensive loss mitigation options to ensure that servicers exhaust all options before moving forward with foreclosing on a borrower. Going forward, a focus on the consumer will define how servicers approach their business and regulators oversee their operations. "We've had standard assistance programs for customers before, like repayment plans and forbearance," said Janice Kay "JK" Huey, senior vice president of foreclosure and asset management at Wells Fargo. "But then as more loans were starting to go into default, we saw Treasury get involved in helping us develop, as well as Fannie and Freddie and HUD, their own programs," she continued. "They wanted to make sure we were doing all that we could to help customers stay in their homes."  Even as short-term measures wind down and servicers reduce their staffing levels in step with declines in delinquency and default rates, the regulations and strategies implemented to address the unprecedented foreclosure crisis will help servicers more adequately respond to the next market downturn. And given the cyclical mortgage industry, the question of a future downturn isn't "if," but "when.""Twenty years from now, we'll probably go through another two or three cycles," Huey said. The challenge, Huey said, lies in maintaining underwriting standards that adequately protect lenders and investors from unnecessary risks without being so restrictive that consumer can't qualify for loans.

An Industry Moving Toward a More Intelligent Design: Any examination of the future of mortgage finance should be grounded in four key pillars: people, policy, technology and capital. To commemorate the 40th anniversary of National Mortgage News, the editorial team interviewed veteran executives from throughout the industry, and asked them to identify the defining moments and trends of the past that will shape and influence the future. Their insights reveal a strong correlation between collaboration and innovation. Whether in the ongoing efforts to promote diversity and inclusion, or in the increasingly intricate interactions between technology platforms, the mortgage industry’s greatest accomplishments will continue to be achieved through coordinated efforts to make complex transactions accessible and transparent to consumers. Also critical to this discussion is the ever-increasing role regulatory compliance plays in the business strategies of lenders and servicers. Not only has the breadth of regulatory requirements expanded, but the scope of oversight has broadened as well. As a result, the stakes have never been higher for the industry to meet these obligations. As lenders and servicers continue to adjust to the industry’s changing landscape, it is essential to remember the lessons learned from the past in order to put future developments in context. After all, in a business as cyclical as mortgage lending, those lessons are often the most telling indicators of what’s to come. Explore the National Mortgage News 40th Anniversary Special: (13 posts, no paywall)

The Mortgage Bank of the Future Can't Survive on Mortgages Alone | Bank Think: The mortgage market is already undergoing dramatic transformations, but within five years the nonbank mortgage industry will look completely different than it does today. The term mortgage bank refers to independent firms not affiliated with an FDIC-insured bank that sell a majority of their loans (directly or indirectly) to Fannie Mae and Freddie Mac. The overall mortgage market today is huge, with $10 trillion-plus in outstanding mortgages and annual production estimates as high as $2 trillion for this year. This year's production is approximately twice the size of the total outstanding balance of credits cards, as well as that of student loans. The nonbank mortgage banks in question originate approximately 50% of all mortgage loans – representing a $1 trillion market this year alone. This is a seriously large and important market. What are the underlying drivers that will force the industry to change its way of doing business? The political, regulatory and environmental factors having a large impact on housing finance over the coming five years include: a new presidential administration and its associated policy changes; the winding down of the Federal Reserve subsidy of Fannie and Freddie via "quantitative easing" (the QE program has ended, but principal runoff from the Fed's portfolio is being reinvested); continued progress toward an automated mortgage experience for the borrower; and the continued relentless increase in regulatory costs driving up the cost to produce a mortgage. Furthermore, the mortgage industry is experiencing the beginning of a massive consolidation. Firms such as Blackstone, PIMCO and larger stand-alone retail firms are buying mortgage-related companies outright as well as rolling up others to increase their footprint in the market and economies of scale.

Nonbank Lenders Market Share is at a Two-Decade High. Heres Why: Depositories still dominate home lending, but nondepositories' market share is the highest it has been in at least two decades. The nonbank share of total mortgage originations was 42% in 2014, according to an analysis of Home Mortgage Disclosure Act data by ComplianceTech and its tool. Just five years before that, in 2010, nonbanks held only a 27% market share. One reason for this is that banks' attraction to mortgages tends to be opportunistic. "Banks have historically been very fickle about the mortgage lending market," . While depositories' participation in the mortgage market has had periods of stability, that steadiness tends not to last. "The banks do a lot of business, and then the nonbanks take over," said Ed Pinto, co-director of the American Enterprise Institute's International Center on Housing Risk. For example, banks' 70%-plus share of the market remained more or less steady between 1995 and early 2003, when mortgage rates trended downward. Some of the reasons that banks' market share fell after that include rate increases in 2003 and 2004 that dampened the refi wave, and subsequent nonbank competition in the form of historically loose underwriting between 2005 and early 2006. Depositories' share rebounded for a couple years after that, due primarily to two reasons. Many nonbanks that had underwritten loans with little regard for consumers' ability to repay collapsed, and the nondepositories that remained became subject to 2008 licensing requirements that weren't equally imposed on banks, which historically had been the more heavily regulated of the two groups. But a continuing downward trend in home prices from 2009 through 2011 served as a disincentive for depositories to participate in mortgage lending. So, too, did a growing number of government actions penalizing banks for mishandling of home loans in the next three years.

Banks Learn the Price of 'Satisfactory' CRA Grades | Bank Think: Even though going for the gold drives so many athletes, businesses and other organizations, it is for the most part absent from banks' performance on Community Reinvestment Act exams. Not only have some notable banks received failing "Needs to Improve" CRA grades of late, but over 90% of institutions are happy with a passing "Satisfactory" CRA rating. Fewer than 10% get an "Outstanding" grade – the gold medal of CRA. In analyzing CRA exam performance, I have found that banks engage in a deliberate strategy of what I call "Satisficing." I have concluded that there are few if any real incentives for banks to go for CRA gold. Bankers tend to be happy with the middle ground along with over 90% of their brethren and indicate sound reasons to get a Satisfactory rating. They say things such as: "When you are at the top, there is only one way to go," or, "An Outstanding rating brings unwanted community groups asking for donations and wanting us to do more." Just look at the Federal Deposit Insurance Corp.'s recent monthly summary of CRA grades for banks under its watch. In the agency's September list, only three of the 60 banks graded received an "Outstanding" rating. The rest were rated "Satisfactory." While it appears unlikely that we will see any substantive CRA reforms in the near future, we should consider incentivizing Outstanding CRA performance. I have previously proposed incentives such as tax rebates, reduced FDIC insurance premiums and a longer period until the next exams for banks that receive the highest rating. Each of these would have a quantifiable bottom-line impact to a bank as compared to a press release or local news article announcing the Outstanding rating. Even a monthly press release from the FDIC, Federal Reserve and Office of the Comptroller of the Currency explicitly naming the Outstanding banks and praising their ratings would be a good start to show that the regulators admire and encourage such CRA performance.

Foreclosure Increase Leads to Rise in Vacant Bank REO: The percentage of vacant bank-owned properties is larger now versus a year ago as banks are completing more foreclosures, according to Attom Data Solutions. Overall there are fewer abandoned properties, as roughly 1.4 million, or 1.6% of all residential properties, were vacant at the end of the third quarter, RealtyTrac's parent company Attom reported in its U.S. Residential Property Vacancy and Zombie Foreclosure Report Thursday. That figure is down 3% from the previous quarter and down 9% year-over-year. Similarly, the number of zombie foreclosures fell 9% from the third quarter of 2015 to 18,304. As a share of the total properties in the foreclosure process, 4.7% were vacant. But as the number of real estate owned properties has grown, it has led to an increase in bank-owned vacant homes. Attom found that there were 46,604 vacant bank-owned residential properties at the end of the third quarter, which represents an increase of 7% from the previous quarter and up 67% from 2015. This vacancy situation is the result of a seller's market that has motivated lenders to complete foreclosures on vacant properties, according to Attom Data Solutions Senior Vice President Daren Blomquist. "While that has reduced the number of vacant properties in the foreclosure process — so-called zombie foreclosures — it has also resulted in a corresponding rise in the number of vacant bank-owned homes,""Assuming that the foreclosing lenders are maintaining these properties and paying the property taxes, they pose less of a threat to neighborhood quality than zombie foreclosures, but they still represent latent inventory in an inventory-starved housing market."

Independent Study: Foreclosure Odds Drop 42% with THDA Homebuyer Ed -- A first-of-its-kind study uses THDA home loan data to identify the impact of homebuyer education classes on default and foreclosure rates. The new study shows the odds of foreclosure were 42 percent lower among participants in THDA's down payment assistance program who completed a homebuyer education (HBE) class compared to participants who did not. THDA began offering down payment assistance as part of its home loan program in January 2002 but did not start enforcing a requirement to attend an HBE class until July of that year. As a result, study author Scott Brown, a Ph.D. student in the Community Research and Action program at Vanderbilt University's Peabody College, recognized a unique opportunity to compare two sets of otherwise identical homebuyers: down payment assistance recipients from the first half of the year who did not take an HBE class and those from the second half of the year who were required to take HBE. "This is one of the first studies on the effectiveness of homebuyer education to provide evidence similar to an experiment with a control group," said Brown. "Because all of the homeowners in this study qualified for and received a home loan with down payment assistance from THDA in the same calendar year, their demographic, geographic, and financial characteristics are nearly identical. This is very helpful from a scientific perspective because it largely controls for factors other than homebuyer education when comparing one group to the other," he explained.

 FHFA s New Refinancing Plan May Not Help Many: Though the Federal Housing Finance Agency has yet to provide full details about its new refinancing program to be launched next year, some analysts and industry observers are already convinced it will have only a limited impact. The agency announced the new bridge program last month even as it extended the Home Affordable Refinance Program for an additional year. While it said it would release more specifics this fall, the program will be aimed at loans with high loan-to-value ratios. Under the program, Fannie Mae borrowers must have an LTV above 97% to take advantage of the program, while Freddie Mac borrowers must be above 95%. That is significantly more strict than the current HARP threshold of 80%. As a result, the program is expected to help far fewer borrowers, but could still play a key role if housing prices begin to fall, according to analysts. "The immediate market impact is limited, but the program should help set up markets better in the future for any future housing downturn, benefiting the GSEs along with investors and borrowers in the long run," wrote Chris Flanagan and Ashwin Rastogi in a recent BofA-Merrill Lynch Securitization Weekly report. One key question is how the new program will treat second liens like home equity lines of credit.Basil Petrou, managing partner of Federal Financial Analytics, said the new program could be used to refinance government-sponsored enterprise loans that were originated simultaneously with HELOCs or second mortgages. That could benefit banks that originated those second liens.

Black Knight July Mortgage Monitor: "Purchase Lending Highest Since 2007" -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for July today. According to BKFS, 4.51% of mortgages were delinquent in July, down from 4.67% in July 2015. BKFS also reported that 1.09% of mortgages were in the foreclosure process, down from 1.52% a year ago. This gives a total of 5.60% delinquent or in foreclosure. Press Release: Black Knight’s Mortgage Monitor: Q2 Originations Hit Three-Year High; Purchase Lending Highest Since 2007, Refinance Volume Still Lags 2015 Today, the Data & Analytics division of Black Knight Financial Services, Inc. (NYSE: BKFS) released its latest Mortgage Monitor Report, based on data as of the end of July 2016. This month, Black Knight looked at first-lien mortgage originations through Q2 2016. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, the data showed significant growth in origination volume; however, refinance volume was not as strong as the current low interest rate environment might suggest. “Mortgage originations posted their strongest quarter in three years in Q2 2016,” said Graboske. “In total, we saw $518 billion in first-lien mortgage originations in Q2, driven by a combination of continued purchase origination growth and refinance activity spurred by low interest rates. Interestingly however, with interest rates 15 basis points lower than in Q1, and even lower than in early 2015, refinance activity wasn’t nearly as strong as one might have expected. While purchase originations jumped more than 50 percent from Q1, refinances saw only an eight percent increase over that period, and were actually down from the same time last year, despite the number of potential refinance candidates outpacing 2015 by over one million in every month since March. That said, refinance lending has risen for three consecutive quarters and accounted for $221 billion in originations in Q2. “It was a particularly strong month for purchase originations, which made up 57 percent of all first-lien lending in the quarter,” Graboske continued. “At $297 billion, Q2 purchase originations marked the highest level – in terms of both volume and dollar amount – seen since 2007.

 Purchase Volume Reaches Highest Level Since 2007: Black Knight: Purchase loans experienced a 52% seasonal increase on a quarterly basis during the second quarter, reaching the highest level both in terms of volume and dollar amount since 2007, according to Black Knight Financial Services. During the second quarter, Black Knight measured $297 billion in purchase originations, representing 57% of all first-lien lending for the quarter, Black Knight executive vice president Ben Graboske said in a news release Tuesday tied to its monthly Mortgage Monitor report. Overall, purchase originations increased by $102 million from the first quarter. "Although the purchase lending credit box remains tight, there is increasing participation among 'moderate' credit borrowers as well," Graboske said. "Two-thirds of second quarter purchase loans went to borrowers with credit scores of 740 or higher – on par with what we saw during the same period last year – but there was a 13% year-over-year increase in lending to borrowers with credit scores between 700 and 739." The highest rate of growth of any segment for the past three quarters has been among moderate credit borrowers, and they now represent 19% of all purchase originations. Overall, first-lien mortgage originations reached $518 billion in the second quarter, the highest volume since the second quarter of 2013. The jump in purchase originations made up for a slowdown in refinance originations, which rose only 8% from the first quarter and fell year over year.

Mortgage Credit Availability Dries Up in August: Mortgage credit availability decreased in August as one originator decided to stop its whole loan purchase program, according to data released Thursday by the Mortgage Bankers Association. The Mortgage Credit Availability Index fell 0.4% to 164.7 in August from the month prior, the MBA said. A decrease in the index signals a tightening of credit standards. On a component basis, the indexes for confirming, government and conventional mortgage credit availability all dropped. The conforming MCAI dropped 0.9% over the month, while the government MCAI dipped 0.5% and the conventional MCAI slipped 0.2%. The jumbo MCAI, meanwhile, rose 0.5% month-over-month. "Credit availability decreased slightly over the month, driven by one midsized investor closing their correspondent operations," Lynn Fisher, MBA vice president of research and economics, said in a news release. The MBA receives anonymized data from Ellie Mae in producing the index, a spokesman clarified. "Despite the loss of all of the programs associated with this investor, the jumbo MCAI increased by 0.5%, indicating that credit conditions continue to ease among jumbo loan programs," Fisher said.

 MBA: "Mortgage Applications Increase Slightly in Latest Weekly Survey" -- From the MBA: Mortgage Applications Slightly Increase in Latest MBA Weekly SurveyMortgage applications increased 0.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 2, 2016.... The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 7 percent higher than the same week one year ago....The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.68 percent from 3.67 percent, with points increasing to 0.37 from 0.33 (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. Mortgage Purchase IndexThe second graph shows the MBA mortgage purchase index. The purchase index is "7 percent higher than the same week one year ago".

"Most lenders continue to offer 30yr fixed quotes around 3.375% on top tier scenarios" - From Matthew Graham at Mortgage News Daily: Mortgage Rates Rise Thanks to Europe Mortgage Rates bounced higher today, bringing them back in line with the pervasive range of the past several weeks. As of yesterday, rates were technically at 2-week lows. The ultra-narrow range continues to be an important caveat for any discussion of rate movement. Simply put, there is such a small gap between 2-week highs and 2-week lows that it could be easily traversed on an average day of movement. Most lenders continue to offer conventional 30yr fixed quotes around 3.375% on top tier scenarios.   Here is a table from Mortgage News Daily:  Home Loan Rates  View More Refinance Rates

CoreLogic: House Prices up 6.0% Year-over-year in July -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA). From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 6 Percent Year Over Year in July 2016 Home prices nationwide, including distressed sales, increased year over year by 6 percent in July 2016 compared with July 2015 and increased month over month by 1.1 percent in July 2016 compared with June 2016, according to the CoreLogic HPI. ...“If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year.” “The strongest home price gains continue to be in the western region,” said Anand Nallathambi, president and CEO of CoreLogic. “As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year.”Feedspot: This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 1.1% in July (NSA), and is up 6.0% over the last year. This index is not seasonally adjusted, and this was another solid month-to-month increase. The index is still 6.1% below the bubble peak in nominal terms (not inflation adjusted). The second graph shows the YoY change in nominal terms (not adjusted for inflation). The YoY increase had been moving sideways over the last two years. The year-over-year comparison has been positive for fifty four consecutive months.

 July 2016 CoreLogic Home Prices Year-over-Year Growth Rate Now Improved to 6.0%.: posted on 06 September 2016 July 2016 CoreLogic Home Prices Year-over-Year Growth Rate Now Improved to 6.0%. CoreLogic's Home Price Index (HPI) shows that home prices in the USA are up 6.0 % year-over-year year-over-year (reported up 1.1 % month-over-month). Last month's 5.7 % year-over-year gain was revised downward to 5.2 %. CoreLogic HPI is used in the Federal Reserves's Flow of Funds to calculate the values of residential real estate. CoreLogic has been revising their data significantly downward in the following month - I would not take the 6.0 % to the bank. However, I would be comfortable suggesting that next month we will discover that the 6.0% was really 5.5%. Overall, home price trends seem to be accelerating. Dr Frank Nothaft, chief economist for CoreLogic stated: If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year. The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year.The strongest home price gains continue to be in the western region. As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year. The way to understand the dynamics of home prices is to watch the direction of the rate of change - and not necessarily whether the prices are getting better or worse. Home price rate of growth is now marginally improving.

Home Prices Should Increase Over Next 12 Months: CoreLogic: Home prices rose again year over year in July and are expected to do the same this time next year, according to CoreLogic. CoreLogic's Home Price Index recorded a 6% year-over-year increase and a 1.1% month-over-month uptick in July, the Irvine, Calif.-based company reported Tuesday. In keeping with recent trends, cities in the Western U.S., including Denver, Portland and Seattle, led the country with double-digit gains over 2015. Additionally, the CoreLogic HPI Forecast suggested that prices will rise 5.4% year over year from July 2016 to July 2017. For August though, CoreLogic is predicting just a 0.4% increase from July. "If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year," CoreLogic chief economist Frank Nothaft said in the release. "The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year."

 Home Prices and Homeownership Rates Are Out of Whack --  Before the financial crisis, home prices and homeownership rates moved roughly in tandem. Expanded access to credit and a booming real estate market made homeownership easier for more Americans. When existing median home prices reached their precrisis peak is roughly when homeownership rates for both those under the age of 35 and for those ages 35 and older began to slip. And they haven't recovered since. Today, the homeownership rate for both groups is lower than it was more than 20 year ago. But the picture now is looking bleaker than it did before and even during the crisis. Home prices have returned to their precrisis peaks, but homeownership rates, which were already depressed because of the crisis, keep on slipping. Affordable housing is becoming scarcer across the country, but especially in popular markets such as the Pacific Northwest and California. And homebuilders have stopped building starter homes at the same rates they did before the crisis, instead turning to the more lucrative luxury home end of the business. Single-family starts are running at recession levels, and home sales are short of normal, according to economists. Altogether, these factors are the ingredients for an affordability crisis. Many would-be first-time homebuyers have been forced to continue renting or living with Mom and Dad after being priced out of the market. "We do know that homeownership rates for young people are lower," Danielle Hale, managing director of housing research at the National Association of Realtors, said. "They're now lower than in the mid-1990s." But signs are cropping up that the tides may be finally shifting to get the home sales market back to where it once was. Citing mortgage application data, the Mortgage Bankers Association has noted that there's greater demand year over year for loans under $150,000. Those loans are closely associated with first-time homebuyers, indicating that they are starting to return to the housing market.

Fewer Consumers Expect Home Prices to Rise: Home purchase sentiment fell in August as home price expectations and other components decreased, according to Fannie Mae. Fannie Mae reported Wednesday that its Home Purchase Sentiment Index fell 1.5 points to 85.0 in August from July's all-time high but still increased 4.2 points from the same period last year. Four of the index's six components also decreased. Leading these decreases was the share of consumers who expect home price will rise in the next 12 months, which dropped 6 percentage points to 35%. Similarly, the share of Americans who say now is a good time to sell dipped 5 percentage points to 15%. Additionally, the share of consumers who think mortgage rates will go down over the next year fell 2 percentage points to 38%, after posting increases for the past three months. The other component to decline was the share of consumers who say their household income is significantly higher than a year ago, which dropped a single percentage point to 10%. Neither of the two components that posted increases showed marked upticks, however. The share of Americans who say it is a good time to buy rose by 1 percentage point to 34%, representing the third consecutive month of increases. And the share of Americans who are not concerned with losing their jobs rose 4 percentage points to 73%.

Vancouver Home Sales Crash 23% In One Month As Prices Tumble - Last week, following the recent dramatic decline to slam the Vancouver housing market after a 15% luxury real estate sales tax aimed at foreign purchasers, ground the local market to a halt, we reported that China's angry consul general to Vancouver lashed out at the local government for finally bursting a housing bubble which doubled Vancouver real estate prices in the past decade. "Why a 15 percent tax? Why now? Why this rate? What’s the purpose? Will it work?" Liu Fei, China’s infuriated consul general in Vancouver, said in an interview with Bloomberg. "The issue is how to help young people afford housing," she added. "I’m not sure even a 50 percent tax would solve the problem."  Arguing that the tax would halt the influx of hot Chinese money into Vancouver - which many have claimed is the reason for Vancouver's stratospheric housing prices - Liu said that "this is a big country with a small population. It needs immigration to grow the economy." The implication was that absent a hospitable housing market where Chinese hot money launderers can park their cash, it is Canada that would suffer. Whether or not the conflicted Chinese consul is correct, remains to be seen, but for now one thing is undisputed: the Vancouver market is being roiled as the latest numbers from the Real Estate Board of Greater Vancouver confirmed. In August, the board reported that Vancouver home sales fell 26% from a year earlier, while prices slid as the 15% tax crimped demand. Compared to July, sales tumbled by 23% to 2,489 transactions. Detached properties were hit hardest as sales dropped 45% from a year earlier. Transactions of attached homes such as town-houses dipped 25% and apartment sales were down 10 percent.

Louisiana Officials Demand That Self-Reliant Locals Stop Surviving The Flood Without Permission -  Around the world, governments have recently been issuing an unsettling call for their citizens to become more self-reliant. Just this week, the governments of both Germany and Czechoslovakia warned that people should be  “be prepared for the worst case possible scenario.” But here in the United States, just the opposite is happening. Our government seems to have an unquenchable thirst for cracking down on those who take responsibility for themselves. There is an abundance of evidence of this in Louisiana. The southern state has been hit with the worst flooding in over 500 years. FEMA says 109,398 people or households have applied for housing help, and 25,000 National Flood Insurance Program claims have been filed. The American Red Cross called it the worst natural disaster since Hurricane Sandy struck New Jersey in 2012. This massive disaster was all but ignored by the mainstream media, since it didn’t fit the current agenda of divisiveness and racial tension. So what did the folks in Louisiana do? They rolled up their sleeves and took care of business. First, the Cajun Navy, a loosely organized group of local fishers, boaters, hunters, and guides, took it upon themselves to being rescuing people trapped by the sudden flood. Initially, the local sheriff’s department was reluctant to accept the assistance, but as they became quickly overwhelmed, they realized that they were disregarding a valuable asset. Initially, authorities in Livingston Parish didn’t want private citizens headed into the water, worried amateur rescuers might end up in trouble themselves, said Layton Ricks, the parish president. But as the calls from stranded residents continued to mount — at one point, Livingston officials said they were about 150 calls behind — parish officials relented. Locals who were not affected by the flood began cooking and donating food.  Others helped flood victims to begin gutting their homes so they could start to rebuild. This community in the bayou pulled together to show the world that a real emergency response begins at home, undertaken by the very people who were affected. They didn’t wait around bemoaning the lack of FEMA, Red Cross, and government aid. They got to work. They opened up their own shelters in local businesses that were not affected. They distributed immediate relief to those who were displaced. They performed their own rescues, organized the response, and used social media to coordinate their efforts. In fact, they were so effective at their own free-market local disaster relief that they rendered the government’s assistance all but unnecessary.   And that is when the government said, “Oh, no. We can’t have that.” Like a horde of modern-day carpetbaggers, they began “helping” by forcing people who were struggling to rebuild to purchase permits. That’s right. They forced people to ask for permission for the right to repair their own property.

Construction worker shortage weighs on hot U.S. housing market | Reuters: The drumbeat of hammers echoes most mornings through suburban Denver, where Jay Small, the owner of company that frames houses, is building about 1,300 new homes this year. That's more than triple what he built a few years ago, when “you couldn’t buy a job” in the residential construction industry, he said. Now, builders can't buy enough workers to get the job done. Eight years after the housing bust drove an estimated 30 percent of construction workers into new fields, homebuilders across the country are struggling to find workers at all levels of experience, according to the National Association of Homebuilders. The association estimates that there are approximately 200,000 unfilled construction jobs in the U.S. - a jump of 81 percent in the last two years. The ratio of construction job openings to hiring, as measured by the Department of Labor, is at its highest level since 2007. "The labor shortage is getting worse as demand is getting stronger," said John Courson, chief executive of the Home Builders Institute, a national nonprofit that trains workers in the construction field. The impact is two-fold. Without enough workers, residential construction is trailing demand for homes, dampening the overall economy. And with labor costs rising, homebuilders are building more expensive homes to maintain their margins, which means they are abandoning the starter home market. That has left entry-level homes in tight supply, shutting out many would-be buyers at a time when mortgage rates are near historic lows. Nationwide, there are 17 percent fewer people working in construction than at the market peak, with some states – including Arizona, California, Georgia and Missouri – seeing declines of 20 percent or more, according to data from the Associated General Contractors of America.

Spike In Grid Failures: The Next Big Headache For Utilities - Reliability of the electrical grid is a big piece of the "package" that franchise-owning electric companies sell their customers. Just trust the local utility. No need to worry about your own costly, high maintenance generator, solar panels or battery. The utility has all the repair crews, backup generators and can get even help from neighboring power companies when necessary. It's all included in the price. But a little over fifty years ago, the 1965 Northeast Blackout made people wonder about reliability but the industry got to work fixing the problem. This episode began with a faulty relay on the Ontario side of Niagara Falls but the resulting power surge quickly overwhelmed transmission lines throughout New York, New Jersey and New England affecting 30 million people in all. For sheer impact and inconvenience, little compares with the August 14-15, 2003 blackout affecting the northeastern U.S. and southeastern Canada. The cause was overgrown trees brushing up against high voltage lines in FirstEnergy's system in northern Ohio. This resulted in a cascade of transmission line failures ultimately affecting 50 million people and was the biggest blackout in North American history. Since 1965 the electricity industry in the U.S. has kept track of service problems. Interestingly, for all the incremental transmission and related investment, the records do not show improvement (Figure 1). Similar incidents occur all over the world. Although Australia and New Zealand seem to account for a disproportionate number of outages (the wonders of letting the market do its work?). So North America is not unique in this regard. The causes behind these events vary: equipment failure, inadequate vegetation management, hurricanes, cyber attacks and even coronal mass ejections from the sun. However, the U.S. has been collecting power outage data longer than most and probably has more reliable and consistent numbers. Here is the pattern that emerges.

Consumer credit jumps to $17.7 billion in July - U.S. consumer borrowing picked up in July, bolstering expectations that consumer spending will remain a key factor in accelerating economic growth. Outstanding consumer credit rose by a seasonally adjusted $17.7 billion in July, the Federal Reserve said Thursday. Economists had expected a $16.0 billion rise in July. Adding to the sense of strength, a slowdown in June was revised to reflect a rise. The Fed’s data now show a $14.5 billion gain in June, up from the prior estimate of $12.3 billion, which was the slowest pace in almost four years. In the second quarter, real consumer spending rose at a 4.4% annual rate. Economists expect spending to moderate somewhat in the third quarter but remain strong. Consumer credit rose at a 5.8% seasonally adjusted annual growth rate in July, a pickup from June’s upwardly revised 4.8% pace. It is below the 7.8% rate seen in March, which was the fastest monthly pace this year. In keeping with recent trends, nonrevolving credit outstanding, including student and auto loans, drove borrowing in July. This category rose at a 6.7% annual pace in July compared with June’s 2.4% growth rate. The gain was mostly autos, however, as student loan growth was typically low in the month.

Rise in July U.S. Consumer Credit Reflects Steady Household Spending - WSJ: —U.S. consumers’ credit balances increased in July, a sign of steady household spending. Outstanding consumer credit, a measure of nonmortgage debt, rose by a seasonally adjusted $17.71 billion in July from the prior month, the Federal Reserve said Thursday. Economists surveyed by The Wall Street Journal had expected a $16 billion increase. July’s 5.83% seasonally adjusted annual growth rate outpaced June’s upwardly revised 4.8%. Revolving credit, mostly credit cards, climbed at a 3.45% annual pace in July, compared with an 11.5% pace in June. Household spending has been a bright spot so far this year, propping up overall economic growth amid declining business and government spending. Separate Commerce Department data last month showed consumer spending rose for the fourth straight month in July. Nonrevolving credit, including student and auto loans, advanced at a 6.7% annual pace in July. June’s growth rate was 2.41%, a nearly five-year low. While overall auto sales are still relatively high, the pace has dropped off in recent month. Weaker auto sales can limit demand for car loans.

July 2016 Consumer Credit: Upward Revision to Previous Month's Data - The headlines say consumer credit rate of annual growth increased from last month. The trends continue to show a decelerating rate of growth, and this deceleration began in October 2015. This month there was significant upward revision for the previous months. At least the decelerating trend lines remain in play so our previous analysis was not destroyed. Saying again, consumer credit growth is slowing - and the growth of student loans is slowing. But consider that consumer loan growth remains higher than GDP growth - and logic tells you that this situation cannot continue forever. Student loans are a relatively new phenomenon so our analysis backs out student loans - and credit growth without student loans is 4.2% year-over-year growth in a 2.4% economy (GDP not inflation adjusted year-over-year). Finally, what is historically significant is that the growth rate of revolving and non-revolving loans is that both are growing at nearly the same rate. The headline said: In July, consumer credit increased at a seasonally adjusted annual rate of 5-3/4 percent. Revolving credit increased at an annual rate of 3-1/2 percent, while nonrevolving credit increased at an annual rate of 6-3/4 percent. Overall takeaways from this month's data:
  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 - but had a slight growth bump this month.
  • Student loans growth rate was up 0.2 % month-over-month and year-over-year growth is 11.2 % year-over-year.
  • Revolving credit (credit cards and this series includes no student loans) and has been slightly accelerating since 2010.

 Consumer Credit Jumps By $18 Billion In July; Student, Auto Loans Hit $2.4 Trillion --After last month the Fed reported that in June revolving, i.e. credit card, credit unexpectedly soared by $7.7 billion, the second highest monthly increase since the financial crisis, many were popping the champagne, ready to celebrate the return of the consumer's "animal spirits" who were out and about, and most importantly, charging it.  One month later, we find that the June revolving credit spike was even higher, rising by $9.2 billion following today's revision.  However, as a result, the July consumer credit grew by just $2.8 billion to start the third quarter, the smallest amount since February, suggesting that the prior month's spike may have been a one-time fluke. Perhaps more troubling is that while non-revolving credit rose just by only a revised $5 billion in June, this credit item, which is almost entirely in the form of student and car loans, once again spiked, rebounding to $14.9 billion in July.  In any case, as a result of these two series, in July total consumer credit rose by $17.7 billion in July, up from last month's upward revised $14.53 billion, and above the $16 billion expected, as US consumers continued to get increasingly more indebted.

US car loan debt hits $1.027 trillion as subprime loans increase - Total debt from car loans has surpassed the $1 trillion mark as loan delinquency rates continue to steadily climb. Some believe the heavy presence of subprime and deep prime loans could be shades of the 2007-10 subprime mortgage crisis. The US has the third highest car ownership rate in the world, beaten only by San Marino and Monaco – two countries that have a lower combined population than Iowa City, Iowa. In addition, a 2015 census found over 86 percent of Americans rely on a car for their primary method of transportation. Given that the US is officially car country, should citizens be worried about the ballooning debt attributed to car loans? With over a trillion dollars in loans for the second consecutive quarter, the percentage of subprime borrowers who are 60 or more days behind on their payment has increased by 17 percent since last year, USA Today reported. In addition, the average car loan has also been increasing and is now up to $29,880, which is a 4.8 percent increase since the second quarter of 2015, reports Experian Automotive. Monthly payments have increased to $499, a $16 increase since last year, with more and more borrowers opting for longer terms, ergo paying more in interest. But a real cause for concern is the subprime and deep prime loans that make up just under a quarter of all auto loans. Subprime loans are traditionally defined as loans given to borrowers with credit scores below 640, which is the threshold for “good” and low risk loans. Deep subprime means the borrower has an even higher chance of being delinquent on payments with credit scores below 550, which is defined by FICO as “poor.”

Is US Auto Sales Data Fabricated: FBI Investigating Chrysler For Falsifying Monthly Sales Reports - Ever wonder how car sales have been so remarkably strong over the past 7 years as the economy has seemingly stagnated?  Sure, a massive subprime auto lending bubble has helped fuel auto sales as $0 cash down, 0% interest and 70 month terms have become the norm for people looking to "manage" monthly payments...though we're sure that buyers making $30k a year really can afford that new $80,000 vehicle.  And, of course, government programs like "cash for clunkers" has also helped to fuel the recovery.  But, as Bloomberg points out today, there might be a little more to the story, at least at Fiat Chrysler.  It seems that the FBI has become interested in whether or not Fiat Chrysler forced dealers to falsify vehicles purchases in order to manage monthly sales figures. Apparently, all fraudulent activities were handled through Fiat Chrysler's "Department of 'unnatural acts.'"  Per BloombergInvestigators are examining whether Fiat Chrysler improperly adjusted monthly numbers to show growth over the prior year, a person familiar with the matter said. They are looking into allegations the company ordered dealers to create false vehicle purchases, some of which were made in the names of friends and relatives of salespeople, including underage family members, the person said. The allegations get even stranger. Investigators are probing calls from Fiat Chrysler officials to dealers saying its department of “unnatural acts” was open for business, the person familiar said. The question is whether those calls had any relationship to allegations that company officials were urging dealers to falsify sales to meet reporting targets, the person said.

 Americans Drive to a New Record in Gasoline Consumption - Americans fueled up this summer at levels not seen since the recession began almost nine years ago, new data shows. But before you raise your Icee in salute to the U.S. economy, consider this: Nine years is a stunningly long road to recovery in gasoline consumption for an economy that replaced all the jobs and output lost during the deep recession several years ago. Americans purchased about 406 million gallons of gasoline per day, on average, in June, according to data the U.S. Energy Information Administration released last week. That just surpassed a previous record set in July 2007. Given that fuel consumption typically peaks for the year in July or August, when road-trip season is in full swing, Americans likely purchased an all-time record volume of gasoline this summer. The thirst for fuel shows gasoline is relatively cheap and that Americans are working, vacationing and driving more. But the recovery was long, even by the standards of the current sluggish expansion. U.S. consumer spending recovered to its peak level in two years. Overall economic output recovered to the level where it stood in late 2007, when the recession began, in three years. The U.S. replaced all the jobs lost in the wake of the recession by early 2014, more than six years after the recession began.

  As Class 8 Truck Orders Continue Collapse, VW Has A "Fix" For Navistar's Diesel Emission Issues -- Truck-related stocks have massively outperformed the broader markets this year up over 30% while the S&P 500 is up only around 7%. This outperformance has come despite abysmal Class 8 net orders which seem to just get worse each month with August 2016 net orders down over 25% compared to last year.  In fact, the level of trailing 12-month net orders is the lowest since January 2011 with YoY changes now in negative territory for 18 consecutive months. This news comes as Volkwagen just announced a $256mm investment in Navistar International and agreed to collaborate on "strategic technology" and to establish a procurement joint venture.  The news pushed Navistar stock up over 40% on the day alleviating near-term investor concerns over an aggressively levered balance sheet and massive pension under-funding.  The investment in Navistar comes after its market share in heavy-duty trucks has been cut in half over the past five years on the back of a diesel emissions scandal.  The scandal ultimately resulted in Navistar paying the SEC $7.5mm to settle allegations it misled investors over its ability to comply with new diesel emission standards that went into effect in 2010.  Navistar had attempted to develop a proprietary solution to comply with the new 2010 regulations, rather than using the same technology as the rest of the truck and engine industry...a bet that obviously didn't work out as planned.  Per BloombergNavistar sought to comply with federal engine emission rules that took effect in 2010 by using an exhaust gas recirculation (EGR) technology that funnels emissions back into the engine’s cylinders as a way of lowering the nitrogen oxide that is released. The trouble for Navistar is that the technique did not reduce the emissions sufficiently to meet the U.S. rules, which led to the company paying a penalty of nearly $2,000 per engine. Rival engine makers, such as Cummins, Paccar, and Daimler, use a system called selective catalytic reduction that applies a urea-water fluid to the exhaust gases to convert the harmful nitrogen oxide to water and nitrogen.

Rail Week Ending 03 September 2016: Down 5.7% For The Month Of August: Week 35 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. This week, all rolling averages' were mixed. We review this data set to understand the economy - and one element continues to stand out. If I remove coal and grain from the analysis, rail is declining a around 5% (this week 3.7%). Under normal circumstances one should consider this recessionary as trucking tonnages are down also. But consumption seems to have migrated from goods purchases to services (such as health care). Even though rail is in contraction, this week was better than last week. The contraction began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years.A summary of the data from the AAR: Carload traffic in August totaled 1,347,989 carloads, down 6.6 percent or 95,341 carloads from August 2015. U.S. railroads also originated 1,327,274 containers and trailers in August 2016, down 4.8 percent or 66,889 units from the same month last year. For August 2016, combined U.S. carload and intermodal originations were 2,675,263 down 5.7 percent or 162,230 carloads and intermodal units from August 2015. In August 2016, eight of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with August 2015. These included: grain, up 24.7 percent or 23,857 carloads; waste and nonferrous scrap, up 25.4 percent or 4,182 carloads; and chemicals, up 1.1 percent or 1,699 carloads. Commodities that saw declines in August 2016 from August 2015 included: coal, down 16.1 percent or 86,638 carloads; petroleum and petroleum products, down 25.1 percent or 17,650 carloads; and crushed stone, gravel and sand, down 6.9 percent or 8,913 carloads. Excluding coal, carloads were down 1 percent or 8,703 carloads in August 2016 from August 2015. Total U.S. carload traffic for the first 35 weeks of 2016 was 8,668,572 carloads, down 11.1 percent or 1,081,450 carloads, while intermodal containers and trailers were 9,042,678 units, down 3.1 percent or 288,427 containers and trailers when compared to the same period in 2015. For the first eight months of 2016, total rail traffic volume in the United States was 17,711,250 carloads and intermodal units, down 7.2 percent or 1,369,877 carloads and intermodal units from the same point last year.

Hanjin Shipping gets U.S. court order, cash to unload ships | Reuters: A U.S. judge on Friday signed an order granting Hanjin Shipping Co Ltd (117930.KS) provisional protection from creditors in the United States, enabling some vessels to dock and unload at U.S. ports. South Korea's Hanjin had asked U.S. Bankruptcy Judge John Sherwood to issue an order to prevent creditors from seizing Hanjin ships or property, and to allow cargo owners to make arrangements to retrieve goods stranded in warehouses. Earlier, the company received authority to spend money needed to dock at U.S. ports and begin unloading four vessels that have been stranded at sea by the company's failure last week, a company lawyer told a U.S. court on Friday. "We have the money," said Ilana Volkov, an attorney for Hanjin, told a U.S. Bankruptcy Court hearing in Newark, New Jersey on Friday. "We want to call these ports and say, please accept our ships and we want to pay for the services to work the ships.” Volkov said at least $10 million was authorized by a Korean court to begin servicing the four ships. Hanjin identified 14 U.S.-bound ships in court papers, but Volkov said she did not have information about the other vessels. One of the four, the Hanjin Greece, was scheduled to dock and unload at the Port of Long Beach early Saturday morning, according to the Marine Exchange of Southern California, a group that tracks cargo ship traffic.

US Wholesale Inventories Are Unchanged in July; Sales Drop - The New York Times: — U.S. wholesale businesses left their inventories unchanged as their sales fell in July.The Commerce Department said Friday that wholesalers held the line on stockpiles after increasing them 0.3 percent in June. Their sales fell 0.4 percent in July, reversing a 1.7 percent increase in June. It was the biggest sales drop since January's 1.9 percent decline.The July numbers show continued stress in the energy industry, which has been pinched by low oil and natural gas prices. Petroleum wholesalers reduced inventories by 1.2 percent and recorded a 3.5 percent drop in sales in July. Grocery wholesalers recorded a 2 percent drop in sales but increased inventories by 0.9 percent. Auto companies registered a 0.3 percent sales drop but increased inventories by 0.4 percent.Weak inventory restocking has been a drag on U.S. economic growth. From April through June, businesses overall reduced inventories at the fastest pace since the fall of 2011. That's one reason second-quarter economic growth came in at a lackluster 1.1 percent.Continue reading the main story

U.S. wholesale inventories flat, boost to third-quarter growth seen modest | Reuters: .S. wholesale inventories were unchanged in July as previously reported and sales recorded their biggest drop in six months, suggesting a modest boost to third-quarter economic growth from inventory investment. An outright drop in inventory investment weighed heavily on economic growth in the second quarter and some economists believe the inventory correction is close to running its course. The Commerce Department said on Friday that the flat reading followed an upwardly revised 0.3 percent increase in June. Wholesale inventories were previously reported to have gained 0.2 percent in June. "The trend towards an increase of inventories at the wholesale level gives us greater confidence that GDP growth will be well above 2 percent in the third quarter as factories restart their engines and start to produce the goods to replenish the store shelves," The department in its recently introduced monthly advance economic indicators report published last month had estimated that wholesale inventories would be unchanged in July. The component of wholesale inventories that goes into the calculation of GDP -- wholesale stocks excluding autos --was also unchanged in July. Following the report, the Atlanta Federal Reserve trimmed its third-quarter GDP estimate by two-tenths of a percentage point to a 3.3 percent annual rate.

Wholesale Sales Tumble Most Since January, Inventories Ratio Deep In Recessionary Territory -- Wholesales sales slumped 0.4% MoM in July - the biggest drop since January. Inventories were unchanged MoM, driving the inventories-to-sales ratio back up to 1.34x. Year-over-year, this was the 19th consecutive month of declines for wholesale sales...Notably Auto sales dropped for the 3rd month in a row but Hardware saw the biggest monthly drop in sales. Farm products saw the biggest drop in inventories along with drugs. Auto inventories rose but professional equipment rose the most. The absolute gap between sales and inventories remains near record highs... But the sales drop and inventiories flat has led to a rise in the inventories-to-sales ratio, which remains deep in recessionary territory...

Headline July 2016 Wholesale Sales Not Good.: The headlines say wholesale sales were down month-over-month with inventory levels remaining at levels associated with recessions. Our analysis shows an degradation of the 3 month averages AND we see a larger decline than the headlines looking at the month-over-month data. Analyst Opinion of this month's Wholesale Sales Something is wrong with this data set. This sector is in an extreme recession. The data this month can only be described as ugly. I can only assume that retailers and manufacturers are buying direct now - and no longer using wholesalers. Note that Econintersect analysis is based on the change from one year ago. Econintersect Analysis:
  • unadjusted sales rate of growth decelerated 5.9 % month-over-month.
  • unadjusted sales year-over-year growth is down 6.6 % year-over-year
  • unadjusted sales (but inflation adjusted) down 6.4 % year-over-year
  • the 3 month rolling average of unadjusted sales decelerated 0.4 % month-over-month, and down 2.3 % year-over-year.
  • unadjusted inventories up 0.4 % year-over-year (up 0.1 % month-over-month), inventory-to-sales ratio is 1.38 which historically is well above recessionary levels.

  ISM Non-Manufacturing Index decreased to 51.4% in August – The August ISM Non-manufacturing index was at 51.4%, down from 55.5% in July. The employment index decreased in August to 50.7%, down from 51.4% in July. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management:August 2016 Non-Manufacturing ISM Report On Business® Economic activity in the non-manufacturing sector grew in August for the 79th consecutive month,  "The NMI® registered 51.4 percent in August, 4.1 percentage points lower than the July reading of 55.5 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased substantially to 51.8 percent, 7.5 percentage points lower than the July reading of 59.3 percent, reflecting growth for the 85th consecutive month, at a notably slower rate in August. The New Orders Index registered 51.4 percent, 8.9 percentage points lower than the reading of 60.3 percent in July. The Employment Index decreased 0.7 percentage point in August to 50.7 percent from the July reading of 51.4 percent. The Prices Index decreased 0.1 percentage point from the July reading of 51.9 percent to 51.8 percent, indicating prices increased in August for the fifth consecutive month. According to the NMI®, 11 non-manufacturing industries reported growth in August. The majority of the respondents’ comments indicate that there has been a slowing in the level of business for their respective companies." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This was below the consensus forecast of 55.5, and suggests slower expansion in August than in July.

August 2016 ISM Services Index Growth Declines: The ISM non-manufacturing (aka ISM Services) index continues its growth cycle, but declined from 55.5 to 51.4 (above 50 signals expansion). Important internals declined but remain in expansion. Markit PMI Services Index also declined but remains in expansion.. Analyst Opinion of the ISM and Markit Services Survey These are surprisingly weak reports. However, other data points to marginally improving conditions, and survey's tend to miss turning points. I am not writing off the results of these surveys - only saying I would be careful how one interprets these results. I will change my view if next month the data comes in weak. Still, the significant decline in ISM business activity subindex and the new orders subindex should wake people up that the service sector may not be supporting economic growth in 3Q2016 GDP. This was below expectations (from Bloomberg / Econoday) of 54.0 to 56.1 (consensus 55.0).For comparison, the Market PMI Services Index was released earlier - and declined from 51.4 to 51.0. From Markit: August data indicated that the U.S. service sector continued to struggle for momentum, with both business activity and incoming new work expanding at slightly slower rates than in the previous month. This contributed to a moderation in job creation to its weakest since December 2014. Meanwhile, service providers are upbeat overall about the 12- month outlook for business activity, and the degree of positive sentiment remained comfortably above the survey-record low seen in June. At 51.0 in August, the seasonally adjusted Markit final U.S. Services Business Activity Index dropped from 51.4 in July but remained above the 50.0 no-change value for the sixth consecutive month. The latest reading signalled only a marginal increase in business activity, and the pace of expansion was the weakest seen since the upturn began in March. Survey respondents noted that relatively subdued client demand and uncertainty ahead of the presidential election had acted as growth headwinds in August. Service providers reported a moderate rise in new business volumes in August, with the pace of expansion remaining weaker than the average seen since the survey began in late-2009. Subdued demand patterns resulted in a renewed slowdown in employment growth during August. The latest survey marked six-and-a-half years of sustained job creation, but the latest rise in payroll numbers was the weakest since the end of 2014.

 Services Economy Crashes To Feb 2010 Lows, Confirming Manufacturing Collapse --Following last week's disappointing Manufacturing ISM/PMI data, Services PMI printed a six-month-low 50.9 over the weekend "pointing to an annualised GDP growth rate of a mere 1%," according to Markit. Services jobs fell to their weakest since Dec 2014 but the ISM Services data collapsed to 51.4 - lowest since Feb 2010 with new orders imploding to their weakest since Jan 2014.  Another chart to completely ignore...As both seasonal and adjusted new orders crashed... ISM Respondents are mixed...

    • "Relatively stable August, with no sharp increase or decrease in sales or pricing. Labor availability and cost remains a very high focal point." (Accommodation & Food Services)
    • "Overall, the oil and gas industry remain in [a] ‘wait and watch’ mode. The price of oil has impacted investment considerably." (Construction)
    • "No significant changes to report. Still on track for expansion efforts to begin fourth quarter 2016." (Finance & Insurance)
    • "Still recovering from the current downturn in the renewable energy market which is expected to pick up in the fourth quarter." (Professional, Scientific & Technical Services)
    • "Stable with some increase in construction activity." (Public Administration)
    • "The business environment has softened a bit over the last month. There are now opportunities to fill in the marketplace." (Retail Trade)

Unemployment Report Shows Hardly Any Change - Robert Oak - (20 FRED graphs) The August 2016 unemployment report shows a fairly underwhelming month of statistics, yet not as bad as some in the press would have you believe.  The unemployment rate remained the same at 4.9%, the third month in a row.  Generally speaking August was no change from July.  Both the labor participation rate and the civilian to employment ratio did not change.  The number of people employed was low and similar to the number of those unemployed.  Generally speaking there was almost no movement in the month to month unemployment statistics, taking into account margins of error.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status. Those employed now stands at 151,614,000, a monthly increase of 97 thousand.  From a year ago, the ranks of the employed has increased by 2.571 million.  That's a reasonable annual gain even though the month is a paltry figure.  Those unemployed increased by 79 thousand for the month, almost a number reversal of those employed and statistically close as well.  From a year ago the unemployed has decreased by -169,000.  That the status quo, but there are still those no longer counted who are still in need of a job.  Those not in the labor force is 94,391 million.  The below graph are the not in the labor force ranks.  Those not in the labor force has increased by 356,000 in the past year and increased by 58 thousand for the month.  It is people who need a job who have stopped trying to get one in addition to baby boomer retirees.  The labor participation rate is 62.8%.  This is no change from last month.  Pre-recession, the January 2008 labor participate rate was 66.2% a far cry from what we see today.  Ignoring labor participation rates after 2008, one has to go to the late 1977 to find rates this low.  Below is a graph of the labor participation rate for those between the ages of 25 to 54.  The rate is 81.3% and this is a 0.1 percentage point increase from last month, a good sign.  These are the prime working years where people are not in retirement or in school full time commonly, so one should not see record low participation rates with a 4.9% unemployment rate.  In January 2008 the prime working years labor participate rate was 83.3%. The civilian labor force, which consists of the employed and the officially unemployed, increased by 176,000 to stand at 159,463,000.  The civilian labor force has grown by 2,402,000 over the past year.  This is actually high annual growth, we hope it is not artificial growth since the BLS counts those on guest worker Visas and even illegal workers mixed in with permanent resident and citizen workers.  Below is a graph of those not in the labor force, (maroon, scale on the left), against the noninstitutional civilian population (blue, scale on the right).   Notice how those not in the labor force crisscrosses the noninstitutional civilian population in growth.  The civilian noninstituitonal population is from where all other labor statistics have sprung, so to see strong acceleration in those not counted as participating in the labor force than the pool of population possible to be part of the labor force in the first place has been the bad sign of the last eight years.

Employment: Preliminary annual benchmark revision shows downward adjustment of 150,000 jobs - The BLS released the preliminary annual benchmark revision showing 150,000 fewer payroll jobs as of March 2016. The final revision will be published when the January 2017 employment report is released in February 2017. Usually the preliminary estimate is pretty close to the final benchmark estimate. The annual revision is benchmarked to state tax records. From the BLS:  In accordance with usual practice, the Bureau of Labor Statistics (BLS) is announcing the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series. The final benchmark revision will be issued on February 3, 2017, with the publication of the January 2017 Employment Situation news release. Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus three-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2016 total nonfarm employment of -150,000 (-0.1 percent). ... Using the preliminary benchmark estimate, this means that payroll employment in March 2016 was 150,000 lower than originally estimated. In February 2017, the payroll numbers will be revised down to reflect the final estimate. The number is then "wedged back" to the previous revision (March 2015). Construction was revised up by 40,000 jobs, and manufacturing revised up by 51,000 jobs.  The key downward revisions were for retail trade of -120,000, Professional and business services of -133,000 and education and health of -98,000. This preliminary estimate showed 224,000 fewer private sector jobs, and 74,000 additional government jobs (as of March 2016).

Labor Department Revises Away 150,000 "Everything Is Awesome" Jobs -- With the swipe of The Labor Department's pen, 150,000 newly created jobs were 'revised' out of existence yesterday. As The New York Times reports, the U.S. economy likely created 150,000 fewer jobs in the 12 months through March than previously estimated, the Labor Department said on Wednesday. The reading, which is a preliminary estimate of the department's annual "benchmark" revision to closely watched payrolls data, showed the retail, wholesale trade, education and professional and business services sectors accounted for the bulk of the downward revision.Once a year, the government compares its nonfarm payrolls data, based on monthly surveys of a sample of employers, with a much more complete database of unemployment insurance tax records. A final benchmark revision will be released in February along with the department's report on employment for January. Government statisticians will use the final benchmark count to revise payrolls data for months both prior to and after March. This revision - which shifts payrolls data lower in 9 of the last 14 months, is enough to knock 12k jobs off each month on average - likely kicking many of these prints to a 'miss'... not that it matters anyway...

Weekly Initial Unemployment Claims decreased to 259,000 --The DOL reported: In the week ending September 3, the advance figure for seasonally adjusted initial claims was 259,000, a decrease of 4,000 from the previous week's unrevised level of 263,000. The 4-week moving average was 261,250, a decrease of 1,750 from the previous week's unrevised average of 263,000. There were no special factors impacting this week's initial claims. This marks 79 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.

BLS: Job Openings increased in July to Record High -- From the BLS: Job Openings and Labor Turnover Summary: The number of job openings increased to 5.9 million on the last business day of July, the U.S. Bureau of Labor Statistics reported today. Hires and separations were little changed at 5.2 million and 4.9 million, respectively. .... The number of quits was essentially unchanged in July at 3.0 million. The quits rate was 2.1 percent. Over the month, the number of quits was little changed for total private and decreased for government (-21,000). Quits decreased in state and local government education (-25,000). The number of quits was little changed in all four regions. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for July, the most recent employment report was for August. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in July to 5.871 million from 5.643 million in June.The number of job openings (yellow) are up 1% year-over-year. Quits are up 9% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is solid report with job openings just above the previous record high set in April 2016.

July 2016 JOLTS Job Openings Rate Year-over-Year Growth Now Zero.: The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings decllined from last month. In addition, the growth rate trends declined in the 3 month averages. It comes as no surprise that JOLTS is now showing little year-over-year job openings growth. Historically, this indicates significant slowing of employment growth. Both employment and JOLTS job openings year-over-year growth have been slowing for the past 11 months. This aligns with Econintersect's Employment Index and the Conference Boards Employment Index - but both indices are forecasting moderate employment gains similar to August's employment growth. There was no market expectations from Bloomberg this month. the number of unadjusted PRIVATE jobs openings - which is the most predictive of future employment growth of the JOLTS elements - shows the year-over-year growth slowed to nearly the lowest level since the Great Recession. The year-over-year growth of the unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) declined to no growth. The graphs below looks at the year-over-year rate of growth for job opening levels and rate. ITT Tech is shutting down all campuses and laying off more than 8,000 employees : ITT Educational Services Inc said it would discontinue operations at its ITT Technical Institutes, in line with the U.S. Department of Education's directive, affecting more than 8,000 employees. The for-profit education provider said on Tuesday that the move would also affect hundreds of thousands of students and alumni. "We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution," ITT said. The company has been under investigation by government authorities for allegations of fraud and deceptive marketing tactics. In August, the U.S. Department of Education banned the company from enrolling students who get federal aid. ITT's accrediting agency said in April that ITT Technical Institutes - which provide career-oriented education programs - had not demonstrated compliance with certain accreditation standards. The for-profit education sector has been struggling with falling enrollment, poor job placement records and regulatory scrutiny. ITT's shares were halted in premarket trading.

 Job Openings In The US Unexpectedly Jump To Record High, As Pace Of Hiring Fails To Keep Up --  Moments ago the BLS reported Janet Yellen's favorite labor market indicator, the JOLTS survey, which as expected (since it tracked the far stronger than expected July payrolls) showed that in July the number of job opening rebounded from the June drop to 5.643 million, jumping by over 200K jobs to a new all time high of 5.871 million, nearly 300K more than the 5.580 million expected. The June job opening rate (job openings as a % of total employment plus openings) rose to 3.9% vs 3.8% prior month, with the greatest number of job openings in the professional and business services sector at 1.27 million, followed by education and health with 1.078 million, and trade, transportation and utilities in third place with 1.030 million. The number of unemployed workers per job opening has dropped to 1.35. When the most recent recession began (December 2007), the number of unemployed persons per job opening was 1.9. The ratio peaked at 6.6 unemployed persons per job opening in July 2009 and has trended downward since.

 A New Record for Job Openings Deepens Mystery Over Lack of Hiring - One of the labor market’s biggest mysteries just got deeper: The number of job openings available at the end of July climbed to a new record of 5.9 million. Yet the number of people actually being hired into one of those jobs was 5.2 million for the second month in a row. The number of unemployed workers per job opening has fallen to 1.3, the lowest since 2001. What would normally sound like good news—abundant jobs—is tempered by the fact that people simply aren’t being hired into the positions at rates like in the past. About 300,000 fewer people are being hired each month compared with the pace reached in February. And during the entire economic recovery, the U.S. has yet to notch a month of hiring that matches the pace seen at the heights of the middle of last decade or the early 2000s. The Job Openings and Labor Turnover Survey, known as Jolts, is the Labor Department’s second-tier report on the labor market. The main jobs report was released last week for the month of August, and provides rich detail across demographic groups and across industries. It showed the economy added a net 151,000 jobs in August. The Jolts report, released today, only goes through July and provides less detail. Still, the report is an intriguing look into trends around job openings and the reason for job separations. More people are being hired each month than leaving a job. That means the net number of jobs is increasing. But the pace of hiring and the pace of voluntary job-quitting are both lower than prerecession levels, a sign of a lack of vibrancy in the labor market. Because job-hopping is a key way that many Americans get raises, an increase in voluntary job-quitting tends to coincide with faster wage growth. The news in the report is not all bad. One good sign is people are much more likely to leave jobs voluntarily than through layoffs. At the height of the recession, this pattern was reversed—layoffs were much more common than voluntary job separations. The number of job quitters and layoffs was little changed between June and July.

An Economic Mystery: Why Are Men Leaving The Workforce? : NPR: At 4.9 percent, the nation's unemployment rate is half of what it was at the height of the Great Recession. But that number hides a big problem: Millions of men in their prime working years have dropped out of the workforce — meaning they aren't working or even looking for a job.It's a trend that's held true for decades and has economists puzzled.In the 1960s, nearly 100 percent of men between the ages of 25 and 54 worked. That's fallen over the decades.In a recent report, President Obama's Council of Economic Advisers said 83 percent of men in the prime working ages of 25-54 who were not in the labor force had not worked in the previous year. So, essentially, 10 million men are missing from the workforce."One in six prime-age guys has no job; it's kind of worse than it was in the depression in 1940," says Nicholas Eberstadt, an economic and demographic researcher at American Enterprise Institute who wrote the book Men Without Work: America's Invisible Crisis. He says these men aren't even counted among the jobless, because they aren't seeking work. So, why are men leaving? And what are they doing instead?

Fading College Dream Saps U.S. Economy of Productivity Miracle - For decades, a growing pool of college graduates poured into the U.S. labor market, boosting productivity and shaping America’s status as the world’s dominant economic power. That driver of growth is diminishing. Enrollment has declined every year since peaking in 2011, according to the Census Bureau and the National Student Clearinghouse Research Center. The reasons include an aging population, rising tuition costs and a healthy rate of hiring that lessens the demand for learning. Lamenting the end of the so-called productivity miracle are Federal Reserve officials and economists more broadly, who hailed its ability to allow faster growth without harmful inflation. Now, central bankers largely powerless to fix the schooling slump say something must be done to counter it to prevent a new era of weaker growth. “As a society, we should explore ways to raise productivity growth,” Fed Chair Janet Yellen said last month at an economic symposium in Jackson Hole, Wyoming, adding that it’s worth considering “improving our educational system and investing more in worker training.” Among the most noticeable consequences of weaker college enrollment is lower wages. Higher education leads to better-paying jobs -- graduates, on average, earn about 90 percent more than non-graduates, but only about a third of Americans get degrees. Workforce quality, which along with technology, helped American employers boost productivity in the 1980s and ’90s, now appears to be contributing to anemic efficiency gains that could continue.

   Fed’s labor-market conditions index sinks back into negative territory in August - The Federal Reserve’s labor-market conditions index slipped back into negative territory in August after a positive reading in July, the seventh negative reading in the past eight months. The Fed’s LCMI fell to negative 0.7 in August from a revised reading of 1.3 in July. This compares to a median reading of 2.1 over the entire series going back to August 1976.The index combines 19 labor market indicators and is designed to give a broader view of jobs-market momentum. At the time of the August release, only 14 of the 19 components were available, said Raymond Stone, economist of Stone & McCarthy Research. Five of the 14 initial components deteriorated between July and August, eight were unchanged and one improved, Stone said.  Fed Chairwoman Janet Yellen told Congress this summer than negative readings in the index show a loss of momentum in the labor market.  Another bellwether of labor-market conditions, the Conference Board’s employment-trends index, also slowed in August. The index edged down to 128.02 from 128.44 in July. This represents a gain of 0.8% from the same month in 2015.  “The employment trends index is consistent with moderating job growth in the second half of 2016,” said Gad Levanon, chief economist for North America at the Conference Board. On Friday, the government said the pace of job growth slowed to 151,000 jobs in August from an average pace of 273,000 jobs over the prior two months.

Dell Fires 3000 US Employees, Requests 5000 Visas For Foreign Workers - The ink was barely dry on Dell’s acquisition of EMC, the largest technology deal ever, valued at $67 billion when it was announced in October last year – and already the layoff rumors are oozing from the woodwork. “People familiar with the company’s plans” told Bloomberg that Dell will cut 2,000 to 3,000 jobs. Dell spokesman Dave Farmer refused to comment specifically on the report on Thursday butsaid instead, as sort of a confirmation: “As is common with deals of this size, there will be some overlaps we will need to manage and where some employee reduction will occur.” On Wednesday, the day the deal closed, CEO Michael Dell gave some clues in an interview: “There are some overlapping functions and that sort of thing – that’s not the primary feature of this, but there is some of that.” These “overlaps” or “overlapping functions” are terms in corporate speak for real people, and these real people are mostly working in the US, according to the report: supply chain, marketing, and general and administrative positions. Combined they have about 140,000 employees. So the trimming might have a long ways to go, especially if the cloud and the Internet of Things are not as fun as imagined. But that doesn’t mean that the headcount will come down – they’re bringing in foreign workers, mostly from India. Between 2014 and 2016, Dell applied for 2,039 H-1B visas and 256 Green Cards. EMC applied for 2,347 H-1B visas and 453 Green Cards, for a total of 5,095 applications.  It’s the hot thing to do for tech companies: laying off existing workers in the US, and bringing it foreign workers on H-1B visas.

"It's Worse Than The Great Depression" - One In Six Prime-Aged Men Has No Job --While Obama has repeatedly touted the sub-5.0% unemployment rate (4.9% most recently) as confirmation his "economic recovery" has been successful, what has received far less media attention has been the unprecedented surge in Americans no longer in the labor force, which as of August stood at a near-record 94.4 million. And while the traditional response by economic apolists and the media has been that this number is the result of a demographic change in US society, with mostly older workers no longer in the labor pool, we have over the years argued that that is misleading, and that millions of prime-aged workers have fallen out as a result of drastic changes to America's job market, coupled with structural lack of demand for legacy jobs, which has - for example - sent the number of employed waiters and bartenders to all time highs even as the number of manufacturing workers is lower than it was in December 2014. Overnight, NPR confirmed precisely what we have claimed for so long, when it said that while the nation's unemployment rate is half of what it was at the height of the Great Recession: saying that the unempoyment number "hides a big problem: Millions of men in their prime working years have dropped out of the workforce — meaning they aren't working or even looking for a job." Citing a recent report by Obama's Council of Economic Advisors, NPR notes that 83% of men in the prime working ages of 25-54 who were not in the labor force had not worked in the previous year. So, essentially, 10 million men are missing from the workforce. Putting that number in context, in the 1960s, nearly 100 percent of men between the ages of 25 and 54 worked. That's fallen over the decades.

 Labor Day Summary: Wage Earners Have Taken a Beating | David Stockman's Contra Corner: Let’s honor Labor Day by reviewing what’s happened to wage-earners in the eight years since central banks “saved the financial system” with free money for financiers: wage-earners have taken a beating and been dumped in a ditch. It’s really very simple: wage-earners have seen their real earnings (as measured by purchasing power) stagnate or decline while those chosen few with access to near-zero interest borrowed capital have seen their net income and wealth explode higher.Do the math, people: annual wage increases once real-world inflation is factored in (roughly 7% to 10% annually for those who rent, have significant healthcare expenses or buy higher education) are either negative or are measured in the hundreds of dollars–in other words, trivial increases for all but the very top echelon of wage earners. Increases in wealth for those with central bank-supplied free money for financiers are measured in the millions of dollars. Even small-fry with capital invested in bubble markets have experienced gains in the hundreds of thousands of dollars–entire lifetimes of earned income for those earning $25,000 to $35,000 annually. There are forces at work that are beyond the power of central banks: the technologies of automation, robotics and software are replacing human labor not just in low-skill sectors but increasingly in sectors that provided the bulk of middle class jobs. One reason why automation is gaining ground is the soaring cost of healthcare (paid by the employers and employees in America, except for those on federally funded Medicaid). Healthcare expenses are labor overhead–employers don’t pay labor overhead on robots or software. While wage earners see their tiny raises wiped out by inflation, employers see their total compensation costs skyrocketing due to employee healthcare expenses.

U.S Wage Pressures Confined to Highly Skilled, Little Sign of Broadening: Fed - — The U.S. economy expanded at a modest pace in July and August, the Federal Reserve said on Wednesday, but there was little sign that wage pressures are being felt beyond highly skilled jobs.Most of the U.S. central bank's 12 districts around the country reported wage pressures remained "fairly modest" and were expected to remain so over the coming months, the Fed said in its Beige Book report of anecdotal information collected from business contacts.A lack of wage pressures has been a thorn in the Fed's side as it seeks to raise interest rates. Despite the U.S. labor market nearing full employment, economists have yet to see that spark broad-based higher wages and in turn higher inflation.The report also tallies with data released earlier on Wednesday which showed U.S. job openings surged to a record high in July, but a lag in hiring suggested employers were struggling to find qualified workers to fill the positions.U.S. central bank policymakers have sought in recent weeks to revive expectations of an interest rate hike this year after repeatedly holding off amid slowing domestic and global economies.  In its report, the Fed said many districts reported increased wage pressures for highly skilled workers and difficulty filling job vacancies for such positions "especially those aimed at technology specialists, engineers, and selected construction workers."But in a sign of the mixed picture, Boston contacts reported an "unusually high" number of job openings whereas the Philadelphia Fed saw an increase in part-time employees and longer workweeks along with a reduction in full-time hires, the Fed said. Overall, price increases remained slight overall and consumer spending was little changed in most districts, the Fed added. Inflation has run below the Fed's 2 percent target rate for more than four years. Policymakers are hesitant to raise interest rates again until they see a sustained pickup.

The Trans-Pacific Partnership would hurt black and Hispanic workers even more than white workers  The White House is making one last push for passage of the Trans-Pacific Partnership agreement. However, growing imports of goods from low-wage, less-developed countries, which nearly tripled from 2.9 percent of GDP in 1989 to 8.4 percent in 2011, reduced the wages of the typical non-college educated worker in 2011 by “5.5 percent, or by roughly $1,800—for a full-time, full year worker earning the average wage for workers without a four-year college degree,” as shown by my colleague Josh Bivens.  Overall, there are nearly 100 million American workers without a 4-year degree. The wage losses suffered by this group amount to roughly a full percentage point of GDP—about $180 billion per year. Workers without a 4-year degree constitute a bit less than 70 percent of the overall workforce, but three-quarters of black workers (75.5 percent) and more than four-fifths (85.0 percent) of Hispanic workers do not have a 4-year degree. While educational attainment levels for blacks and Hispanics are rising, differences remain.

 In 2015, 12.7% of U.S. households were food insecure, and 4.2% of respondents reported hunger -- According to the annual USDA report, released moments ago, 12.7% of U.S. households were food insecure in 2015, an improvement from 14.0% the previous year. Households were classified as food secure or food insecure, based on their responses to a set of questions about food-related hardship.  In 2008, the last year of the George W. Bush administration, the rate of household food insecurity was 14.6%. In 2012, the most recent presidential election year before the current year, the rate of household food insecurity was 14.5%.Although it is sometimes said that USDA no longer measures "hunger," this is not really true. One of the clearest statistics in USDA's report each year is the simple question (buried deep in the statistical appendix) about whether the household respondent had been "hungry" at some point in the previous year due to not having enough resources for food. Just 4.2% reported hunger in 2015, down from 4.8% the previous year. Even with the recent improvement, the United States has fallen terribly far short of national goals for improving food security. There is no fundamental economic or physical barrier preventing our country from achieving lower rates of food insecurity and hunger.

 "We Just Can't Let The Bad Guys Go" - This Rural Indiana County Sends More People To Jail Than Any Other -- Welcome to Dearborn County, Indiana - which sends more people to prison per capita than any other county in the United States. (click image for interactive version) As The New York Times reports, Dearborn County represents the new boom in American prisons: mostly white, rural and politically conservative. A bipartisan campaign to reduce mass incarceration has led to enormous declines in new inmates from big cities, cutting America’s prison population for the first time since the 1970s. From 2006 to 2014, annual prison admissions dropped 36 percent in Indianapolis; 37 percent in Brooklyn; 69 percent in Los Angeles County; and 93 percent in San Francisco. But large parts of rural and suburban America — overwhelmed by the heroin epidemic and concerned about the safety of diverting people from prison — have gone the opposite direction. Prison admissions in counties with fewer than 100,000 people have risen even as crime has fallen, according to a New York Times analysis, which offers a newly detailed look at the geography of American incarceration. Just a decade ago, people in rural, suburban and urban areas were all about equally likely to go to prison. But now people in small counties are about 50 percent more likely to go to prison than people in populous counties.

Mother Jones Our Hats Are Off To You -- How many Americans know that America has privatized prisons, the shares of which are listed on stock exchanges?  Free market ideologues provided cover for corrupt Republican politicians to divert taxpayers’ hard-earned money to favored political insiders with the false claim that prisons run by private owners are more cost effective.  A Mother Jones reporter took a job as a private prison guard and found that private prisons are places of unimaginable violence.  In response to the report published in Mother Jones, high ranking US Department of Justice officials have said that the federal government will cease contracting with privatized prisons.  Republicans learned to use libertarian “free market” ideologues in order to feather their own nests.  Privatization, favored by libertarians, is the Republican way of turning public functions into million dollar businesses for themselves and their friends.  In the case of the armed forces, the privatized parts of the US military are multi-billion dollar businesses. Most Americans are too brainwashed to understand that Obamacare is not “socialized medicine.”  Obamacare is privatized medicine.  Obama permitted the private insurance companies to write Obamacare.  What Obamacare does is to divert federal subsidies into the pockets of private insurance companies.  The deductibles and co-pays are so high that those who qualify for the subsidized premiums cannot afford to use the policies.  Republicans intend to privatize Medicare and Social Security.  The road to Medicare privatization is the small percentage of medical billings that Medicare pays.  Medical care providers are beginning to find that it is unprofitable to provide care to Medicare patients.  When doctors cease to provide care under Medicare, the massive payroll tax revenues will be diverted into the hands of “more efficient” private providers. The road to Social Security privatization is the “reform” of the consumer price index, which under-measures inflation in order to deny Social Security recipients cost-of-living-adjustments.  The continuing decline in the real value of Social Security benefits will result in large-scale economic distress.  This distress will be used to discredit the Social Security system and to privatize it.

How inmates are organizing a nationwide strike from behind bars - Whenever an inmate and a guard get into an altercation, Melvin Ray sees an opportunity to connect and educate. After stepping in and trying to de-escalate the situation, he’ll talk to his fellow inmate and ask him how he got here. Not just “here,” in the sense of an altercation stemming from the emotional stresses of being incarcerated. Or “here,” in terms of the conviction that sent him to prison in the first place. Ray, ultimately, presses a larger point: “You’re not here because of that crime. You’re here because someone has figured out a way to make money off of you.” These sorts of one-on-one conversations are critical for organizing incarcerated people, and Ray — who also goes by Bennu Hannibal Ra-Sun — knows this better than anyone. He is one of the founders of the Free Alabama Movement, or FAM — a prisoner-led human rights group that is organizing what could become the largest nationwide prison work stoppage, starting September 9, the 45th anniversary of the Attica Prison uprising. Along with Support Prisoner Resistance and the Incarcerated Workers Organizing Committee, or IWOC, of the IWW labor union, FAM issued a call to action earlier this summer, with an estimated 40 prisons in 24 states expected to participate. Much like the inmates who took over New York’s infamous correctional facility in 1971, today’s prisoners are fighting against the conditions of their imprisonment, especially the conditions under which they are forced to work, which many describe as slavery.Although some states allow prisoners to get paid for their labor, the pay is often less than a dollar per hour, and sometimes absolutely nothing. Half of those wages, in federal institutions at least, are withheld for room and board, victim’s programs and family support. Whatever remains goes toward buying the necessary commissary items for making life in prison tolerable. Essentials like toilet paper, deodorant, menstrual products and laundry detergent can each cost multiple days’ wages.

State bill backlog expected to hit $14B -- Illinois’ unpaid bills are expected to reach $14 billion by summer 2017, according to a new report from Moody’s Investors Service. Gov. Bruce Rauner and the General Assembly reached an agreement in June on a stopgap budget to fund state operations through the November elections. But the stopgap budget was a temporary measure to keep the state running; it was not a full budget and did not include structural or spending reforms. Consequently, Moody’s has speculated the state will manage its mounting bills in its usual way: by borrowing money. “Moody’s does not anticipate Illinois would suspend its statutory debt service requirements to continue funding operations,” spokesman David Jacobson said, according to the Chicago Tribune. “But if the bill payment backlog becomes sufficiently large, the state could resort to borrowing from debt service funds for operating needs. That or similar actions would signal a deterioration in Illinois’ credit position.” A year-long impasse between Illinois’ Republican governor and Democrats who control the legislature left the state with an incomplete fiscal 2016 budget and only a six-month spending plan for fiscal 2017, which began on July 1. A bipartisan legislative commission has projected the stopgap budget will push the state’s general fund deficit to a record $7.8 billion. As a result, Illinois’ chronic pile of unpaid bills is likely to balloon to as much as $14 billion, surpassing a previous high of $10 billion in 2012, according to the credit rating agency.

 Chicago Sees Huge Spike Murders Over Labor Day As Cops Stay Home In "Disrespect Of Police" Protest -- Last week, we noted the risk of a violent Labor Day weekend in Chicago with the Fraternal Order of Police urging its rank and file members to deny overtime requests for the holiday weekend "to protest the continued disrespect of Chicago Police Officers and the killings of Law Enforcement Officers across our Country" (see "As Chicago Violence Soars, Officers Told To Stay Home In Protest Of 'Continued Disrespect Of Police'").  While it's unknown how many cops did choose to stay home and ignore overtime requests,there was a clear spike in violence over the long holiday weekend with a total of 65 people shot and 13 of them killed.  Chicago recorded a total of 481 shootings and 91 homicides in August which tied for the most the city had seen in a single month in 20 years.  In fact, according to the Chicago Tribune, the Labor Day weekend was the deadliest of the three holiday weekends of the summer with 13 killed versus 6 over the Memorial Day weekend 5 over the Fourth of July weekend. Data from HeyJackass! shows a huge spike in violent crime on Labor Day with over 30 shootings and 10 homicides.

 Government Cash Handouts Won't Strengthen Families -   Heather Boushey, an economic adviser to presidential candidate Hillary Clinton, and the executive director of the Washington Center for Equitable Growth, has a plan to help American families while attacking inequality. She wants to require that companies give all their employees, both male and female, paid parental leave.  The U.S. is a laggard in this regard -- all other developed countries now have mandatory paid leave for mothers and some for fathers as well. There is, as in so many policy debates, another side. In a recent column, my Bloomberg View colleague Tyler Cowen said that as an alternative the government could give people cash, which they could spend as they please, rather than mandating paid leave: I usually suggest comparing any proposed program for amelioration to the simple alternative of sending people cash or leaving more cash in their hands, whether through tax cuts, tax credits or outright payments. Giving cash is a favorite solution of many economists, since it doesn’t tell people what to spend their money on. And that often makes perfect sense. But in this case, I see two reasons why paid parental leave is probably better than cash. The first is that mandated benefits like parental leave tend to distort the economy less than giving people cash. To give people money, you must levy taxes (or borrow). Economist Larry Summers made this point in a 1989 paper entitled “Some Simple Economics of Mandated Benefits.” But I see an even deeper reason for mandated parental leave. In this case, there are good reasons for the government to give people incentives to pay more attention to their families. Parents are critical for childhood development. Research confirms that the more attention parents pay to their kids, the better-adjusted those kids become. More parental time spent with kids translates into better behavior and better social skills. But left to their own devices, parents may not give their kids enough attention. If the government mails parents a check instead of mandating that they get time off to spend with their children, the parents may squander the money, instead of staying at home spending quality time with those kids.

7 Iowa teachers guilty of sex abuse get no prison time: Iowa lawmakers nearly 20 years ago passed a law to hold educators who sexually abuse students to higher levels of accountability. A Des Moines Register Investigation shows it's not being followed. Some Iowa teachers convicted of sexually abusing students have been placed on probation rather than sentenced to prison, despite a state law requiring they spend time behind bars, a Des Moines Register investigation has found. The law, passed in 1997, specifically prohibits anyone who is a "mandatory reporter" of child abuse — such as a teacher, social worker or psychologist — from eligibility for probation. It was passed to hold educators and others in positions of power and influence over children to higher standards of accountability. But the Register's review of such cases over the past five years revealed at least seven instances in which teachers served no prison time after being convicted of sex crimes involving children attending their schools. The most recent cases:

  • •Cherokee physical education teacher Chad Osler was accused of having sex with a student over a three-year period before his arrest in 2015. In July, a judge waived his 10-year prison term for third-degree sex abuse and instead ordered him to serve five years of probation. The victim was no more than 15 years old in 2013 when the conduct began, according to court documents.
  • • A Floyd County judge waived 10 years of prison and sentenced Pella band instructor Ben Thompson to five years of probation in April. Thompson was accused of sexually abusing a student 14 or 15 years old, court records show.
  • •Remsen-Union teacher Samantha Kohls in April was sentenced to one year of probation after pleading guilty to lascivious conduct with a minor. The case involved sex with a 17-year-old student. After probation, her conviction could be expunged.
  • Drew Lipovac, a former Winterset teacher convicted in 2012 of sexual exploitation by a school employee and sentenced to two years of probation.

After Hundreds of School Closures, Black Families Are Still Waiting for Justice  - As students across the country head back to school this week, some will be traveling longer distances than usual to reach the classroom. These students do not live in remote areas. In fact, they live in some of the most urban districts in the country, and they used to have schools right in their own neighborhoods -- until school boards and state officials closed their doors in the name of "reform." In May of 2014, civil rights organizers in Newark, Chicago and New Orleans filed complaints with the Department of Education demanding federal intervention to stop widespread discrimination against people of color in their cities' public school systems. The complaints couldn't have been more urgent -- neighborhoods were literally losing their schools to closures and consolidations, and the students whose schools were being shuttered were overwhelmingly Black and Brown. It's been more than two years, and of those three cities, only Newark, New Jersey's school system has reached an agreement with federal officials. Even that agreement, which requires the district to identify and fix transportation and academic problems faced by students displaced by school closures, is only between the district and federal officials. To the frustration of civil rights advocates, the deal does not include an agreement for accountability between the schools and the taxpaying families who say their children were systemically discriminated against as the closures swept through their neighborhoods. In New Orleans and Chicago, the Education Department's Office of Civil Rights is still investigating the complaints, offering no regular updates to the civil rights attorneys and the communities behind them. Speaking on background, a department spokesman said officials do not discuss the details of ongoing investigations as a matter of policy, and some take longer than others to complete due to complex legal issues. Meanwhile, schoolchildren in New Orleans are crossing busy, four-lane roads to reach charter schools located neighborhoods away from the shuttered school buildings sitting vacant on their own streets.

The NAACP’s ill-conceived opposition to charter schools - The Post's View – WaPo - “WHEN SCHOOLS get it right, whether they’re traditional public schools or public charter schools, let’s figure out what’s working and share it with schools across America.” Hillary Clinton was booed at the National Education Association’s summer convention for that self-evidently sensible proposition. The reaction speaks volumes about labor’s uniformed and self-interested opposition to charter schools and contempt for what’s best for children. Now the union has been joined by a couple of organizations that purport to be champions of opportunity. In separate conventions over recent weeks, the NAACP, the nation’s oldest black civil rights organization, and the Movement for Black Lives, a network of Black Lives Matter organizers, passed resolutions criticizing charter schools and calling for a moratorium on their growth. Charters were faulted by the groups for supposedly draining money from traditional public schools and allegedly fueling segregation. The NAACP measure, which still must be ratified by the board before becoming official, went so far as to liken the expansion of charters to “predatory lending practices” that put low-income communities at risk. No doubt that will come as a surprise to the millions of parents who have seen their children well-served by charters and to the additional million more who are on charter school waiting lists for their sons and daughters. “You’ve got thousands and thousands of poor black parents whose children are so much better off because these schools exist,” Howard Fuller of the Black Alliance for Educational Options told the New York Times.

What If Schools Abolished Grade Levels? - We asked prominent voices in education—from policy makers and teachers to activists and parents—to look beyond laws, politics, and funding and imagine a utopian system of learning. They went back to the drawing board—and the chalkboard—to build an educational Garden of Eden. We’re publishing their answers to one question each day this week. Responses have been lightly edited for clarity and length. Today’s assignment: The Classification. What impact do students’ individual abilities have on their education? In an ideal school, there will be more diagnosis and detailed reporting on what students know and can do in relation to the academic objectives that are identified at their grade level, complemented with reporting on students’ strengths on social and emotional skills that are valuable for career readiness and civic engagement. This information will be readily available to the student, parents, and teachers at any time to allow all stakeholders involved to offer remediation and enrichment where necessary. There will be less emphasis on grading for specific subjects than there would be for accomplishing learning objectives. The key is to have a rich, detailed view of what the student knows and can do. Advancement will then be at the student’s pace, but there will be expectations for how quickly a student should advance. With flexible scheduling and more time in both the day and the year for schooling, students will have more opportunity to catch up during, before, or after school.

Do teachers' climate change beliefs influence students?: A North Carolina State University study of middle school science classes explored whether teachers' beliefs about climate change influenced students' perceptions.  "The answer is yes and no," says Kathryn Stevenson, an assistant professor in NC State's College of Natural Resources and lead author of a paper describing the study, published in PLOS ONE. "While students generally mirror a teacher's belief that global warming is happening, when it comes to the cause of climate change, students reason for themselves and reach different conclusions than their teachers do."Stevenson said the study included 369 middle school students in coastal North Carolina, a region at high risk of sea-level rise and related effects of climate change. While more than 95 percent of the world's climate scientists attribute global warming to human causes, only about half of U.S. adults agree. Teachers share those views, suggesting such polarization over climate change causes may be spread through classroom teaching. "We know that adults' views of climate change are strongly related to their worldviews and ideology," Stevenson says. "Early adolescence is a time when students' views are still forming, and we wanted to find out which factors affect their beliefs about climate change." Researchers found that having a teacher who believed climate change was occurring - as 92 percent of students in the study did - was a "strong, positive predictor" of students' belief in global warming.However, students diverged from their teachers when it came to understanding the causes of climate change. Students who believed climate change was happening concluded it was caused by humans regardless of their teachers' beliefs.

No, the Internet Has Not Killed the Printed Book. Most People Still Prefer Them. -- Even with Facebook, Netflix and other digital distractions increasingly vying for time, Americans’ appetite for reading books — the ones you actually hold in your hands — has not slowed in recent years, according to a study by the Pew Research Center. Sixty-five percent of adults in the United States said they had read a printed book in the past year, the same percentage that said so in 2012. When you add in ebooks and audiobooks, the number that said they had read a book in printed or electronic format in the past 12 months rose to 73 percent, compared with 74 percent in 2012. Twenty-eight percent said they had opted for an ebook in the past year, while 14 percent said they had listened to an audiobook. Lee Rainie, the director of internet, science and technology research for Pew Research, said the study demonstrated the staying power of physical books. “I think if you looked back a decade ago, certainly five or six years ago when ebooks were taking off, there were folks who thought the days of the printed book were numbered, and it’s just not so in our data,” he said.

The Changing Higher Education Landscape - Part 1 Of 4 – NY Fed - The past decade and a half has seen dramatic changes in the higher education landscape, characterized by significant growth in enrollment. This growth has been concentrated mostly in for-profit schools, where enrollment skyrocketed in the first decade of the period, nearly quadrupling between 2000 and 2011. The post-2011 period has been marked by an abatement of this growth. These patterns have strong implications not only for the higher education market but also for the labor force and the economy more broadly. Therefore, it is essential to understand the evolution of the different sectors of higher education over the last sixteen years; in this post we aim to do just that. How have the different sectors of higher education changed during this period, in particular the for-profit sector? Is the story here more about enrollment in existing schools, or were there differential entries and exits of for-profit schools? This post is the first in a four-part series looking at different aspects of the changing higher education market, including enrollment growth and its composition, student loans, and student loan defaults.

The Changing Face of the Higher Education Market – Part 2 - NY Fed - The higher education landscape changed drastically over the last decade and a half. This evolution was largely characterized by the unprecedented growth of the private for-profit sector. In this post, we examine whether the evolution of the higher education market was associated with changes in the types of students who attended the institutions in various sectors of the market. Was the growth in enrollment spurred by an increased entry of traditional students? Or was it driven by an inflow of nontraditional students? Has student composition in higher education changed differentially between sectors? It is important for us to understand not only the growth in the higher education market but also which types of students contributed to this growth, because any changes in the composition of students may have implications for the composition of skilled workers in the labor market, for student loans, for loan repayment, and for the labor market returns to education investments.   Among students studying at public two-year and less-than-two-year institutions between 2000 and 2015, our analysis shows that more than 60 percent were part-time. The comparable figure for students at for-profit schools is only 13 percent (less than one-quarter the public number). However, as we saw in our opening post in this series, the vast majority of students studying at two-year and less-than-two-year institutions study at public schools. Taken as a whole, then, more than 57 percent of all students studying at two-year and less-than-two-year institutions were part-time. This share of part-time students decreased gradually, from 60 percent in 2000 to 54 percent in 2011, but post-recession years have seen an increase back to 58 percent in 2015.

The Changing Role of Community-College and For-Profit-College Borrowers in the Student Loan Market – NY Fed – Part 3 - In the first post in this series, we characterized the rapid transformation of the higher education market over the 2000-2015 period, a transformation that was led by explosive growth of the for-profit sector of higher education. In the second post, we found that most of this growth was driven by nontraditional students entering these institutions. Given this growth and the marked change in student composition, it is important to understand what impact these patterns might have on student loan originations, student loan volume, and the borrower pool in the various sectors of higher education. While a causal analysis is beyond the scope of this post, we instead examine descriptive patterns in these critical postsecondary outcomes. Was the growth in for-profit enrollment associated with a higher incidence of student loans? Were for-profit students, the main contributors of this growth, more or less likely to take student loans, and were they more or less likely to originate larger student loans? How about community-college borrowers, especially since community college enrollment increased noticeably over the period? This post focuses on these questions.

Who Falters at Student Loan Payback Time? -  NY Fed - This is the final post in a four-part series examining the evolution of enrollment, student loans, graduation and default in the higher education market over the course of the past fifteen years. In the first post, we found a marked increase in enrollment of 35 percent between 2000 and 2015, led mostly by the for-profit sector—which increased enrollment by 177 percent. The second post showed that these new enrollees were quite different from the traditional enrollees. Yesterday’s post demonstrated an unprecedented increase in loan origination amounts during this period—nearly tripling between 2000 and 2015. This surge was driven most prominently by a massive increase in the number of borrowers in the public community college sector and the private for-profit college sector. Given the large increase in the borrower pool and loan originations, it is paramount to understand the consequences of these changes for the student loan default rate. This post aims to do just that. We focus on three-year cohort default rates reported by the United States Department of Education. The three-year cohort default rate is defined as the percentage of a school's borrowers who enter repayment during a particular federal fiscal year—running from October 1 to September 30—and default prior to the end of the second following fiscal year. Most federal loans enter default when payments are more than 270 days past due.

Professors Locked Out of LIU Brooklyn Amid Contract Fight for More Pay— Faculty members at Long Island University’s campus will be locked out of the school starting Friday night after their contract with the university expired — as the school plans to borrow staff from other campuses to teach upcoming classes, the union says. Starting at midnight, unionized members of the LIU Faculty Federation (LIUFF) won’t be allowed on campus after the university refused to accept terms of a new contract that would have increased pay to match that of their Long Island colleagues. When classes start on Sept. 7, staff members from LIU's Brooklyn campus and Post campus on Long Island will be taking over classes for full-time and part-time faculty members, according to LIUFF Vice President Ralph Engelman.  Engelman, who’s also a journalism professor at the university, said mid-level staff members, many of whom have no teaching qualifications, will be covering the classes. “This is the first time that the administration went to great lengths to have our classes covered mostly by staff, people who in many instances are unqualified to teach,” he said. The lockout follows a series of failed contract negotiations that started in April between LIU's administration and the union. Faculty members lost their salaries and health benefits Wednesday, when the five-year contract officially expired.

L.I.U.-Brooklyn Locks Out Professors Amid Contract Dispute - NYTimes: Classes will start on Wednesday at Long Island University-Brooklyn without key participants: The professors.After failing to reach an agreement on a new faculty union contract, which expired on Aug. 31, the university’s administration then locked faculty members out of their offices and their email accounts and canceled their health insurance over the Labor Day weekend.Those who teach at the Downtown Brooklyn campus, which serves many black, Hispanic and immigrant students, said the lockout was an unprecedented move intended to weaken the union, the Long Island University Faculty Federation, which is part of the American Federation of Teachers.“That’s never happened before in the history of L.I.U. to my knowledge, or in the history of higher education,” said Jessica Rosenberg, a professor of social work and the president of the faculty federation, which represents about 230 full-time faculty members and several hundred adjunct professors.On Tuesday, administrators for L.I.U. Brooklyn said that the lockout was a pre-emptive move, given the faculty’s history in negotiations. “The last five out of six contracts, the faculty has gone on strike, and they have created chaos and virtually shut down the institution at the start of classes,” said Gale Stevens Haynes, a vice president and university counsel. The faculty went on strike in 2011 for five days. She said that in May, the union had seemed to signal its intentions by authorizing a strike at the end of bargaining.But the union’s lawyer, Louie Nikolaidis, said that was a pro forma action, “something to have in our back pocket.”“We were intending on showing up for work,”

University budget surpluses: irreversible investment and uncertain demand – Nick Rowe - Unless it has a massive endowment fund, a university's biggest asset is its reputation. If it loses its reputation and students stop coming and paying, a university has only got a bunch of buildings that often aren't well-suited for any alternative use.  That asset is not on the books.  Unless it has a massive debt, a university's biggest liability is the future salaries of its tenured professors. It's hard to just lay them off and stop paying profs if students stop coming and paying for them. That liability is not on the books. Even those assets and liabilities that do appear on the books aren't always recorded in a useful way. My university has the campus land valued at what we paid for it in 1947, IIRC. So take a handful of salt with the balance sheets and income statements that university accountants present. In my experience (n=1) the Board of Governors and the University Administration are guided by some vague notion of sustainability. "If we keep on spending like we have been spending, are we going to be forced to tighten up our spending some time in the future? If yes, we should tighten a bit now, so we don't have to tighten even more drastically in future. If not, we're doing OK". It's fuzzy, because "like" and "tighten" could be defined different ways. Total spending? Spending per student? Relative to other universities? Even if we did define "sustainability" precisely, it all depends on what happens in future, which we don't know. What happens if we hire a lot of profs and build more classrooms and residences and then kids stop wanting to go to university? Demographics can give you a good forecast of how many 18-year-olds there will be 17 years ahead, but participation rates are a lot harder. And predicting which particular university will be fashionable for future high school students to apply to is even harder. And government funding, and the fees they will allow us to charge, aren't very predictable either. Faced with the dark forces of time and ignorance, it is understandable that university decisionmakers (and their critics) should pay too much attention to the pretty, polite techniques of balance sheets and income statements. (That's Keynes, in case you missed the reference.) Or as my mother says, the accountants always end up running things. So the Board of Governors (unless the debt is "too high") tells the University Administration to bring it a budget with a planned surplus of zero. Here is an oversimplified model of the problem the University Administration faces when it makes that budget.

Liberal Academics are ‘Open’ but Are They Truly Tolerant? -- One of the purposes of university is to challenge the opinions of students. This requires freedom of thought and a variety of voices. But academic departments today, especially in the social sciences, are far more liberal or progressive than the population at large. Conservative views are notably underrepresented. One survey even suggests that approximately 20% of social psychologists (my field) are willing to discriminate against papers or grants with conservative views. So, if we value contrary opinion on campus, it’s important to ask: Where are the conservatives?  One argument is that conservatives are less open to experience, diversity and curiosity than liberals. If conservatives are not open to new experiences and therefore not as driven by curiosity as liberals, then they might not seek out academic positions that require them to push the boundaries of knowledge and to search for new answers. Their lack of openness precludes them from occupying positions of academic influence. The argument has data on its side. Openness to experience is a key personality dimension. It’s measured with survey items such as ‘I’m interested in learning about the history and politics of other countries’ and ‘I think of myself as a somewhat eccentric person’. People who score high on this measure tend to be curious, imaginative and interested in new people and ideas. A number of studies, including my own, use data from a variety of people to find that liberals score higher on personality measures of openness to experience and curiosity than do conservatives. This is true of studies using self-report and observer report measures, including a study where researchers analysed the contents of participants’ living areas (i.e. dorm rooms). Liberal dorm rooms tended to have a wider variety of books and music than conservative dorm rooms. The link between ideology and openness is consistent.  Scoring low on openness, meanwhile, has been linked to prejudice towards black people, immigrants and the LGBT community. In one study, people scoring low on openness rated a black individual as less likeable than did people who scored high on openness. A second study found that people low in openness rated black job candidates as less intelligent, responsible and honest than did people high in openness. All of this research suggests that people who are low in openness will be less likely to deal well with diversity, while people high in openness will be well-suited for it. If this is the case, then it might indeed be desirable to have liberals dominate our universities.

Political Correctness and Its Real Enemies - Last November, Scott C. Johnston, a 1982 Yale graduate, was attending a conference organized by the William F. Buckley Jr. Program at his alma mater when student protesters disrupted it. Soon after, he watched an online video of a black Yale student hurling imprecations at a professor who headed her residential college for failing “to create a place of comfort and home.” Such protests have prompted Mr. Johnston and other alumni to cease funding what they see as coddled children and weak-kneed administrators. “I don’t think anything has damaged Yale’s brand quite like that” video, he said. “This is not your daddy’s liberalism.” More than a brand, however, a college has a mission: to teach young people the arts and disciplines of open inquiry and expression. That mission has just been reaffirmed in a University of Chicago letter to incoming freshmen that rejects “trigger warnings” about discomfiting course material, “safe spaces” for the hypersensitive and cancellations of invitations to controversial speakers. But it isn’t the protests per se that damaged open inquiry and expression, but the frenzied way they have been portrayed by the right. The video that so angered Mr. Johnston was shot by Greg Lukianoff, president of the Foundation for Individual Rights in Education, which the Daily Caller then reposted under a headline, “Meet the Privileged Yale Student Who Shrieked at Her Professor,” with photos of her and her parents’ suburban Connecticut home. What the video didn’t show were the hundreds of white students having their first frank conversations about race with minority classmates. A thousand students of all colors joined a vibrant campus “march of resilience” — I know, because I was on campus last fall. Another thousand convened in the chapel to hear classmates and professors speak from their deepest humanity, without malevolence or duplicity. Free speech and open inquiry are alive and well on campus.

 Study: Mich. tuition hikes, aid cuts boost student debt: Skyrocketing college costs coupled with reductions in state funding and financial aid will saddle Michigan students with debt for decades, according to a study released Tuesday. The Michigan League for Public Policy said tuition has more than doubled at most of the state’s 15 public universities since 2003. Increases in the cost of a four-year degree range from 91 percent at the University of Michigan-Ann Arbor to 158 percent at Michigan Technological University. The average tuition for an in-state student at a state university, $11,991, is the sixth-highest in the country, the group said.“Once again, Michigan is a national leader in a negative category, and one that runs counter to the political rhetoric of attracting and keeping talent,” said Gilda Jacobs, the league’s president and chief executive officer. A spokesman for Gov. Rick Snyder said he hopes, by the end of his administration, to return state funding to the level it was in 2010. The fiscal year 2017 budget includes an additional 2.9 percent, or $39.8 million, for the state’s universities and an additional 1.4 percent, or $4.4 million, for community colleges, said spokesman Ari Adler.“Spending by universities and colleges should be analyzed as well as their incoming revenue,” he said. For schools to receive the funding bump, their tuition increases can’t exceed 4.2 percent for the year, he said.

ITT to shut institutes, thousands of students to be affected | Reuters: ITT Educational Services Inc said it would shut its flagship ITT Technical Institutes, following a U.S. Department of Education order, affecting thousands of students and employees. ITT's move is the latest blow to the over $20 billion U.S. for-profit education industry, which has come under fire from the government in the past couple of years for its poor track record in helping students find employment. Shutting the institutes will affect more than 8,000 employees and hundreds of thousands of students and alumni, ITT said on Tuesday. The New York Stock Exchange said it would immediately suspend trading in ITT's shares and delist the company. ( The stock last traded at 38.4 cents in premarket trading before being halted. "We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution," ITT said. In August, the U.S. Department of Education banned the company from enrolling students who get federal aid. Such students accounted for more than two-thirds of ITT's revenue in 2015. The company had 40,000 students at its ITT Technical Institute and Daniel Webster College locations as of June 30.

40,000 Students In Limbo, 8,000 Employees Fired As ITT Suddenly Shuts Down - The long-running tragic saga of ITT Education Services, which was established nearly 50 ago and operates the ITT Technical Institutes for-profit college chain, finally came to a end this morning with both a bang and a whimper, when it announced that it is shutting down effective immediately, leaving the fate of 40,000 students currently enrolled in limbo, and some 8,000 workers without a job.The company said the closure is due to an investigation and sanctions by the U.S. Department of Education."It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service," the company stated Tuesday. "Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees."As previously reported,  ITT Tech stopped enrolling new students on August 29, just a few days after it was cut off from a significant amount of federal funding by the government. ITT's collapse was catalyzed when the Department of Education effectively killed the company two weeks ago, when it told the company on August 25 that it couldn’t enroll new students who use federal financial aid. The school accused federal officials of forcing the closure and denying it due process. The company has been the subject of state and federal probes for various reasons, including its recruitment tactics, lending practices and job placement figures.

ITT Tech is shutting down all campuses and laying off more than 8,000 employees : ITT Educational Services Inc said it would discontinue operations at its ITT Technical Institutes, in line with the U.S. Department of Education's directive, affecting more than 8,000 employees. The for-profit education provider said on Tuesday that the move would also affect hundreds of thousands of students and alumni. "We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution," ITT said. The company has been under investigation by government authorities for allegations of fraud and deceptive marketing tactics. In August, the U.S. Department of Education banned the company from enrolling students who get federal aid. ITT's accrediting agency said in April that ITT Technical Institutes - which provide career-oriented education programs - had not demonstrated compliance with certain accreditation standards. The for-profit education sector has been struggling with falling enrollment, poor job placement records and regulatory scrutiny. ITT's shares were halted in premarket trading.

29,000 ITT Students Are Stuck In Limbo: Guess What Happens To Their Debt Next -- Two days ago ITT was forced to shut down amid an investigation by the U.S. Department of Education which restricted new enrollees from acquiring federal student loans (see our posthere).  Now, with ITT's 29,000 students stuck in limbo, many are asking what's going to happen to their $500mm worth of outstanding student loans.  Well, like with everything else these days, taxpayers will likely have the "honor" of picking up the bill.    As Bloomberg reports, the Education Department is "frantically trying to limit debt cancellations" though it likely has few options as federal student loan docs allow for loan forgiveness in the event an enrolled student's school shuts down during their education and that student subsequently fails to enroll in a "comparable" institution.The Education Department is frantically trying to limit debt cancellations. Students who transfer even one ITT credit toward what the agency considers "comparable" programs at other schools and then complete their studies aren't eligible to have their loans wiped. But federal regulations don't clearly define "comparable"—giving the department the authority to reject borrowers' pleas for forgiveness. The application borrowers must fill out is similarly vague.All ITT students who don't complete "comparable" programs elsewhere can apply for debt cancellations.  That said, the Education Department has expressed it's view that current rules around student debt cancellation go too far in protecting taxpayers.  Apparently, forcing students to actually apply for debt forgiveness, rather than just offering it up, is too large a burden for their millennial souls to bear.    Meanwhile, according to Bloomberg, Massachusetts Attorney General Maura Healey is actually encouraging students to stick it to taxpayers by canceling their debts before enrolling in a new institution.  She's even holding workshops to help the young, millennial victims of ITT's microaggressions to game the system.  Per Bloomberg: Massachusetts Attorney General Maura Healey, whose own fraud lawsuit against ITT is still pending, is urging students to consider canceling their federal debt before deciding to transfer their credits, her spokeswoman Jillian Fennimore said. Her office will soon hold seminars to help them fill out the required paperwork.

ITT Shut Down. Some Options for its Former Students – Alexis Goldstein - After years of preying on students seeking a better life, the for-profit college ITT Tech announced this week that it would be shutting its doors.   ITT’s decision followed a decision by the Department of Education to protect both students and taxpayers by prohibiting ITT from enrolling new students using federal financial aid. The fact that ITT announced it would be closing its doors just a week later proves that the school’s business model was entirely dependent on government support. With ITT’s closure, it is important that students who were still enrolled know that they have a right to cancellation of their federal student loans, also known as a closed school discharge. Anyone enrolled at the time of closure, or who withdrew three months or less prior to ITT shutting down, is eligible. To apply for a closed school discharge, either contact your servicer, or fill out this form and send it to your servicer. There is NO FEE to apply for this discharge; anyone who tries to tell you different is scamming you.   While some students may be eager to continue their education elsewhere, many schools will not take the credits they earned at ITT anyway. And if students transfer even one credit to a comparable program at another school, they won’t be eligible to have their loans cancelled.  ITT’s troubles go much further back than the Department’s decision to limit enrollment. ITT has long abused not only its students but also U.S. taxpayers through their misconduct. Over the years, they have faced numerous lawsuits and investigations by regulators and law enforcement, including a lawsuit by the Securities and Exchange Commission for fraud, a lawsuit by the Consumer Financial Protection Bureau for predatory lending, and an investigation by 13 states attorneys general for lying to students.   What about students who have already graduated, or attended years ago? If you believe that ITT committed fraud or otherwise broke the law while you attended, there is another path for debt cancellation that you can pursue. The Consumer Financial Protection Bureau pointed this out in a blog post about the closure:

Inside Bill Clinton’s nearly $18 million job as ‘honorary chancellor’ of a for-profit college - WaPo - The guest list for a private State Department dinner on higher- education policy was taking shape when Secretary of State Hillary Clinton offered a suggestion. In addition to recommending invitations for leaders from a community college and a church-funded institution, Clinton wanted a representative from a for-profit college company called Laureate International Universities, which, she explained in an email to her chief of staff that was released last year, was “the fastest growing college network in the world.” There was another reason Clinton favored setting a seat aside for Laureate at the August 2009 event: The company was started by a businessman, Doug Becker, “who Bill likes a lot,” the secretary wrote, referring to her husband, the former president. Nine months later, Laureate signed Bill Clinton to a lucrative deal as a consultant and “honorary chancellor,” paying him $17.6 million over five years until the contract ended in 2015 as Hillary Clinton launched her campaign for president. There is no evidence that Laureate received special favors from the State Department in direct exchange for hiring Bill Clinton, but the Baltimore-based company had much to gain from an association with a globally connected ex-president and, indirectly, the United States’ chief diplomat. Being included at the 2009 dinner, shoulder to shoulder with leaders from internationally renowned universities for a discussion about the role of higher education in global diplomacy, provided an added level of credibility for the business as it pursued an aggressive expansion strategy overseas, occasionally tangling with foreign regulators.

Retiree fund for Arkansas teachers down $572M: The Arkansas Teacher Retirement System's investments dropped in value by $572 million last fiscal year to $14.4 billion during stock market turbulence, according to the system's investment consultant.The system's investment losses totaled $53 million in the 2016 fiscal year that ended June 30, according to a written report from Chicago-based Aon Hewitt Investment Consulting.The value of system investments fell largely because the system paid out more than $1 billion in benefits while receiving $537 million in contributions from employers and members, system Executive Director George Hopkins said Tuesday.The teacher retirement system "ended the 2016 fiscal year essentially in the middle of the pack of returns for large public pension plans in the U.S," Hopkins said.The return on investments was minus 0.5 percent in the fiscal year, compared to a median return of minus 0.2 percent for public retirement systems, Aon Hewitt reported.

Pension Cuts On Deck In Latest Shock To California Workers --Many public employees utilize a tool, known as "salary spiking," to boost their annual pensions payment in retirement and we taxpayers get to foot the bill.  So what is "salary spiking?"  Typically, a public employee's pension benefit in retirement is equal to some percentage of their highest annual pay which is often their final year on the job.  Fortunately for public employees who plan ahead, there are all sorts of fun games that can be played to "spike" your final year salary so that you actually earn more in retirement than you did on the job.  In fact, a recent report by the Los Angeles Times found that there are 60 ways to "spike" your final year salary in California including taking cash payouts for accrued vacation time, special 1x bonuses related to graduate degrees (though we're sure you really needed that extra degree as you head off into retirement), "longevity" bonuses, etc.  One example of salary spiking comes from former Ventura County CEO, Marty Robinson, who offered up a textbook example of how to stick it to taxpayers by planning ahead.  Robinson's official salary heading into her final year on the job was $228,000.  That said, Robinson "spiked" her final year salary by cashing out $34,000 in unused vacation pay, taking an $11,000 bonus for a graduate degree and collecting more than $24,000 in extra pension benefits the county owed her.  Adding all the 1x payments, Robinson earned nearly $300,000 in her final year which entitled her to an annual pension payment of $272,000 or the rest of her life...nearly 20% higher than the salary she received for actually working. But, as the Los Angeles Times pointed out, Robinson is not alone:  In fact, the problem is pervasive.  In Ventura County, 84% of the retirees receiving more than $100,000 a year are receiving more than they did on the job. In Kern County, 77% of retirees with pensions greater than $100,000 a year are getting more now than they did before.  Well, turns out that the party might be over for the "salary spikers" in California. In a surprisingly logical decision, particularly for a state like California which is typically devoid of all reason, a court upheld the rights of Marin County (and it's taxpayers) to reduce final year salary levels utilized to calculate pension payments.  According to Bloomberg, the court found that while a public employee does have a "vested right" to a pension it is only to a "reasonable pension."

U.S. coal miners hit Congress to rally for pension protection - About 10,000 retired coal miners and their families descended upon the U.S. Congress on Thursday to pressure lawmakers to pass stalled legislation that would prevent 22,000 of them from losing their pension and health benefits as soon as early 2017. A bipartisan group of senators is trying to pass legislation to ensure the retirees' coverage with the United Mine Workers of America's retirement and healthcare funds, which are dwindling as some coal companies drop benefits in their bankruptcy proceedings. Coal has been an issue in national politics. With just weeks to go before the presidential and congressional elections in November, time for passage of the bill is limited. The union said the federal government was obligated to ensure coal workers continue to get the benefits. The UMWA pension currently supports about 120,000 former miners and their families. "These miners put in decades of back-breaking work in America's coal mines to energize our nation," UMWA International President Cecil Roberts said. But some Republican senators, including Senate Majority Leader Mitch McConnell of Kentucky, have hesitated to support the legislation, either because they do not want to be seen bailing out unionized workers or because it does not address what they say is President Barack Obama's regulatory "war" on the coal industry.

 A plan that's widely used by companies to keep healthcare costs down is a sham -  Arriving at work, I headed to a conference room where I met a nurse from my company’s wellness vendor. She weighed me, took my height and blood pressure, and calculated my body-mass index.  She pricked one of my fingers and inserted my blood sample into a small machine that measured my blood sugar, LDL cholesterol (the bad one), and HDL cholesterol (the good one).  She wrote down each, and I breathed a sigh of relief. I had passed. I wouldn’t have to take a multi-week online health-improvement course to avoid paying an extra $600 on my health insurance next year.  If you work for an American corporation, there’s a good chance you’ve undergone a similar routine. According to a 2015 Kaiser Family Foundation survey, 50 percent of large firms (defined as having 200 or more workers) annually offer or require employees to complete what’s known as a biometric screening, and more than half of those companies offer a financial incentive to employees who participate. Some even make participation mandatory for employees who enroll in company-sponsored health insurance.    Half of large employers surveyed offer health risk assessments (HRAs), which are questionnaires intended to identify high-risk behaviors. Biometric screenings and HRAs are just two types of workplace wellness programs, a broad category that can also include smoking cessation courses, lifestyle coaching, and weight-loss competitions.  The notion that wellness programs save companies money by making their employees healthier is appealing. In fact, the federal government encourages companies to implement wellness programs. But wellness programs promote medical tests of dubious value, encourage unnecessary doctor visits, and collect sensitive health information despite often extremely lax privacy policies, with little to no evidence that they improve health outcomes. There’s not even much sign that wellness programs help a company’s bottom line—not directly, anyway. So how did we get to a point where employers consider wellness programs a “need to have,” in the words of Redbrick?

Report: Cost of health care in Bay State jumps to $8,424 per person | Boston Herald: The cost of health care for every man, woman and child in Massachusetts grew to a whopping $8,424 in 2015 — a nearly 4 percent increase from the previous year — and skyrocketing prescription drug costs accounted for a third of that growth, according to a new report. The Center for Health Information and Analysis today released its annual health care cost analysis for the Bay State, which found that total costs rose to $57.2 billion. The most recent data shows the price of prescription drugs increased 10.1 percent. While the increase in the cost of these drugs slowed slightly from the 13.5 percent bump seen in 2014, the report notes that “it represents continued substantial growth and is responsible for one-third of the overall growth in THCE (total health care expenditures).” CHIA also found that private commercial members were paying greater out-of-pocket costs, with a 4.4 percent increase in cost-sharing among private commercial members. Spending by commercial payers increased by 4.7 percent, up from the 2.6 percent increase from the year before. Commercial enrollment increased by 1.7 percent to 4.5 million members. CHIA was created under state law in 2012 to track health care spending. The report will be used by the Health Policy Commission for its Health Care Cost Trends Hearing Oct. 17 and 18.

More Americans Negative Than Positive About ACA: 18% say the law has helped their families; 29% say it has hurt them Long term, most Americans say law will hurt or not make much difference -- In a summer that saw many insurers drop out of the Affordable Care Act's health insurance exchanges, Americans' support for the healthcare law continues to be slightly more negative than positive. Now, 44% of Americans support the law, also known as Obamacare, and 51% disapprove of it -- similar to what Gallup measured last November. Insurance giant Aetna decided in August to pull out of most of the healthcare exchanges it had entered in 2014 and announced it would not expand into any more states. This news followed similar announcements from other major insurers such as United Healthcare and Humana. There have also been reports that the cost of individual plans offered through health insurance exchanges in many states is likely to jump significantly in the coming years as federal subsidies disappear. Since the spring, the percentage who approve of the law has declined slightly from 47% to 44%, while disapproval has risen two percentage points to 51%. Percentage of Americans Saying ACA Hurt Their Family Rises to New High Currently, 29% of Americans say Obamacare has hurt them and their family, up from 26% in May, and the highest Gallup has measured to date. Meanwhile, the percentage who say the ACA has helped their family dropped from 22% to 18%. The bulk of Americans, 51%, continue to say the law has "had no effect." As more provisions of the law have taken effect over the years, the "no effect" percentage has dropped from the first reading of 70%, in early 2012.

When Exchanges Collapse, ObamaCare Penalizes You Even If Coverage Is Unaffordable -- In opeds at Time and National Review Online, I discuss how ObamaCare’s health-insurance Exchange has collapsed in Pinal County, Arizona, throwing some 10,000 residents out of their ObamaCare plans. Charles Gaba of and Cynthia Cox of the Kaiser Family Foundation asked me to explain a claim I make in the NRO piece: Obamacare will still penalize those residents if they don’t buy coverage — even if the amount they must pay increases tenfold or more.  Before I explain, let me first apologize on behalf of the Affordable Care Act’s authors for the complicated mess that follows. Remember, the ACA penalizes people if they fail to purchase insurance, unless they qualify for an exemption. The unaffordability exemption applies only if “the annual premium for the lowest cost bronze plan available in the individual market through the Exchange” in Pinal County, minus “the amount of the credit allowable under section 36B,” whether the individual enrolls in Exchange coverage or not, exceeds 8.13 percent of the individual’s household income. You can’t do that calculation in Pinal County. The premium for the lowest-cost bronze plan in Pinal County is not $0.00. It’s not even a number. It’s the empty set. The “credit allowable under section 36B” is likewise the empty set. Section 36B “allow[s] as a credit…an amount equal to the premium assistance credit amount for the taxpayer.” To calculate the premium-assistance credit amount, you need to know either the premium for the health plan the taxpayer “enrolled in through an Exchange established by the State under [section] 1311,” or the premium for the “the second lowest cost silver plan” available to the taxpayer “through the same Exchange.” It would be awesome if all those premiums were $0.00. (Free health care!) But it’s not. Instead, no such premiums exist. Since there are no such premiums, there is no “required contribution.” Since there is no “required contribution,” there is no unaffordability exemption in Pinal County. Where there are no Exchange plans, there is no unaffordability exemption from the individual mandate.

Newly Discovered Flatworm Is Named After Obama - A new species of blood fluke was found infecting the lungs of turtles in Malaysia. This parasitic flatworm has been dubbed Baracktrema obamai, in honor of the President of the United States (who is the fifth cousin twice removed of one of the discovering scientists).  B. obamai is described in the August issue of the Journal of Parasitology as having a long, thread-like body. So far, it’s shown up in two freshwater turtles, the black marsh turtle (Siebenrockiella crassicollis) and southeast Asian box turtle (Cuora amboinensis).  The scientists found clusters of tens to hundreds of fluke eggs in the turtles’ lung alveoli, the tiny sacs where blood receives oxygen and gets rid of carbon dioxide. How these eggs get outside to hatch and infect new hosts isn’t clear, although making the turtles cough is probably involved.

Inside the world of India's booming fertility industry - News from Al Jazeera: - Pregnancy and childbirth take a toll at any age, but Rajo Devi Lohan has struggled to regain her health more than most other women since becoming a mother.After she had given birth eight years ago, the Indian woman was diagnosed with cancer. She has had three operations to repair a ruptured uterus and to remove tumours, many rounds of chemotherapy, and still suffers from stomach pain. Lohan was 70 years old when she gave birth in 2008, becoming the oldest mother in the world at that time."The doctor didn't tell me anything about the dangers and I never felt that there was any danger," Lohan says.A doctor who is now treating Lohan believes that her health problems could have been caused by fertility treatment and pregnancy.Stories of elderly women having babies in India have made international headlines in recent years, including a 72-year-old who set a new world record when she gave birth in April. The doctor responsible for helping these women get pregnant says it is every woman's right to have a child regardless of their age. But the ethics surrounding such births are increasingly coming under attack.Critics insist that doctors, eager for fame and fortune, are putting lives at risk - from the elderly mothers and the young women who provide donor eggs, to the children themselves.At least two young Indian women have died after donating eggs.

Researchers suggest 3D-printing could be a solution to childhood obesity -- Childhood obesity has reached epidemic proportions – the World Health Organisation recognises it as a major public health challenge of the 21st century.  But in a world of engaging technology, mobile technology and video games of epic lengths, it can be very difficult to encourage children to move around more.  Recent advances in accessible technologies such as wearable activity monitors, pedometers and an array of online apps have provided lots of new opportunities to gain an insight into our daily physical activity levels.  Reward systems such as goal setting, physical activity profiles, real-time feedback and social support networking are some of the top strategies that are helping keep people motivated and get more active.  At present, more than one-third of children don’t achieve the recommended levels of 60 minutes of moderate-to-vigorous physical activity every day. To make matters worse, physical activity has been displaced by sedentary behaviours, such as watching television and playing video games.  Children are reported to spend an average of eight hours per week playing sedentary video games and this has been shown to increase the risk of childhood obesity.  One of the major reasons that children don’t meet the recommended requirements for physical activity is thought to be because it is difficult for them to understand, interpret and apply recommendations to everyday activities.  Ask your average six-year-old what they think an “intense” or “vigorous” activity is or they will struggle to accurately answer.   Modern technology is evidently a fantastic way of getting children motivated to exercise – but it can help them understand their own physical activity and health as well. Apps targeted at an adult market focus on activities such as mapping cycling or run routes, counting steps or recording daily gym sessions. But for children the information collected needs to be a bit more tangible than just facts and figures.  It is with this in mind that our team has been looking into helping children get more active – with the help of 3D printers. The Exertion Games Lab in Melbourne was the first to use 3D printing to visualise heart rate during physical activities. The print-outs were used to provide feedback on intensity: the larger the spike, the higher the heart rate and therefore intensity of activity.  Following on from this, our research team is now looking at different ways that children can see, feel and interact with a personal 3D model of their weekly physical activity.   We believe these models have great potential to educate and enthuse children about developing and maintaining appropriate levels of physical activity and sedentary behaviours.

Pictures: What’s Really in Your Fast Food? – WebMD slide show -

  • Fremch Fries: The humble potato, fried in a vat of simmering oil, and finished with a sprinkling of salt. What could be simpler? Apparently, quite a lot. Fast-food fries often have more than 15 ingredients, including sugar and artificial coloring. They also have preservatives like sodium acid pyrophosphate and tert-butylhydroquinone, which in high doses has been linked to vision problems.
  • Hamburgers: Ground beef, right? Sure -- but there also may be growth hormones and antibiotics, which can end up in your system. And in one study, some burgers had over 100 calories more per serving than the fast-food places said they did.
  • Soda: It’s the same soda you buy at the grocery store. But when you get it at a fast-food chain, you get more calories because the drink sizes are so large. And we’re not talking “supersize.” A medium soda at a typical fast-food place is about 30 ounces and has about 300 calories. And studies show that if you order it, you’ll drink it.
  • Breakfast Sandwich: Some of the ingredients listed for what one national outlet calls a “fried egg” include modified corn starch, soybean oil, medium chain triglycerides, propylene glycol, artificial flavor, citric acid, xanthan gum, and -- oh yeah -- egg whites and yolks (listed separately). If you didn’t bargain for all of that, ask for the propylene glycol (also used in fog machines and to make polyester) on the side.

 New York to probe Mylan EpiPen contracts for schools | Reuters: New York has opened a probe into whether Mylan Pharmaceuticals (MYL.O) broke antitrust law in writing contracts to provide EpiPens to some schools systems, state Attorney General Eric Schneiderman said in a statement on Tuesday. A person briefed on the matter said the New York attorney general's office has subpoenaed documents from Mylan over the EpiPen program. There had been allegations that schools which had used Mylan's EpiPen4Schools program, which gives many schools the devices for free, were contractually barred from buying products from Mylan competitors for a year. Senators Richard Blumenthal and Amy Klobuchar asked the Federal Trade Commission on Tuesday to investigate the allegation. Mylan did not immediately respond to a request for comment.

EpiPen alternative costs pennies in Mexico - — A life-saving medication that costs more than $600 is the United States is only a few cents in Mexico. The EpiPen’s controversial price hike from about $100 to more than $600 in just a few years is drawing many Rio GrandeValley residents to seek relief in Mexico, where medication is easily accessible. Nuevo Progreso is a Mexican medical destination, with tourists from near and far making the trip to the tiny border town. An array of street promoters greets tourists as they enter the country, promoting anything from Viagra to Xanax to Lipitor. However, the EpiPen, which is used to treat extreme and possibly fatal allergic reactions, is highly sought there but is not available. “They were thinking of bringing it to Mexico, but it’s possible that because of the cost, they couldn’t bring it,” Dr. Noel Rodriguez said. “It’s very expensive.” Rodriguez is an allergist in Matamoros, Mexico. He is a distinguished doctor in both Mexico and the United States, and he has been in the field for more than 28 years. He met with the medical director of the EpiPen maker in 2011, when he was president of the MexicanCollege of Allergy, Asthma and Pediatric Immunology. Mexico has strict restrictions on epinephrine, the main ingredient in EpiPens, Rodriguez said. It is only sold to hospitals, clinics and specialists like himself. “If you go to the pharmacy, they won’t sell it to you,” he said. Less than three percent of Rodriguez’s patients suffer from extreme allergies, but he still is able to have medication handy. For Rodriguez, a box with 50 vials of epinephrine costs him $250 pesos — or the equivalent of 25 cents per vial. “To us, it is very abusive on behalf of pharmaceuticals and health insurances companies to sell two vials at 600 dollars — seeing as how inexpensive the vial actually is,”

Ohio city shares shocking photos of adults who overdosed with a small child in the car - On Wednesday afternoon, a police officer in East Liverpool, Ohio, stopped a vehicle for driving erratically and made a shocking discovery: The driver was barely conscious. A woman was slumped across the passenger seat next to him, turning blue. In the back of the vehicle, a 4-year-old boy sat restrained in a car seat, according to a police report. The officer called an ambulance, and when the EMTs arrived, they administered the lifesaving drug Narcan, used to reverse opioid overdoses. After 47-year-old James Lee Acord and 50-year-old Rhonda L. Pasek were revived, police arrested them and contacted Columbiana County Children’s Services.  Acord pleaded no contest and was sentenced to 180 days in jail on charges of driving under the influence and endangering children, according to a local news report. Pasek pleaded not guilty to charges of disorderly conduct, endangering children and a seat-belt violation. It seemed like just another day of near-tragedy on the front lines of America’s opioid epidemic. But the East Liverpool incident was unique in one key respect: Someone at the scene snapped photos of the adults passed out in the car with the grim-faced child sitting in back. The city of East Liverpool then took the surprising step of posting those photos to its public Facebook page.

Drug Linked to Ohio Overdoses Can Kill in Doses Smaller than a Snowflake - As he crumpled to the sidewalk, Mr. Hatmaker became one of more than 200 people to overdose in the Cincinnati area in the past two weeks, leaving three people dead in what the officials here called an unprecedented spike. Similar increases in overdoses have rippled recently through Indiana, Kentucky and West Virginia, overwhelming ambulance crews and emergency rooms and stunning some antidrug advocates. Addiction specialists said the sharp increases in overdoses were a grim symptom of America’s heroin epidemic, and of the growing prevalence of powerful synthetic opiates like fentanyl. The synthetics are often mixed into batches of heroin, or sprinkled into mixtures of caffeine, antihistamines and other fillers. In Cincinnati, some medical and law enforcement officials said they believed the overdoses were largely caused by a synthetic drug called carfentanil, an animal tranquilizer used on livestock and elephants with no practical uses for humans. Fentanyl can be 50 times stronger than heroin, and carfentanil is as much as 100 times more potent than fentanyl. Experts said an amount smaller than a snowflake could kill a person. Dr. Lakshmi Kode Sammarco, the coroner here in Hamilton County, said her office had determined that carfentanil was the cause of several recent overdose deaths, the first confirmed cases in the county. Investigators are now examining deaths back to early July to see if carfentanil was the cause. “We’d never seen it before,” Dr. Sammarco said in an interview, while toxicologists and drug specialists on the third floor of the coroner’s office tested blood samples and small bags of white powder. “I’m really worried about this.” Advertisement Continue reading the main story Officials suspect the carfentanil is being manufactured in China or Mexico and is making its way to the Cincinnati area in heroin shipments that flow north on Interstates 71 and 75. The drug has shown up in Columbus, Ohio, the Gulf Coast of Florida and central Kentucky, according to local news reports.

Researchers think they can cure cocaine addiction by erasing memories -- A new therapy could treat drug addicts by erasing their memories.   The experimental treatment, developed by researchers at Cardiff University and published in the journal eLife, can wipe clean the memories associated with taking cocaine, which is one of the main reasons users find the drug so addicting.  Cocaine produces a buildup of the neurochemical dopamine in the brain, which causes the user to feel euphoric and compulsive. This is because of its impact on the limbic system, which is an area of interconnected regions in the brain responsible for pleasure and motivation.  New memories made when high on cocaine are therefore intense and filled with enjoyment, leading the user to seek out these feelings again and again. The researchers therefore scoured clinical trials for an approved substance that interfered with the brain chemistry in that area.  The team found that when cocaine-dependent mice were given a dose of a certain molecule called PD325901, they acted as if they had never been addicted or ever taken it at all, because the pathways in the brain that associated pleasure with drug use had been blocked.   "We collected all available molecules which block this pathway, awaiting clinical trial, and we tested them in animal models for cocaine addiction," lead researcher Professor Riccardo Brambilla told Business Insider. "We found one molecule which actually does the job very nicely."  The treatment also appeared to not interfere with general memory function of the animals, which Professor Brambilla points out would be a major side effect in human studies.  "Obviously patients who are people might make the situation slightly more complex," he said. "If we have a protocol for patients where we only administer the drug once or twice, it would minimise the potential side effects."

How we discovered a possible link between car exhausts and Alzheimer’s - Iron is known to be toxic to brain cells, and tiny magnetic iron particles (magnetite) are thought to be involved in the development of neurological disorders. Now, for the first time, we have identified the abundant presence of these highly reactive particles in human brains. Previous studies have suggested that there are increased amounts of magnetite in Alzheimer’s-affected brains, and that these particles may be linked with the development of the disease. We wondered if this increased brain magnetite might come from inhaling polluted air.Very small, round particles made out of magnetite (called magnetite nanospheres) are abundant in city air pollution. They are formed at high temperatures and condense as iron-rich droplets as they cool. These particles range in diameter from less than 5nm (nanometres) to more than 100nm (for comparison an HIV is 120nm in diameter) and are often found together with pollution particles made out of other metals. Vehicles are a major source of these magnetite nanospheres. They are created by fuel combustion (especially diesel), iron wear from the engine block and frictional heating from brake pads. In addition to some occupational settings, high concentrations of magnetite pollution nanoparticles may be produced indoors by open fires or poorly-sealed stoves used for cooking or heating.  Larger magnetite particles can be more than 10 micrometres in diameter (about the size of a cloud water droplet) and come from industrial sources, such as power stations, but only magnetite pollution particles that are smaller than 200nm can enter the brain directly by being breathed in through the nose. They can then travel through the nerve cells of the olfactory bulb (see illustration).  The blood-brain barrier – the protective cell wall that prevents harmful substances entering the brain – doesn’t protect against this type of nasal entry, so these small particles can enter the brain relatively unimpeded. After nanoparticles enter these olfactory areas, they can spread to other parts of the brain, including the hippocampus and cerebral cortex, which are regions affected in Alzheimer’s disease.

The FDA banned antibacterial soaps for some surprising reasons - The US Food and Drug Administration banned antibacterial soaps on Friday because they're not better, cleaner, or safer than regular soap.  "Consumers may think antibacterial washes are more effective at preventing the spread of germs, but we have no scientific evidence that they are any better than plain soap and water," said Dr. Janet Woodcock, director of the FDA's Center for Drug Evaluation and Research, said in the agency's press release.  "In fact, some data suggest that antibacterial ingredients may do more harm than good over the long-term." The ban applies to products with 19 active ingredients, including triclosan and triclocarban — two widely used antibacterial agents. There's "extensive literature suggesting that triclosan does not provide a benefit when used in a 'real world' setting compared to plain soap," Allison Aiello, an epidemiologist from the University of North Carolina who has published a review on several studies of triclosan tests, told Chemistry World. One study, published in the Journal of Antimicrobial Chemotherapy in September 2015, compared soap containing triclosan with regular soap both in lab tests and on people's hands. The researchers exposed people to a type of common bacteria than can infect those with weakened immune systems and then had them wash their hands with triclosan and regular soap. They found no difference between the two soaps.  In lab tests, the researchers also exposed 20 different kinds of bacteria to triclosan soap to see if it could do any damage there. It took nine hours to show any antibacterial effects.  While that was in test tubes, not on actual humans, that's much longer than the 20 seconds the US Centers for Disease Control and Prevention recommends you take to wash your hands.

FDA ban on antibacterial soap is good, but what about everything else? -- While the FDA's new ban is good news, there are many other personal care products, including cosmetics, toothpastes, detergents, deodorants, and fragrances, that can still use antibacterial chemicals.  It is time to say goodbye to antibacterial hand wash. The popular product will no longer exist by this time next year, thanks to the U.S. Food and Drug Administration’s recent announcement that “over-the-counter consumer antiseptic hand products” and antibacterial body washes can no longer be marketed, citing potential health risks and bacterial infection. All products containing one or more of 19 specific active ingredients, including triclosan and triclocarban, must be removed or reformulated within one year.  The announcement is a reason to celebrate, particularly among environmental protection and public health groups that have long advocated for triclosan to be banned. The chemical is a known endocrine disruptor that has demonstrated in animal studies to weaken heart muscle function, alter the shape of sperm, impair brain development, and contribute to bone deformation. Indeed, TreeHugger has long written about the potentially harrowing effects of triclosan and advocated for an end to its use. (See Lloyd’s great roundup of articles, titled “There’s a frog disruptor in my soap.”)  What’s strange, however, is that the FDA has banned triclosan only in hand and body washes – products that are “intended for use with water, and are rinsed off after use.” The ban feels oddly incomplete, leading one to wonder about all the other things that still can contain ingredients such as triclosan. Take toothpaste, for example. Colgate Total contains triclosan and is touted by maker Colgate-Palmolive as “the only toothpaste approved by the FDA to help fight plaque and gingivitis.” And yet, despite the fact that it goes directly into one’s mouth, where chemicals are more easily absorbed than on the surface of the skin, it is unaffected by the FDA’s ban.

Americans Slowly Being Poisoned By Chemical Industry - Maybe they ought to make the Corporations & Industries foot the bill for our single-payer health care system since they are the ones making us sick!  Research needed on low-dose chemical mixtures and cancer Researchers is needed to determine if low doses of noncarcinogenic chemicals in the environment may be able to combine and lead to cancer, according to new recommendations published Aug. 12 in the journal Environmental Health Perspectives. The authors compiled the recommendations from a 2015 NIEHS-sponsored scientific workshop.  “The more we look into the mechanisms of different cancers and their origin, the more we can see the environment is playing a role,” said Mark Miller, Ph.D., NIEHS chief of staff and lead author on the paper. “By focusing only on individual carcinogens, we may be underestimating the cancer-related risks of the everyday exposures that people face.” Many chemicals are treated as safe if they are not complete carcinogens, or chemicals that can cause cancer on their own. However, the authors said recent evidence suggests that approach should be revised. “It is no longer sufficient to assess chemical safety using individual chemicals,” they wrote. Watch a portion of the 2015 NIEHS low-dose mixtures workshop, in this NIEHS video. (2:16:28)  The low-dose mixture hypothesis suggests that environmental chemicals to which humans are normally exposed, in low-levels and combined with multiple chemicals, can trigger the hallmarks of cancer. Hallmarks are biological events necessary for the development of cancer, or carcinogenesis. Examples are when cells become resistant to normal cell death or send continuous signals to promote growth. In June 2015, the Halifax Project published a series of articles in the journal Carcinogenesis that laid the foundation for the low-dose mixture theory. The articles showed that a number of seemingly safe chemicals have the ability to act on individual cancer hallmarks, and thus may contribute to carcinogenesis.

How the Christian Right's Sex Hangups Turn Zika Into a Bigger Crisis | Alternet: Zika could have been an ordinary epidemic, like the ever-changing influenza that emerges each winter and spreads across the Northern Hemisphere with sad but rare complications. But the Religious Right’s antagonism to birth control and abortion—and honest conversation about sex in general—has transformed the Zika epidemic into a nightmare that will devastate lives for an entire generation. In the absence of pregnancy, Zika usually isn’t a big deal. Only one in five people who contract Zika experience symptoms, and those who do mostly feel like they’ve gotten the flu. This is not to say Zika never does lasting harm to adults, just that, like the flu, those cases appear to be rare. The difference, as most people now know, is that getting Zika while pregnant is really, really bad. The virus attacks the fetal nervous system, eating brain structures that have already developed and blocking development of others. Even babies who look normal may be damaged for life. Unlike the flu, when it comes to Zika, pregnancy prevention or timing is everything. Even if  Zika spreads across its potential range of 41 states, a quick and targeted response could make lasting harm rare, at least within U.S. borders. The solution is simple and relatively cheap, but it consists of policies that the sex-obsessed, patriarchy-protecting Religious Right has been opposing for decades:
  • Information. Launch a huge public education campaign so all couples know how to prevent mistimed or unwanted pregnancy and can delay parenthood till the time is safe. Currently a third of pregnancies globally and almost half in the U.S. are accidents, with some of the highest rates where Zika-carrying mosquitos live.
  • Contraception. Make state-of-the-art birth control available to all free of charge, including the very best IUDs and implants, which drop the accidental pregnancy rate below 1 in 500. (With the Pill that’s 1 in 11; with condoms 1 in 6; with the rhythm method it's closer to 1 in 4.)
  • Abortion. Ensure that couples who discover microcephaly and other fetal defects in utero can, if they prefer, abort a diseased pregnancy and start over. Millions of healthy children exist in this world only because their parents receive the mercy of a fresh start (like I did).

Massive New Study Suggests Pesticide the Cause of Microcephaly — NOT Zika Virus -  A new scientific study carried out by the New England Complex Systems Institute (NECSI) is casting doubt on the assumed connection between the Zika virus and microcephaly. The study was prompted by the fact that no similar epidemics of microcephaly are being found in other countries hit hard by the Zika virus.“Recently, the New England Journal of Medicine published the preliminary results of a large study of pregnant Colombian women infected with Zika. Of the nearly 12,000 pregnant women with clinical symptoms of Zika infections until March 28, no cases of microcephaly were reported as of May 2. At the same time, four cases of Zika and microcephaly were reported for women who were symptomless for Zika infections and therefore not included in the study itself.” The four cases are consistent with the expected normal background rate of microcephaly–2 in 10,000. Also, there have been almost 50 microcephaly cases in Colombia up to April 28 with no connection to the Zika virus. The mathematical analysis demonstrates that there are at least 60,000 Zika-infected pregnancies in Colombia, yet the near absence of microcephaly calls for a renewed investigation into the cause of this birth defect. Four days after the NECSI study was reported by media, five new cases of microcephaly with Zika infections were found prior to June 18. However, this is still consistent with the random co-occurrence of each of the separate conditions. Reports out of Colombia over the next few weeks will provide much more evidence on whether there is a causal connection between Zika virus and microcephaly. If there is a link, the number of microcephaly cases should rise dramatically. The U.S. Centers for Disease Control and the New England Journal of Medicine (NEJM) have already concluded that Zika is a cause of microcephaly. However, the NEJM acknowledges that no experimental evidence exists yet to support that conclusion. Also, “no flavivirus has ever been shown definitively to cause birth defects in humans, and no reports of adverse pregnancy or birth outcomes were noted during previous outbreaks of Zika virus disease in the Pacific Islands.”

Climate change threatens to double malaria risk from African dams, say researchers | Reuters: - The number of Africans at risk of malaria who live near dams will nearly double to 25 million by 2080 as areas where the disease is not currently present will become transmission zones due to climate change, researchers said on Monday. Without prevention measures, the number of malaria cases associated with dams could triple to nearly 3 million a year over the same period, they said in a study published in Malaria Journal. "While dams clearly bring many benefits ... the role of climate change on malaria around dams will fundamentally alter the current impact," said Solomon Kibret of the University of California and the paper's lead author. "Accurately predicting the impacts of such changes is critical to planning effective disease control," he said in a statement. Malaria is transmitted by mosquitoes, which breed in stagnant water such as shallow puddles along dam shorelines. The disease kills around 400,000 people a year, the vast majority of them children and babies in sub-Saharan Africa. World Health Organization (WHO) data show there are around 200 million malaria cases a year. More than half of dams that are located in malaria-free areas that will turn into transmission zones as temperatures rise due to climate change are mainly found in the east African highlands and southern Africa, the study said. In those regions the impact of dams may be especially harsh because of lower immunity among people who have not had to deal with the disease before, it said.

Rainforest destruction in the Brazilian Amazon rises to rate not seen since 2009  – Newly released data suggest that rainforest destruction in the Brazilian Amazon has reached the highest level since 2009. In the past week, Brazil’s National Space Research Institute (INPE) and Imazon, a Brazilian NGO, have independently released data from their near-real-time deforestation monitoring programs. Both show a steep rise in forest clearing relative to this time last year, putting deforestation near decade-level highs.  INPE, which last year stopped reporting deforestation on a monthly basis, released numbers for April through July 2016 showing that its alert system detected 2,953 square kilometers ofclearing in the Amazon rainforest. That represents a 25 percent increase over the year earlier period. For the twelve months ending July 31, the area amounted to 5,971 square kilometers — the highest 12-month total dating back to March 2009. Though Imazon uses its own deforestation detection algorithm, its data shows a similar trend, with forest loss rising to a seven-year high.  Both INPE and Imazon show particularly pronounced deforestation in June 2016: 1,431 square kilometers and 972 square kilometers respectively. Imazon’s system also revealed a big increase in forest degradation, which often precedes outright deforestation

Indonesia: Haze investigators held captive, threatened with death -- A LARGE group of about 100 men hired by an Indonesian palm oil firm took several investigators hostage last weekend in an apparent bid to stop their probe into the forest fires blamed for the region’s haze problem. According to Jakarta Globe, the captors, believed to be mobilized by PT Andika Permata Sawit Lestari, a palm oil company operating in Riau province, demanded that the investigators delete photographs and video evidence compiled in their digital cameras. They also threatened to burn their captives alive and throw their remains into a river. The investigators were said to be investigating the burning of a 2,000-hectare area, which was believed to have been set by palm oil company workers who pretended to be local farmers. The investigators – seven of them in total – complied with the demands but the group of captors asked for the minister in charge to travel to the area before they would allow their release. There were no reasons given as to why the minister needed to be present in the area. Novrizal Tahar, a ministry spokesman, said Monday that the hostages were eventually released early Saturday following negotiations involving police and local officials. The incident earned condemnation from Indonesia’s minister of environment and forestry who said the ministry was now more determined to act against illegal forest burning. Minister Siti Nurbaya Bakar added that the incident has also encouraged her ministry to take stern actions against rogue corporations in accordance with the law. “Most likely, these illegal activities were supported by the company, who employed local farmer groups,” Siti was quoted saying in a statement on Sunday.

Cambodian Journalists Are Dying Trying to Save the Country's Forests - Taing, 49, was a journalist who covered the logging of Cambodia's forests, a black market much like the international arms or drug trades. Cheam Mom, his wife, had watched with increasing unease as he left time after time, heading out to range the woods with camera and cellphone, looking for caches of illegal logs and the loggers who felled them.  Taing said he wasn't worried, and that she shouldn't be either. His job, he said, was just another job. He wasn't going to get close enough to anyone to "touch" him or her.  Quit reporting, she begged. Come home. Work with me in our rice field. Help raise our daughter. After a while, she looked over and saw that Taing was asleep. The next day, Cheam woke relieved and unburdened. She went to the fields filled with a strange sense of peace. But Taing had not been strictly honest with her. He left the house that morning and drove east toward the Province of Kratie, on the border of what remained of Cambodia's eastern forests. He headed for a place awash in money from the illegal sale of land, gems, and wood, a place where dirty cops and soldiers ran shadowy, heavily armed logging networks. Out there, in the dark, something went wrong. Two days after Taing left home, local peasants found his body facedown in the muck of a logging road, a bullet in the back of his head.   Taing's death, while tragic, was not unique. In Cambodia and in remote forests elsewhere, a rising boom in the illegal sale of wood, land, and minerals has turned the environmental beat into a new sort of conflict journalism. Since 2005, 40 journalists around the world have died while reporting these stories, more than all of the journalists killed covering America's war in Afghanistan. The dead have overwhelmingly been local reporters, like Taing, covering illegal mining or logging. They are largely independent, poorly educated, untrained, and despised by their nations' Establishment Media. Reporting on a violent, corrupt frontier, they are never sure when they'll cross a line and end up dead. Their lives in their hands, they head into the woods.

  Poachers are wiping out giraffes in central Africa just for their tails -- Documentary filmmaker David Hamlin recalls the adrenalin rush when he was flying over the Democratic Republic of the Congo’s Garamba National Park in late June and spotted three giraffes standing in a small clearing. But Hamlin’s exhilaration at seeing and photographing the giraffes didn’t last long. Twelve hours later rangers reported hearing gunshots, and they later discovered three bullet-riddled giraffe carcasses rotting in the sun. “It was horrible for me and the team,” Hamlin says—”the crushing realization that most likely it was these guys, the ones we’d seen.”  Hamlin decided to document the aftermath of the tragedy (watch the video above) to raise awareness about poaching in the park, which is managed by the nonprofit organization African Parks in association with the Congolese Institute for the Conservation of Nature, a government agency.  Garamba is Africa’s second oldest national park and has been hit hard by poaching in recent years as civil unrest has escalated in the region. Its rhinos have been wiped out, and elephants have suffered huge losses. The same goes for its Kordofan giraffes, one of Africa’s nine giraffe subspecies.  Fewer than 2,000 now roam central Africa, according to Julian Fennessy, co-director of the Giraffe Conservation Foundation, a Namibia-based organization. Garamba’s Kordofans represent the last population in the Democratic Republic of the Congo. “If the number slips in half, then we’re in a real dire situation,” Fennessy says. “Every single giraffe is valuable.”  Congolese usually kill the giraffes for one body part: their tails, considered a status symbol in some communities. Meanwhile men from neighboring South Sudan target the giraffes for their meat to feed impoverished villagers. But the massive bodies (giraffes can grow to 18 feet and weigh up to 3,000 pounds) of the three giraffes were intact—only the ends of their tails were missing.

World’s loneliest snail lives in Hawaii but can’t get a date - It’s the loneliest snail on the planet. Just one individual of the species is known to exist. He or she – for snails are hermaphrodites – is 9 years old, has borne no offspring so far and lives quietly in the conservation lab of the University of Hawaii. The sole specimen of Achatinella apexfulva, a grey-white tree snail once abundant on the island of Oahu, is a sad symbol of biological freefall on Hawaii – sometimes dubbed the extinction capital of the world.A new study shows that most species of forest birds native to the island of Kauai, have crossed the tipping point, with multiple extinctions predicted in forthcoming decades.But smaller and less obvious species often get less attention. Enter snails..Some 750 species of terrestrial snail used to flourish in Hawaii, many of them with colourful ringed shells around 2 centimetres long. About 50 species, all listed as endangered, are left.“All are rapidly plunging to extinction. They will be gone in five to 10 years,” says Melissa Price at the University of Hawaii.Unlike many other snails, Hawaiian tree snails are long-lived – one individual in the wild is known to be 18 years old. They take four to seven years to reach maturity and have few offspring.“The invertebrates are quickly collapsing,” Price says. “The base of the food chain is collapsing. Molluscs are the species most vulnerable to extinction over the last 100 years.”

For lizards, climate change is a deadly — and complex — threat    - Lizards are expected to be hard-hit by climate change — and a new study suggests it might be even worse for some the creatures than scientists thought.  Lizards and other reptiles are sensitive to global warming because they regulate their body temperature using the environment — basking in the sun, cooling off in the shade. It's been predicted that about 20 percent of lizard species will go extinct by the year 2080. That prediction was based on certain assumptions about how easy it is for lizards to find shade, says Michael Sears, a biologist at Clemson University who was the study's lead author.  "The thing that those models assumed is that the lizard can find a piece of shade anywhere in the environment instantly if it needed it," says Sears. In reality, of course, it takes lizards energy and time to find shade, which means those past predictions of extinction risk could be too low.He and his colleagues recently did a study using computer modeling and real-world experiments to see how the kind of shade available affects a lizard's ability to keep its body temperature in the optimal range.The team surgically implanted tiny temperature sensors into dozens of spiny lizards, and then did experiments in special enclosures constructed in the New Mexico desert.

Climate change and other human activities are affecting species migration --One of the reasons climate change is such an important topic is that it will affect (and already is affecting) the natural biological systems. Both plants and animals will have to respond to the changing climate. In some cases, this means adapting to higher temperatures. In other cases, the changes may be alterations in the precipitation, length of growing season, availability or resources, or other influences.  While some animals can adapt, others will have to migrate. Obviously migration can be apparent in mobile animals that will move to maintain a more or less similar climate to that to which they are accustomed. But animal and plant movement does not occur in just a changing climate. It also has to navigate changes to the landscape that humans create. For instance, increased land allocation to agriculture or urbanization can create barriers for free migration. So, what scientists really want to know is how these two factors (climate change and land use change) will collectively affect the patterns of animal and plant movement.  A study that actually was published a few years ago but is only now getting press looked at this issue. The publication was authored by Julian Olden and his colleagues from the University of Washington and the Nature Conservancy. What they researchers found was very interesting. The study was published in the journal Ecology Letters and is titled Projected Climate-Driven Faunal Movement Routes. From their analysis, the authors identified several locations in North and South America that will be crucial for species movement in a changing climate. Large movements are expected in the southeastern US, the Amazon region, and parts of Brazil. Some of the areas where migration is expected have intact biological regions. Others, in particular the southeastern US and Brazil, have pathways that are heavily impacted by human activities, which may create a barrier to the migration routes.

Sperm Whales Found Full of Car Parts and Plastics -  Fishing gear and an engine cover are just some of the startling contents found inside the stomachs of sperm whales that recently beached themselves on Germany’s North Sea coast. The 13 sperm whales washed up near the German state of Schleswig-Holstein earlier this year, the latest in a series of whale strandings around the North Sea. So far, more than 30 sperm whales have been found beached since the start of the year in the U.K., the Netherlands, France, Denmark, and Germany. After a necropsy of the whales in Germany, researchers found that four of the giant marine animals had large amounts of plastic waste in their stomachs. The garbage included a nearly 43-foot-long (13-meter-long) shrimp fishing net, a plastic car engine cover, and the remains of a plastic bucket, according to a press release from Wadden Sea National Park in Schleswig-Holstein. However, “the marine litter did not directly cause the stranding,” says Ursula Siebert, head of the Institute for Terrestrial and Aquatic Wildlife Research at the University of Veterinary Medicine Hannover, whose team examined the sperm whales. Instead, the researchers suspect that the whales died because the animals accidentally ventured into shallow seas. The beached whales were all young males between the ages of 10 and 15, and the necropsies revealed that they died of heart failure. The team believes this particular group mistakenly swam into the North Sea, a shallower zone in between the U.K. and Norway. There the whales could not support their own body weights, and their internal organs collapsed.

 Lightning strikes: Thunderstorms spread mercury pollution -- In the southern United States, an afternoon thunderstorm is part of a regular summer day. But new research shows those storms might be doing more than bringing some scary thunder and lightning. In fact, these storms are moving significant amounts of mercury to the ground. In a new study published in the journal Environmental Science and Technology, Assistant Professor of Meteorology Christopher Holmes writes that thunderstorms have 50 percent higher concentrations of mercury than other rain events. “The mercury is being transported into our region by winds, and tall thunderstorms are bringing it down to the earth,” Holmes said. Holmes and a team of researchers collected rain in a variety of locations in Florida, as well as Vermont, Georgia and Wisconsin. They then matched it to weather data that told them whether it was from a thunderstorm or just rain. They also used radar and satellite data to examine storm clouds. In a regular rainstorm, clouds are only a few kilometers thick. In a thunderstorm, they reach about 15 kilometers thick. Researchers found that more mercury was in rain from the clouds that reached the highest altitudes. “The highest concentrations occurred during thunderstorms and the lowest during a regular rainstorm,” Holmes said.

U.S. experiences 5th warmest summer on record | National Oceanic and Atmospheric Administration: September 8, 2016 An oppressively hot Summer 2016 for many across the contiguous United States tied 2006 as the 5th warmest in 122 years of record keeping. The average summer U.S. temperature was 73.5 degrees F, 2.1 degrees above average, according to scientists from NOAA’s National Centers for Environmental Information. Every state in the continental U.S. and Alaska were warmer than average this summer. Precipitation totalled 0.60 inch above average, making summer the 24th wettest on record. The month of August was the 17th warmest on record, with an average temperature across the Lower 48 of 73.6 degrees F, 1.5 degrees above average. Twenty-four states were much warmer than average. The precipitation total for the month was 0.85 inch above average, making this August the second wettest. The year to date (January-August) for the contiguous U.S. was the 3rd warmest on record with an average temperature of 56.7 degrees F, 2.8 degrees above average. All Lower 48 states and Alaska observed above-average temperatures during this eight-month period.. Other notable climate events included:

  • Northeast/Mid-Atlantic: Eight states, including Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania and Rhode Island, had a record warm August. Connecticut and Rhode Island had their warmest summer on record.
  • California had its warmest summer on record, which contributed to an active wildfire season. 
  • Alaska experienced its third warmest August, second warmest summer and was record warm for the year to date at 7.6 degrees F above average.
  • Louisiana: In mid-August, a storm system dropped more than 30 inches of rain on parts of the state that caused record flooding and at least 13 deaths.

USA swelters through hottest summer nights in 121 years: Nights provided no relief from the heat this summer: While days were certainly hot across the USA, it was the endless parade of sultry, swampy nights that set an all-time record. The summer of 2016 recorded hotter nights than any summer since records began in 1895, according to data released Thursday by the National Oceanic and Atmospheric Administration. The national average low temperature rested at a balmy 60.8 degrees, about 2.4 degrees above average, said climate scientist Jake Crouch of NOAA's National Centers for Environmental Information. Meteorologists define summer as the year's warmest months of June, July and August. The reason for the nighttime swelter, especially in the East, was unusually high levels of humidity due to a persistent flow of moisture-laden air off the Gulf of Mexico and Atlantic Ocean, Crouch said. Temperatures don't drop as much at night when the atmosphere is humid. The devastating flooding in West Virginia in June, Ellicott City, Md., in July and Louisiana in August were also related to the flow of warm, humid air, Crouch said. Overall, when day and night temperatures were factored in, the summer of 2016 tied with 2006 for the fifth-hottest summer on record in the U.S. Only the summers of 1936, 2012, 2011 and 1934 were hotter, NOAA said. Three states — California, Rhode Island and Connecticut — were record warm this summer. No state saw a cooler-than-average season.

La Nina Is Already Here According to Japan as U.S. Drops Watch -  La Nina, a weather pattern that can cause flooding in parts of Asia and colder weather in the U.S. , has set in and may continue through the winter, the Japan Meteorological Agency said, a day after the U.S. dropped its watch for the event.There is 70 percent chance that the event, which also causes dry weather in Brazil, may continue through the winter period, the Japanese forecaster said on its website Friday. The U.S. Climate Prediction Center said Thursday it was dropping its La Nina watch and lowered the odds it will form this year to 35 to 45 percent from 75 percent in June. The Australian Bureau of Meteorology says a late and weak La Nina is still possible. The onset of La Nina can bring more rains to countries including Indonesia, India and Thailand and help ease stress on palm oil and sugar cane from two years of below average rains caused by El Nino. While there’s little chance of the event forming this year, any event is unlikely to affect commodity supplies, according to Olam International Ltd. Still some investors may be caught off-guard if the weather event materializes. La Ninas typically occurs every two to seven years when cooler sea surface temperatures trigger a reaction in the atmosphere. When the same area warms, it’s an El Nino. Forecasters haven’t seen any changes in thunderstorms, winds or ocean temperatures pointing to a La Nina in the last month, according to the U.S. center’s monthly update Thursday.

Hottest summer? Snowiest winter? Yes, data shows, weather is getting more extreme -  Boston just sweated through the driest summer and hottest August ever recorded. And it was only several months ago that the city was basking in the warmest December ever measured here. But a year ago, records were falling in the opposite direction. The winter of 2014-2015 was the snowiest ever recorded, and featured the second-coldest February. It’s not your imagination — there has been a pattern of increasingly extreme weather in recent years not just in our region, but across the country, according to data collected by meteorologists. It’s not just some wacky coincidence, either. It fits with what experts say is the expected result of human-caused global warming. According to the U.S. Climate Extremes Index, which considers both the frequency of extreme weather and how much land area is affected by such conditions nationwide, 2015 ranked as the second-most extreme year on record, trailing only 2012. Records date to 1910. The first half of 2016 ranked as the seventh most-extreme when compared with the same period in other years. The index is based on data on several key indicators: maximum and minimum temperatures that are much above or much below normal; how much of the country has either a severe drought or moisture surplus; single-day events with unusually high precipitation; and abnormalities in the number of days with, and without, precipitation.

Corn, Wheat Crops At Record Production Levels -- Nothing Like A Bit Of Additional CO2 To Help -- Whether or not you agree with or appreciate the "tone" of this linked article, the fact is that a) clement weather for the past ten years; and, b) growing atmospheric CO2 concentrations -- minimal as they are, crop yields are growing (almost) exponentially in the US.   From American Interest quoting Financial Times: Extensive planting and benign weather have forced analysts to repeatedly raise crop outlooks. The International Grains Council last week increased its global wheat production forecast to a record 743m tonnes, up 1 per cent from last year. […]  The recent US winter wheat harvest was 45m tonnes, up 21 per cent from 2015, according to the US Department of Agriculture.  Merchants who have run out of room in silos are piling wheat outdoors.  Storage concerns are also growing in Russia, which is this year set to become the largest wheat exporter after hauling in more than 70m tonnes. In Canada, the government anticipates the second-largest wheat crop in 25 years, of 30.5m tonnes. Australia’s imminent wheat harvest is forecast at 26.5m tonnes, the most in five years. In addition to clement weather, minimally higher atmospheric CO2, my hunch is technology and government policies have driven a lot of this increase in production.

U.S. forests are so full of dead trees that some want to burn them instead of coal --The state of California, wracked by drought, has 66 million dead trees across its landscape. They’ve been killed by both the drought itself and by voracious bark beetles, and now they’re just sitting there — destined to either decompose, burn in a wildfire, or be incinerated, for safety reasons, by state fire managers before the next blaze comes along.  And it isn’t just California. Raging bark beetle infestations, fanned by warmer temperatures and droughts, have also struck forests in Colorado, Wyoming, Montana, and Idaho in recent years. “About 100,000 beetle-kill trees fall every day in Wyoming and northern Colorado, to give you an idea of the order of magnitude,” says Erica Belmont, a professor of mechanical engineering at the University of Wyoming. Belmont is studying an intriguing solution for what to do with all these dangerous dead trees — namely, burn them for energy. In a recent study in Energy Policy, Belmont and colleague Emily Beagle do the math on whether it would make sense to use the timber in existing coal plants, which can be “co-fired” with wood.  In isolation, it probably costs coal plants too much money to go around rounding up dead trees, carting them back, and then burning them — a big endeavor, Belmont explained. But there are sources of possible funds. For instance, the U.S. Forest Service is currently spending considerable money to treat forests and rid them of these dangerous trees — money that, maybe, could be given to the companies that burn them for energy instead, the study suggests.  Moreover, coal plants are facing strong climate regulations, in the form of the pending Clean Power Plan. In this regulatory context, burning trees that are already destined to decompose, catch fire, or be incinerated — and thus, give off greenhouse gases to the atmosphere no matter what — could conceivably supplant some of coal’s voluminous emissions.

No end in sight for South Africa's historic drought: government | Reuters: South Africa remains in the grip of a drought that is not expected to ease soon, a government task team said on Thursday, putting pressure on inflation as the cost of staple foods soars. The long-range forecast showed below normal rainfall expected and "therefore little relief is anticipated in the coming months," local government minister Des van Rooyen, chairman of an inter-ministerial task team on drought, told a media briefing in Cape Town. Van Rooyen, flanked by Water and Sanitation Minister Nomvula Mokonyane and Agriculture Minister Senzeni Zokwana, said there was no need to declare a national disaster even as the national planting area for maize declined by 30 percent. The drought has also reduced the national cattle herd by 15 percent with no relief in sight. "About 370 large commercial farmers around the country... were at risk of going under due to them not being able to service their debts as a result of the drought," he said. The cost of staple foods, such as maize, has sky rocketed and had a knock-on effect on inflation, the central bank has said. Inflation is running at 6 percent. Dam levels have fallen to 53 percent as an El Nino weather pattern, which ended in May, triggered drought conditions across southern Africa and placing millions at risk of food shortages. Large swathes of scorched land decimated the maize crop, with current forecasts pointing to a 26.6 percent lower harvest this year. Temperatures soared to historic peaks in 2015, the driest year since records started in 1904.

Hunger in Sudan has reached 'unprecedented' levels: UN (AP) — The United Nations says hunger in South Sudan has reached "unprecedented" levels, with nearly 5 million people suffering from severe food insecurity. The U.N.'s Food and Agriculture Organization said Friday that without a return to stability that will allow agricultural production to continue, "the situation could rapidly become catastrophic." The World Food Program has said both South Sudan's government and the opposition have held up food shipments in parts of this East African country, which is trying to recover from civil war. Roughly $30 million in supplies were looted from warehouses of the two U.N. agencies during clashes between government and rebel forces in July, South Sudan is experiencing severe hyperinflation, and the World Food Program said the price of food spiked by 778 percent after the July fighting.

The forecast for Lake Mead: Hot and dry with plenty of anxiety - A reckoning arrives every August for the Colorado River and the 40 million people across the West who depend on it. After water managers measure annual inflows and outflows and do their best to estimate future precipitation in places as far-flung as northwestern Wyoming and southwestern New Mexico, they make a pronouncement that once was arcane but has become increasingly prominent — and ominous. Technically, what they announce is the projected elevation of Lake Mead, the Colorado River’s largest reservoir, on Jan. 1 for each of the next two years. Psychologically, in a region already parched by years of drought and staring into a hotter, drier, climate-changed future, they are forecasting anxiety.Under current policy, if the projected elevation falls below 1,075 feet on Jan. 1, states in the southern part of the basin face a “shortage.” That would prompt mandatory cuts in water use that could force farmers to fallow fields and require cities and tribes to reduce use. In the eight decades since the Hoover Dam was completed and Lake Mead was first filled, that has never happened. Then, last month, it did. For a while. Sort of. Maybe. On Aug. 16, the Bureau of Reclamation, the federal agency that oversees the basin, projected that Lake Mead would fall below the 1,075 threshhold — not next year, but in 2018. It released a report predicting it would reach the 2018 shortage by a narrow margin — the lake would fall to 1.074.31 feet on Dec. 31, 2017 — but it would be a shortage nonetheless. Yet the following week, another bureau report came out that shed more light on that forecast. Instead of just projecting an elevation level, it stated the specific probability that the lake would hit that level. The chance, the agency said, was 48%. Or, as Rose Davis, a spokeswoman for the Lower Colorado region of the bureau, put it: “It’s kind of a flip of the coin.” So, by that math, maybe there will be a shortage in 2018 and maybe there will not be. Maybe the Southwest will finally confront the very real limits of its water supply. Or maybe it will not. Except the story does not end there.

Scientists See Push From Climate Change in Louisiana Flooding - - Climate change has increased the likelihood of torrential downpours along the Gulf Coast like those that led to deadly floods in southern Louisiana last month, scientists said Wednesday. Using historical records of rainfall and computer models that simulate climate, the researchers, including several from the National Oceanic and Atmospheric Administration, found that global warming increased the chances of such intense rains in the region by at least 40 percent.  “But it’s probably much closer to a doubling of the probability” of such an event, or a 100 percent increase, said Heidi Cullen, chief scientist for Climate Central, the research organization that coordinated the study. “Climate change played a very clear and quantifiable role,” she added.A storm carrying large amounts of moisture from the Gulf of Mexico stalled over southern Louisiana in mid-August, bringing several days of apocalyptic rain — up to two feet in 48 hours — that caused record flooding in Baton Rouge and elsewhere. The authorities said 13 people were killed and about 55,000 homes and 6,000 businesses were damaged in what is now considered the nation’s worst natural disaster since Hurricane Sandy, the storm that hit the Northeast in 2012.Gov. John Bel Edwards, who was forced to flee the flooding with his family, said damage was expected to be close to $9 billion.  Climate scientists have long said that a warming atmosphere and oceans should lead to more intense and frequent rainstorms, because there will be greater evaporation, and warmer air holds more moisture. But until recent years most scientists have said it was not possible to link any single event to climate change.

When Will New York City Sink? -- The latest scientific findings suggest that a child born today in this island metropolis may live to see the waters around it swell by six feet, as the previously hypothetical consequences of global warming take on an escalating — and unstoppable — force. “I have made it my mission,” Jacob says, “to think long term.” The life span of a city is measured in centuries, and New York, which is approaching its fifth, probably doesn’t have another five to go, at least in any presently recognizable form. Instead, Jacob has said, the city will become a “gradual Atlantis.” The deluge will begin slowly, and irregularly, and so it will confound human perceptions of change. Areas that never had flash floods will start to experience them, in part because global warming will also increase precipitation. High tides will spill over old bulkheads when there is a full moon. People will start carrying galoshes to work. All the commercial skyscrapers, housing, cultural institutions that currently sit near the waterline will be forced to contend with routine inundation. And cataclysmic floods will become more common, because, to put it simply, if the baseline water level is higher, every storm surge will be that much stronger. Now, a surge of six feet has a one percent chance of happening each year — it’s what climatologists call a “100 year” storm. By 2050, if sea-level rise happens as rapidly as many scientists think it will, today’s hundred-year floods will become five times more likely, making mass destruction a once-a-generation occurrence. Like a stumbling boxer, the city will try to keep its guard up, but the sea will only gain strength. No New Yorker, of course, needs to be reminded of the ocean’s fearsome power — not since Hurricane Sandy. Jacob began trying to sound the alarm about the risk more than a decade ago. He sent students into the New York subways with barometers to measure their elevation, and produced a 2008 report for the MTA, warning that many lines would flood with a storm surge of between seven and 13 feet. He urged policymakers to “muster the courage to think the almost unthinkable” and install flood defenses while considering whether, over the long term, climate change might necessitate radical alterations to the transit system, like moving back to elevated tracks. In 2011, while working on a government panel, Jacob produced a study that mapped how subway tunnels would be inundated in the event of a hurricane. The next year, he was proved right.

Flooding of Coast, Caused by Global Warming, Has Already Begun - — Huge vertical rulers are sprouting beside low spots in the streets here, so people can judge if the tidal floods that increasingly inundate their roads are too deep to drive through. Five hundred miles down the Atlantic Coast, the only road to Tybee Island, Ga., is disappearing beneath the sea several times a year, cutting the town off from the mainland.And another 500 miles on, in Fort Lauderdale, Fla., increased tidal flooding is forcing the city to spend millions fixing battered roads and drains — and, at times, to send out giant vacuum trucks to suck saltwater off the streets. For decades, as the global warming created by human emissions caused land ice to melt and ocean water to expand, scientists warned that the accelerating rise of the sea would eventually imperil the United States’ coastline. Now, those warnings are no longer theoretical: The inundation of the coast has begun. The sea has crept up to the point that a high tide and a brisk wind are all it takes to send water pouring into streets and homes. Federal scientists have documented a sharp jump in this nuisance flooding — often called “sunny-day flooding” — along both the East Coast and the Gulf Coast in recent years. The sea is now so near the brim in many places that they believe the problem is likely to worsen quickly. Shifts in the Pacific Ocean mean that the West Coast, partly spared over the past two decades, may be hit hard, too. These tidal floods are often just a foot or two deep, but they can stop traffic, swamp basements, damage cars, kill lawns and forests, and poison wells with salt. Moreover, the high seas interfere with the drainage of storm water.In coastal regions, that compounds the damage from the increasingly heavy rains plaguing the country, like those that recently caused extensive flooding in Louisiana. Scientists say these rains are also a consequence of human greenhouse emissions. Local governments, under pressure from annoyed citizens, are beginning to act. Elections are being won on promises to invest money to protect against flooding. Miami Beach is leading the way, increasing local fees to finance a $400 million plan that includes raising streets, installing pumps and elevating sea walls.

EPA sued over clean water rules to curb ocean acidification | Reuters: Environmentalists sued the Obama administration on Thursday seeking new federal water-quality standards designed to protect marine life against the corrosive effects of carbon emissions absorbed into the ocean from the burning of fossil fuels. The lawsuit, brought by the Arizona-based Center for Biological Diversity, accused the U.S. Environmental Protection Agency of failing to take action as required under the Clean Water Act to stem the rising threat of ocean acidification. Specifically, the lawsuit demands that water quality criteria for measuring pollutants be updated by the EPA to reflect the latest science showing carbon dioxide emissions are altering the chemistry of oceans, making seawater increasingly acidic. The center said that water-quality standards as measured by pH levels have not been revised in 40 years. Ocean acidification, a side effect of fossil fuel combustion driving global climate change, harms a wide range of marine animals "by hindering their ability to build protective shells and skeletons they need to survive and by disrupting metabolism and critical biological functions," the lawsuit said. According to the 12-page complaint, filed in U.S. District Court in Washington, seawater today is 30 percent more acidic than during the pre-industrial era, and this trend is occurring more rapidly than it has over the past 300 million years. "The EPA is ignoring the threat of ocean acidification, and that's very dangerous,"

The Southern Ocean is getting less salty. Here’s what that could mean for the rest of the world -- The ocean surrounding Antarctica has become substantially less salty over the past couple of decades — and until now, scientists weren’t really sure why. But because changes in the Southern Ocean’s salinity have the potential to affect all kinds of important processes, including ocean circulation and its transport of heat and nutrients around the world, researchers have been eager to figure it out. Now, a new study, published Wednesday in Nature, suggests that sea ice may be one of the major culprits. Using satellite data and models, the authors have shown that Antarctic sea ice has been moving farther and farther away from the continental coastline by strengthening winds in recent years, pouring fresh water farther out into the ocean as it melts.   In the past, scientists have raised several theories about what could be causing the freshening, which has been particularly pronounced in specific regions of the Southern Ocean. These have included both precipitation patterns and an increasing influx of meltwater from Antarctic glaciers. But studies have indicated that neither of these processes could fully explain the region’s salinity changes.   It’s already well known that sea ice has an important influence on salinity around Antarctica. Sea ice forms when ocean water freezes, typically very close to the continent’s icy shoreline, where temperatures tend to stay coldest. When it freezes, the water expels its salt back into the water below. In the meantime, sea ice tends to drift away from the coast once it’s formed, and later melts and pours fresh water back into the sea.   These processes are important drivers of ocean currents all over the world. The salty water created by sea ice formation is denser than fresh water, so it has a tendency to sink to the bottom of the ocean. In doing so, it helps push the water below it forward along the sea floor, creating a current that runs north toward the equator. As the water warms up, it rises to the surface and eventually runs back toward the poles. This process helps carry heat and nutrients around the world.

 'Massive' reservoir of melt water found under Greenland ice - BBC News: Researchers say they have discovered a large reservoir of melt water that sits under the Greenland ice sheet all year round. The scientists say the water is stored in the air space between particles of ice, similar to the way that fruit juice stays liquid in a slush drink. The aquifer, which covers an area the size of Ireland, could yield important clues to sea level rise. The research is published in the journal, Nature Geoscience. The melting of the Greenland ice sheet has been a significant contributor to a rise in sea levels over the past 100 years. The water is stored in the air space between the ice particles, like the juice in a snow coneProf Rick Forster, University of Utah According to the latest report from the Intergovernmental Panel on Climate Change, the ice sheet lost 34 billion tonnes of ice per year between 1992 and 2001 - but this increased to 215 billion tonnes between 2002 and 2011 Scientists still have many unanswered questions about the direction and speed and ultimate destination of this melted water. This new research finds that a significant amount is stored in partially compacted snow called firn. In the spring of 2011, researchers drilled deep into this slushy layer and to their surprise, found liquid water flowing back to the surface even though air temperatures were -15 degrees C. As this was well before the onset of the summer melt, the team concluded the water had persisted in a liquid state through the Greenland winter.

Open water nears North Pole as 2016 melt season races to finish: With the midnight sun sinking lower in the sky each day, now is typically the time of year when the annual summer sea ice melt slows to a crawl in the Arctic. But 2016 is not your typical year in that part of the world. In fact, no year is "typical" anymore for a region that is warming at about twice as fast as the rest of the globe. Right now, broken ice and open waters are inching closer to the geographic North Pole. This is extremely rare, but likely not unprecedented, said Mark Serreze, the director of the National Climatic Data Center, in an interview. The state of the sea ice pack at the top of the world is a sign of the rapid pace of warming taking place there. This year has been record warm across the Arctic, and has seen several unseasonably powerful storms swirl across the Arctic Ocean, churning the sea ice. Sea ice concentration as viewed by satellite, showing broken ice to greater than 87 degrees North latitude. The ice pack after these storms was more vulnerable to melting, since it was split into smaller chunks in greater contact with comparatively mild seawater. In addition, a late season warm spell has propelled 2016 to run close to 2007 for the title of the second-lowest sea ice minimum on record.

Arctic Ocean shipping routes 'to open for months' - BBC News: Shipping routes across the Arctic are going to open up significantly this century even with a best-case reduction in CO2 emissions, a new study suggests. University of Reading, UK, researchers have investigated how the decline in sea-ice, driven by warmer temperatures, will make the region more accessible. They find that by 2050, opportunities to transit the Arctic will double for non ice-strengthened vessels. These open-water ships will even be going right over the top at times. And if CO2 emissions are not curtailed - if the aspirations of the Paris Agreement to keep global temperature rise "well below two degrees" are not implemented - then moderately ice-strengthened vessels could be routinely ploughing across the Arctic by late century for perhaps 10-12 months of the year. "The reduction in summer sea-ice, perhaps the most striking sign of climate change, may also provide economic opportunities," commented Reading's Dr Nathanael Melia. "There is renewed interest in trans-Arctic shipping because of potentially reduced costs and journey times between Asia and the Atlantic. So far only a few commercial vessels have utilised these routes as they are not currently reliably open." Sea-ice is in a committed, long-term decline as the polar north warms. The traditional September minimum extent is about to be set in the coming days, and this year looks on course to be the second lowest in the satellite record.  Researchers do not see this trend being reversed anytime soon.

 U.S. companies tout climate policies, fund climate skeptics | Reuters: U.S. companies that have expressed the most fervent public support for President Barack Obama’s environmental agenda are also funding its biggest enemies - the scores of U.S. lawmakers who are climate change skeptics and oppose regulation to combat it, according to a Reuters review of public records. Ahead of the Nov. 8 presidential and congressional elections, the donations from companies including PepsiCo, Dupont, and Google reveal a disconnect between how these companies present themselves to the public on environmental issues, and how they manage their political contributions to support business-friendly policy. Many companies active in U.S. politics spread their political donations broadly on both sides of the aisle and consider multiple issues when deciding whom to support. But inconsistency between a company's environmental positions and its political giving may point up a need for better oversight, according to Jon Lukomnik, head of the Investor Responsibility Research Center Institute. "There really needs to be a process that looks at these issues ... at C-suite and board levels on a periodic basis," Lukomnik said. The Reuters review covered donations made during the 2016 election cycle by the political action committees (PACs) of 30 of the biggest publicly traded U.S. companies that signed Obama’s “American Business Act on Climate Change Pledge” in 2015, a public promise to enact climate-friendly corporate policies and support strong climate change oversight like the global climate accord signed in Paris. The review found that 25 of the 30 companies are funding the campaigns of lawmakers featured on a "climate deniers" list that was put together by Organizing For Action, a non-profit created by former Obama campaign aides to advocate his agenda.

Paris climate deal: US and China formally join pact - BBC News: Signing up to cut emissions means China will have to move away from coal power The US and China - together responsible for 40% of the world's carbon emissions - have both formally joined the Paris global climate agreement. After arriving with other leaders of G20 nations for a summit in the city of Hangzhou, Mr Obama said: "History will judge today's effort as pivotal." CO2 emissions are the driving force behind climate change. Last December, countries agreed to cut emissions in a bid to keep the global average rise in temperatures below 2C. The Paris deal is the world's first comprehensive climate agreement. It will only come into force legally after it is ratified by at least 55 countries, which between them produce 55% of global carbon emissions. Members of China's National People's Congress Standing Committee adopted "the proposal to review and ratify the Paris Agreement" on Saturday morning at the end of a week-long session.

U.S., China ratify Paris climate agreement | Reuters: The United States has joined China to formally ratify the Paris agreement to curb climate-warming emissions, the world's two biggest economies said on Saturday, which could help put the pact into force before the end of the year. U.S. President Barack Obama and Chinese President Xi Jinping submitted their plan to join the agreement to U.N. Secretary-General Ban Ki-moon, who is in China to witness the announcement. Senior Obama adviser Brian Deese said the joint declaration should push other countries to formally join the agreement. "The signal of the two large emitters taking this step together and taking it early, far earlier than people had anticipated a year ago, should give confidence to the global communities and to other countries that are working on their climate change plans, that they too can move quickly and will be part of a global effort," Deese told reporters on Friday. India is also poised to join the agreement this year, Deese said, adding that Obama was expected to meet Indian Prime Minister Narendra Modi on the sidelines of a Group of 20 nations meeting in Hangzhou, China, this weekend. Obama and Xi committed to cooperate on two other global environmental agreements this year - an amendment to the Montreal Protocol to phase down air-conditioning refrigerants and on a market-based measure to reduce carbon emissions from aviation. "Today's announcement is the strongest signal yet that what we agreed in Paris will soon be the law of the land," said Mattlan Zackhras, minister-in-assistance to the president of the Marshall Islands.

US and China ratify Paris climate pact, leaving EU behind – The United States has joined China to formally ratify the Paris agreement to curb climate-warming emissions, the world’s two biggest economies said on Saturday, which could help put the pact into force before the end of the year. US President Barack Obama and Chinese President Xi Jinping submitted their plan to join the agreement to UN Secretary-General Ban Ki-moon, who is in China to witness the announcement. Senior Obama adviser Brian Deese said the joint declaration should push other countries to formally join the agreement. “The signal of the two large emitters taking this step together and taking it early, far earlier than people had anticipated a year ago, should give confidence to the global communities and to other countries that are working on their climate change plans, that they too can move quickly and will be part of a global effort,” Deese told reporters on Friday. India is also poised to join the agreement this year, Deese said, adding that Obama was expected to meet Indian Prime Minister Narendra Modi on the sidelines of a Group of 20 nations meeting in Hangzhou, China, this weekend. Obama and Xi committed to cooperate on two other global environmental agreements this year – an amendment to the Montreal Protocol to phase down air-conditioning refrigerants and on a market-based measure to reduce carbon emissions from aviation. “Today’s announcement is the strongest signal yet that what we agreed in Paris will soon be the law of the land,” said Mattlan Zackhras, minister-in-assistance to the president of the Marshall Islands. “With the two biggest emitters ready to lead, the transition to a low-emissions, climate-resilient global economy is now irreversible.” Saturday’s joint statement could spur further ratifications by the likes of Brazil and Canada.Europe has been slow to put the agreement into effect because it must be ratified separately by the EU and each individual member state. The procedure in some countries like the Netherlands would require changes to the constitution, which may take some time.

 Poland ties climate-deal ratification to EU concessions on coal (Bloomberg) - Poland said it will ratify the global climate deal that the U.S. and China joined last week only after it gets European Union assurances on investment in coal-based power plants. The east European country, which relies on the most polluting fossil fuel for about 90 percent of its electricity production, plans to start procedures to ratify the global climate-protection Paris agreement reached in December and the United Nations deal on 2013-2020 emissions limits agreed to in Doha in 2012. The latter was blocked last year by Poland’s president, who said it needed more economic and legal analyses. “The ratification will be possible provided that Poland’s interests in relation to the European climate policy are secured,” the government said in a statement on Monday, adding that it wanted the Paris agreement to be ratified as soon as possible. The 28-nation EU, which aims to lead the global fight against climate change, is under increasing pressure to formally join the landmark Paris deal that set an ambitious goal to curb temperature increases and applies to all nations, rich and poor. To enter into force, it needs to be ratified by at least 55 parties, accounting for 55 percent of global emissions. The European Commission, the EU’s regulatory arm, in June proposed a procedure to ratify the deal and urged member states to sign off as soon as possible. Ratification rules differ among nations and in some countries a parliamentary vote is needed. The commission’s efforts to ensure a quick ratification risk being hindered by an ongoing debate on how to share the burden of the EU emission-reduction goal among member nations.

PM Modi pledges India will join Paris climate change deal this year - Prime Minister Narendra Modi pledged on Thursday to formally join the Paris climate change agreement this year, a potentially major step toward the pact entering into force. After a meeting with US President Barack Obama, a champion of the deal, in Vientiane, the White House said the two leaders had made a joint commitment “to join the Paris Agreement this year”.  While in China earlier this week, the US already took that step. Flanked by president Xi Jinping at a joint adoption ceremony in the Chinese city of Hangzhou, Obama said climate change would “define the contours of this century more dramatically than any other challenge”. The 180-nation deal sets ambitious goals for capping global warming and funnelling trillions of dollars to poor countries facing climate catastrophe. It aims to limit global temperature increases to two degrees centigrade, and will be triggered after it is ratified by at least 55 countries, accounting for 55% of global greenhouse gas emissions. India had been a reluctant adherent to the agreement, concerned that it would curb efforts to bring millions of Indians out of poverty

Brazil could raise emissions and still meet Paris goal: study | Reuters: Brazil could increase carbon emissions by up to 21 percent until 2030 and still meet its pledge under the 2015 Paris climate agreement to fight global warming, according to a study released on Tuesday. The country based its goals on a version of its national inventory on greenhouse gas emissions that was available at the time, in 2014, a year before the Paris climate accord was reached. As a result, it would be easier for Brazil to reach the goals, according to the report by Climate Observatory, a non-profit, which is asking the government to quickly change its commitments. New inventory data did not become available until this year. "It would certainly create a large embarrassment for the country if adjustments are not made," said Andre Ferretti, coordinator of Climate Observatory. Brazil's government said it was aware of the study, but that this is not the moment to make changes to the pledges. "Both houses of Congress ratified the document. If we change it now we could create room for further discussions, which we don't want at this moment," Climate Change Secretary Everton Frask Lucero said. He said the Paris agreement foresees timely revisions, which Brazil plans to do in the future. Brazil pledged to reduce emissions 37 percent by 2025 and 43 percent by 2030 compared with 2005 numbers. The plan was considered ambitious by experts when released last year.

B.C. Climate Plan Subsidizes Fossil Fuels (Yes, You Read That Correctly) -- The B.C. government has quietly slipped subsidies for the natural gas sector into its climate plan, which has been panned as “cynical” by leading experts. B.C.’s so-called Climate Leadership Plan, quietly released on August 19, includes a vague pledge to subsidize the electrification of upstream natural gas facilities in the northeast of the province, using “renewable” power from BCHydro projects. “I just could not believe the audacity of it when I was reading the plan,” Alex Doukas, senior campaigner at Oil Change International, told DeSmog Canada.“We’re using public dollars to help them reduce their emissions, when that should be the responsibility of the natural gas producers.” “That’s why B.C. ostensibly has a carbon tax: there’s a principle called the ‘polluters pay principle.’ Taxpayers shouldn’t be picking up the tab for big polluters.” The hidden subsidies come on top of B.C. Premier Christy Clark’s many concessions to the natural gas industry, including more than a billion dollars in royalty breaks, a freeze on the provincial carbon tax and taxpayer-subsidized promotion and marketing.

Living in the Web of Soft Climate Denial - Michael Hoexter - Contents

  1. Conventional “Hard” Climate Denial
  2. A Web of Soft Climate Denial
  3. The Foundations of Soft Climate Denial in Economics
  4. Settling on Neoliberal, “Market-Based” Carbon Gradualism
  5. Soft Climate Denial, Fossil Fuels, and the Hedonic Self
  • 1. Conventional “Hard” Climate Denial.  The Rio Olympics opening ceremony highlighted global warming as a major theme of international concern even on an occasion of diversion from the cares of the world.  That most Brazilians understand intuitively and uncontroversially that climate change is a real threat contrasts with the still substantial fights that occur in parts of the Anglophone world regarding the reality of human caused climate change.  A powerful minority in that world, strongest in the United States and Australia, holds to the idea that climate change is a hoax.   The Republican governor of Florida, a state that almost certainly will lose population centers and land area to rising seas, has, for instance, banned the use of the words “climate change” by state employees.  The GOP and further-right denialists and the supporting infrastructure for their denial, I am calling here “hard” climate denialists.   “Hard” climate denialists stubbornly and publicly proclaim a belief that anthropogenic climate change is either unsupported by scientific evidence or, more frequently, an elaborate hoax.  “Hard” climate denialists demonstrate a “soft” or slippery relationship to physical and scientific reality because they will clutch at almost any piece of information that seems to them to disconfirm or discredit climate science and climate action.  Hard climate denialists continually spin various stories to support their fixed or proclaimed (but insincerely held) belief that humans are not responsible for the upcoming climate catastrophe.   Alternatively, the cleverer deniers that want to retain their own respectability in the public sphere, such as MIT-educated Charles Koch, allow others to do the tale-spinning or funding of climate denial from their extensive donor network.
  • 2. A Web of Soft Climate Denial. But there is another, perhaps more troubling web of climate denial, that is far more widespread both within and outside the Anglophone world.  I will call this type of climate denial “soft” climate denial and it is now a few orders of magnitude more common than “hard” climate denial.  While hard climate denialists can be fingered and excoriated, soft climate denial represents a wide-ranging diffuse “climate” that surrounds much of our lives in the developed and rapidly developing worlds.  Soft climate denial takes a few different forms but it is remarkably easy to define:  The critical defining feature of soft climate denial is the pairing of recognition of a dire state of the global climate with inadequate means to address that dire state or humanity’s impact on the climate.  Soft climate denial is defined by the disconnect between the recognition of an apparent climate emergency and the psychological repression or the dismissal of appropriate responses to that emergency.  There are many political positions that fit into this “space”, including the embrace of various carbon pricing systems as the single “silver bullet” to address climate catastrophe.  Other political positions emblematic of soft climate denial are those that maintain a narrow focus on divestment from or removal of subsidies for fossil fuel companies.

Rolling Coal’ in Diesel Trucks, to Rebel and Provoke - — There is a new menace on America’s roads: diesel truck drivers who soup up their engines and remove their emissions controls to “roll coal,” or belch black smoke, at pedestrians, cyclists and unsuspecting Prius drivers. “You can hear those trucks across town, driving like idiots,” Sgt. Chris Worthington said on a recent Friday evening patrol. He is among the first law enforcement officers in the country to be trained at “smoke school” to pick up the skills to police the coal rollers. He lost sight of one truck cruising in the opposite direction, trailing plumes of smoke. But another, a Ram 3500 fitted with two steel smokestacks, was parked in a Walmart parking lot. The owner, Pryce Hoey, insisted his truck was emissions compliant, but nevertheless agreed to demonstrate its smoke-generating prowess.“I just wanted something different,” Mr. Hoey said, revving the engine and releasing two black pillars of smoke into the evening air before Sgt. Worthington shut him down. “People who see it giggle. They think it’s funny.”Depending on whom you ask, rolling coal is a juvenile prank, a health hazard, a stand against rampant environmentalism, a brazen show of American freedom. Coal rollers’ frequent targets: walkers, joggers, cyclists, hybrid and Asian cars and even police officers. A popular bumper sticker reads “Prius Repellent.”  Many document their feats online. Coal rollers also have their own reality TV show

The golden age of natural gas - The Hill (blog) --U.S. carbon emissions from power plants have fallen to 25-year lows.  No country is reducing its emissions faster.  Remarkably, we are doing this  while still growing our economy.  In fact, wholesale electricity prices have fallen 40 percent over the past five years. This remarkable achievement is not the product of a “green revolution.” Yes, we are subsidizing and building wind and solar power.  But despite billions in taxpayer funds, these two power sources still generate less than 7 percent of our electricity. Rather, it's natural gas which leads the charge in our emissions and cost reduction efforts. The word that makes some environmentalists cringe – “fracking” - is doing more to decarbonize our electricity sector than any EPA mandate or Silicon Valley solar startip.  Rig hands and petroleum engineers have delivered a clean-energy solution that is taking over much of the electricity marketplace.  Once short on natural gas, the combination of hydraulic fracturing and horizontal drilling has turned the U.S. into the world's largest natural gas producer. Inexpensive, abundant, and clean, natural gas is cleaning coal's clock in the electricity marketplace. Just 10 years ago coal was used to generate more than half of U.S. electricity. Today, it's less than a third. About 350 coal plants have been shut down in the past five years, and there's not a single new coal plant planned in the U.S. At the same time, use of natural gas has grown dramatically. Utilities are converting older coal plants to burn natural gas and are using their existing natural gas plants at higher rates than ever. Why has this shift from coal to natural gas reduced emissions?  It’s simple -  natural gas produces just half the carbon emissions of coal. One would think there would be near-universal praise for the progress enabled with natural gas. But that’s not so. Environmentalists on the far left refuse to embrace our golden age of gas.  They are fighting greater production, transportation and use of natural gas at every turn. While environmentalists pound the climate change drum, they seem more interested in promoting wind and solar power than finding cost-effective solutions to reducing greenhouse gas emissions. Basically, these same environmentalists want an all-renewable energy future. But greater use of natural gas isn't an impediment to renewables, it's actually helping integrate them onto the electrical grid.

The “Fuel” That's Helping America Fight Climate Change Isn't Natural Gas - You’ve heard the good news on climate: after a century or more of continuous rise, U.S. CO2 emissions have finally begun to decline, due largely to changes in the energy sector. According to the Energy Information Agency (EIA), energy-related CO2 emissions in 2015 were 12% below their 2005 levels. The EIA says this is “because of the decreased use of coal and the increased use of natural gas for electricity generation.” Is the EIA right in making natural gas the hero of the CO2 story? Hardly. Sure, coal-to-gas switching is real. But take a look at this graph showing the contributors to declining carbon emissions. Natural gas displacement of coal accounts for only about a third of the decrease in CO2 emissions. By far the biggest driver of the declining emissions is energy efficiency. Americans are using less energy overall, even as our population grows and our economy expands Energy efficiency is sometimes called the “first fuel” because cutting waste is a cheaper and faster way to meet energy demand than building new power plants. Improvements in energy performance cut across all sectors of the economy, from industrial machines to home electronics to innovations like LED bulbs replacing famously wasteful incandescent light bulbs. Energy efficiency’s stunning success in lowering carbon emissions should get more attention, and not just because it is cheaper than building new natural gas-fired power plants. Efficiency has no downsides. Natural gas has plenty. Indeed, when methane leakage from drilling and infrastructure is factored in, natural gas doesn’t look much like a climate hero at all. And that’s not the full story. A growing share of the credit for carbon reductions also goes to non-carbon-emitting sources, primarily wind, and solar. Both sources exhibit double-digit growth rates. Wind power in the U.S. has grown from a little over 9,000 megawatts (MW) in 2005 to more than 74,000 MW by the end of 2015. In 2005, the solar market scarcely existed. By early this year, we had 29,000 MW installed.

EPA finalizes cross-state pollution rule for ozone-causing nitrogen oxides  - The U.S. Environmental Protection Agency on Wednesday released the final version of its updated Cross-State Air Pollution Rule, which aims to reduce power plant emissions of nitrogen oxides (NOx) across 22 states. The final rule aims to help states downwind from major NOx emitting sources comply with a ground-level ozone standard issued in 2008 that limits ozone pollution to 75 parts per billion. NOx pollution is a major component of ground-level ozone, which is linked to respiratory problems. Environmentalists had hoped EPA would set a more stringent guideline for cross-state pollution at 70 parts per billion, reflecting a benchmark set last October for in-state ozone. But the D.C. Circuit court last summer ordered the agency to re-write its cross-state standards, saying they were too broad. A part of the Obama administration's push to clean up air pollution, the Cross-State Air Pollution Rule was originally proposed in 2011 to help address the interstate transport of ozone and other pollutants typically covered by the National Ambient Air Quality Standards within individual states. On Sept. 7, the agency finalized those rules, issuing federal implementation plans that provide summertime budgets for NOx emissions in 22 states. The plans apply only to states that failed to submit approvable state plans under the 2008 update to the CSAPR, the agency said. Starting in May 2017, the new rules will affect more than 2,800 generating units at 886 coal, gas and oil power plants. The states will be responsible for reducing ozone pollution, a main component in smog, to 75 ppb measured over eight hours.

Pollution woes prompt pension fund to dump Duke Energy stock (AP) — One of the world’s largest investment funds is dumping its shares in Duke Energy Corp. because it sees too much risk in what it called the largest U.S. electric company’s history of environmental damage. The decision to bar investments in Charlotte, North Carolina-based Duke Energy was announced Wednesday by the arm of Norway’s central bank that manages the pension fund created by the Scandinavian country’s oil wealth. Norges Bank said it is excluding investments in Duke Energy and three operating subsidiaries. The fund’s ethics advisory council cited the U.S. utility’s years of environmentally harmful discharges from pits at North Carolina coal-burning power plants storing waste byproducts. Duke Energy says it’s disappointed and is cleaning up the pits. The fund started 2016 with about 4.7 million shares of Duke Energy stock.

 AP Exclusive: Defying Downturn in Coal, 2 New Mines Planned - ABC News: Mines are closing and the coal industry is facing a run of bankruptcies and other bad news, but a company backed by a $90 million investment is defying conventional wisdom by preparing to open two new mines in Appalachia, the hardest-hit coal region. The mines in West Virginia and Virginia will create some 400 jobs in counties where unemployment ranges close to three times the national average, Ramaco Development CEO Randall Atkins told The Associated Press. "It's a fairly big deal, frankly, for southern West Virginia," Atkins said. Low prices for natural gas and new pollution regulations are turning many utilities off coal as their fuel of choice for generating electricity. U.S. coal-fired power capacity is down 15 percent since 2011, according to the U.S. Energy Information Administration. This coal won't be used for electricity but for steel manufacturing. Metallurgical coal prices are up lately due to a mix of international market factors. But Ramaco can make the mines work even at even fairly low prices, Atkins said. The Elk Creek Mine in southern West Virginia and the Berwind Mine spanning the boundary between southern West Virginia and Virginia will be operational for around 17 years. A $90 million private equity investment should enable test mining at both sites to begin early next year. Work on the Elk Creek Mine's coal preparation plant will start even sooner, according to Kentucky-based Ramaco. "We will start construction at the Elk Creek property just as soon as we get all the equipment lined up there," Atkins said. The company plans to begin talking with potential buyers in the next few weeks and could begin shipping coal under supply agreements in 2018, he said

What Might Determine The Course Of U.S. Nuclear Development For Decades To Comefrom the Richmond Fed - Nuclear construction boomed in the 1960s and early 1970s, but in the mid-1970s, rising electricity prices triggered increased scrutiny of utilities' capital expenditures. Safety and environmental fears also intensified in 1979 when a film called The China Syndrome portrayed a nuclear power plant on the verge of a total meltdown. The movie debuted 12 days before a partial meltdown occurred at Three Mile Island in Pennsylvania. No one got hurt, but the incident created a sense of panic that radiated throughout the nation. Orders for new reactors dwindled to zero in the United States, but most American reactors continued to deliver clean, reliable, low-cost power for decades with no major problems. Today, only four of those 24 proposed reactors are under construction: the two Vogtle units at the crux of Davis and Rothwell's wager and two reactors of the same type at the V.C. Summer Nuclear Station in South Carolina. These two projects are only 55 miles apart as the crow flies; if nuclear construction has come to a crossroads in the United States, this is it.Nearly all active proposals to build nuclear power plants are confined to the Southeastern United States for three primary reasons.First, power generation in the region is dominated by large, well-capitalized companies with regulated returns on investment. In other words, if they can convince their utility commissions that building nuclear reactors is a prudent use of resources, they can pass along the development costs to their ratepayers.Second, nearly all Southeastern states have adopted CWIP (cost of work in progress) accounting, which allows a utility to start passing along some financing costs to ratepayers while a plant is under construction. Third, population growth and the increasing use of air conditioning per capita has continued to increase demand for electricity in the Southeast relative to other regions of the United States that have had significant, positive experience with nuclear power. Georgia Power expects demand for electricity to rise 27 percent in the Southeast by 2030, with Georgia's population growth driving much of that increase. To help meet that anticipated demand, the company is adding two reactors to its Vogtle plant, a facility it owns jointly with Oglethorpe Power, Municipal Electric Authority of Georgia, and Dalton Utilities. Southern Nuclear, a subsidiary of Georgia Power's parent company,oversees the project. These partners are building the first new nuclear units in the United States in the past three decades. (The Tennessee Valley Authority, or TVA, completed a reactor this year, but the TVA received a construction permit for that unit in 1973.) Vogtle also features the U.S. unveiling of the Westinghouse AP1000, a 1,117-megawatt reactor that is designed to be less expensive to build, operate, and maintain. Compared to earlier-generation reactors, the AP1000 has 50 percent fewer valves, 35 percent fewer pumps, 80 percent less piping, 45 percent less building volume, and 70 percent less cable. In addition to Westinghouse, the other primary contractor on the project was Chicago Bridge & Iron.

Report: Buckeye Fracking Leads to Asthma Attacks - -- Environmental advocates cite a new study to suggest drilling and fracking in eastern Ohio leads to thousands of asthma attacks in Cleveland and Columbus, but industry officials say the research ignores the reduction in carbon emissions resulting from greater natural gas use.  According to the Ohio Environmental Council and the Clean Air Task Force, children in the Columbus metro area suffer 7,129 asthma attacks per year due to smog resulting from oil and natural gas operations, with another 7,558 youngsters experiencing these symptoms in the Cleveland area every year. “What this report clearly shows us is that air pollution from the oil and gas industry can have a significant impact on children’s health even in areas far from oil and gas production,” Melanie Houston, director of oil and gas at the council, said. “As the mother of a young child, I can’t stress enough that safeguards are urgently needed to protect our children and communities from this dangerous pollution. Cutting methane pollution from oil and gas will have an immediate benefit for our children.”  Methane is the primary constituent in the consumer product commonly referred to as natural gas. Officials with the U.S. Environmental Protection Agency want to cut methane emissions from the oil and natural gas industry 45 percent by 2025.

 NE Ohio Injection Well Operation To Stay Halted Amid Litigation | WCBE 90.5 FM: A Youngstown-area wastewater injection well at the center of a dispute over Ohio's authority to regulate oil-and-gas operations will remain closed during litigation by judge's order. Judge Kimberly Cocroft denied a request to allow the Weathersfield Township well to resume short-term operations while its legal appeal proceeds. Arguments are scheduled Novenber 1. Well operator American Water Management Services disputes the legal authority of the oil-and-gas chief at the Ohio Department of Natural Resources. The company also claims state actions against its well -which disposes of fracking wastewater - defy science. At least 20 small seismic events occurred near the well in 2014. State regulators believe they tapped the same fault as a 4.0-magnitude quake in Youngstown in 2011.

Scientists Discover New Genus of Bacteria Unique to Fracking Sites  - A new study from the Ohio State University revealed a never-before-seen genus of bacteria believed to be unique in shale oil and gas wells made by hydraulic fracturing.  The study, published in the journal Nature Microbiology, showed that the new genus is one of the 31 microbial members found in two separate fracking sites. Despite the great distance between the wells and different shale formations, the researchers were able to find almost similar microbial communities in the two sites.  "We think that the microbes in each well may form a self-sustaining ecosystem where they provide their own food sources," explained Kelly Wrighton, assistant professor of microbiology and biophysics at Ohio State, in a press release. "Drilling the well and pumping in fracturing fluid creates the ecosystem, but the microbes adapt to their new environment in a way to sustain the system over long periods." Most of the organisms found in the two wells is believed to be come from the surface ponds being drawn to fill the wells. The researchers also noted the possibility that the organisms they found in the wells are already living in the shale deposits even before the fracking operations began.The new genus of bacteria, dubbed as Candidatus Frackibacter, was named as a play of words in the owrd fracking. Scientists use the term Candidatus to classify new organism that is being studied for the first time using genomic approach, not an isolated culture from the lab. If the Frackibacter bacteria are living in the well before fracking operations began, it needs to be highly tolerant of high temperatures, pressure and especially salinity. High salinity levels in the fracking sites could force microbes synthesize organic compounds called osmoprotectants to avoid bursting.

New genus of bacteria found living inside hydraulic fracturing wells - Researchers analyzing the genomes of microorganisms living in shale oil and gas wells have found evidence of sustainable ecosystems taking hold there—populated in part by a never-before-seen genus of bacteria they have dubbed "Frackibacter." The new genus is one of the 31 microbial members found living inside two separate fracturing wells, Ohio State University researchers and their colleagues report in the Sept. 5 online edition of the journal Nature Microbiology. Even though the wells were hundreds of miles apart and drilled in different kinds of shale formations, the microbial communities inside them were nearly identical, the researchers discovered.  Almost all the microbes they found had been seen elsewhere before, and many likely came from the surface ponds that energy companies draw on to fill the wells. But that's not the case with the newly identified Candidatus Frackibacter, which may be unique to hydraulic fracturing sites, said Kelly Wrighton, assistant professor of microbiology and biophysics at Ohio State.In biological nomenclature, "Candidatus" indicates that a new organism is being studied for the first time using a genomic approach, not an isolated organism in a lab culture. The researchers chose to name the genus "Frackibacter" as a play on the word "fracking," shorthand for "hydraulic fracturing."Candidatus Frackibacter prospered alongside the microbes that came from the surface, forming communities in both wells which so far have lasted for nearly a year.  By sampling fluids taken from the two wells over 328 days, the researchers reconstructed the genomes of bacteria and archaea living in the shale. To the researchers' surprise, both wells—one drilled in Utica shale and the other drilled in Marcellus shale—developed nearly identical microbial communities. In addition, the two wells are each owned by different energy companies that utilized different fracturing techniques. The two types of shale exist more than a mile and a half below ground, were formed millions of years apart, and contained different forms of fossil fuel. Yet one bacterium, Halanaerobium, emerged to dominate communities in both wells.

Rare species lurks down fracking wells  -- For environmentalists, it is a dilemma. On the one hand, they don’t like fracking for gas. On the other hand, they don’t like destroying fragile ecosystems and making species extinct. Which is why a bacterium called Candidatus frackibacter may prove to be a problem. Scientists have found that the drilling technique used for fracking has created unique habitats deep beneath the surface populated by bacteria that have never been seen before. “We think that the microbes in eachwell may form a self-sustaining ecosystem where they provide their own food sources,” Kelly Wrighton, from Ohio State University, said. Professor Wrighton believes that the ecosystem is based on bacteria adapting to the extremely briny conditions in fracking fluids. The research is published in the journal Nature Microbiology.

 The $10 Billion Petchem Growth Engine for Appalachia - Supporters of a proposed massive infrastructure project in Appalachia say that it would provide a strong impetus for growth in the region's petrochemicals sector. "The Appalachian Storage Hub is needed to take full advantage of chemical and plastic raw materials found in the Marcellus, Utica and Rogersville shales," Kevin DiGregorio, executive director of the economic development non-profit Chemical Alliance Zone, Inc. (CAZ), said of the proposed $10 billion natural gas transmission and storage project that would provide regional access to natural gas liquids (NGL) from shale plays in West Virginia, Ohio, Pennsylvania and Kentucky. The storage and distribution system would comprise underground storage facilities for ethane – and possibly other NGL such as propane and butane – as well as pipelines to move ethane and other raw materials to cracker and other manufacturing facilities, DiGregorio explained. "The proposed 'six-pack' pipeline system would transport methane, ethane, ethylene, propane, propylene and chlorine to manufacturing facilities throughout the region," he said. NGL likely would be stored in depleted natural gas fields, depleted salt domes or other natural underground caverns, noted DiGregorio. Exactly where the hub would be located remains undetermined, but experts reportedly are exploring candidate sites. Geology researchers from universities in West Virginia and Ohio are compiling a list of the top three to five potential locations in the quad-state region based on various technical criteria. Much of Appalachia's existing chemical and plastic manufacturing capacity straddles the corridors of the Ohio River and its main tributaries. New capital projects – particularly Shell's ethane cracker near Pittsburgh and PTTGC America's proposed ethane cracker in Belmont County, Ohio – would also enjoy easy river access to facilitate transport of raw materials, products and equipment. The benefits of having a multibillion-dollar storage hub would extend well beyond the locality and state hosting it.

 US Gulf Coast September distillate exports to Europe at 920,000 mt -  Exports of distillates from the US Gulf Coast to Europe in September stand at 920,000 mt so far, according to data from cFlow, S&P Global Platts trade flow software. By comparison, a total of 1.21 million mt crossed the Atlantic during the same period in August, the data shows. The inbound clean products are set to arrive in European ports in 22 cargoes, with eight of these comprising 340,000 mt heading towards Mediterranean destinations. In a reversal of the usual flow of distillates from US to European ports, some cargoes have been crossing the Atlantic laden with product in the opposite direction. Exports out of Europe to Latin America were helping clear some summer volumes from Amsterdam-Rotterdam-Antwerp, where vessels were seen loading product from Primorsk, Amsterdam and Rotterdam. A strong Gulf Coast market has been put down to some unexpected refinery outages both there and in Latin America, which have provided a price floor for spot barrels. LyondellBasell's 263,776 b/d Houston facility reported a plant-wide power outage Thursday after a fire at the plant Wednesday, while PDVSA reported that it was gradually restarting its 310,000 b/d Cardon refinery in Venezuela after a blackout Thursday. "Demand is good, it's the end of winter... it's always more or less the case... plus there are still some problems in Venezuela so refining is down so [they] import instead of exporting, it changes the balance," a trader said.

What will happen to normal butane exports during motor gasoline winter blending season? - We are rapidly approaching September 15, when summer blend motor gasoline changes over to winter blend, allowing the increased use of high vapor pressure normal butane in the blending.  However, the spread between Reformulated Blendstock for Oxygenate Blending (RBOB, the benchmark unleaded gasoline) and normal butane was down to 85 cents/gal as of the end of August, reducing the incentive to blend as much butane into motor gasoline as possible to its lowest level in recent years.  Sure, 85 cents/gal is still 85 cents.  But what impact might that smaller RBOB/normal butane spread and other market factors have on butane exports?  Today we examine the state of the gasoline blending and normal butane markets, and the effect that current dynamics –– a gasoline glut and strong butane prices among them –– ­­may have. Let’s begin our look at winter blending of motor gasoline, the RBOB/normal butane spread, and butane exports with a review of the physical performance limitations to the amount of butane that can be blended into motor gasoline and the regulations that govern the practice of blending.  There are two primary boundaries regarding normal butane related to engine performance: (1) in the summer, too much butane in the gasoline can cause flashing (vaporization) in the fuel lines and as a result prevent the fuel pump from sending gasoline to the engine (a.k.a. vapor lock); and (2) on cold winter days and nights, insufficient levels of butane in the gasoline can cause the engine to have difficulty starting, since vaporized gasoline is needed for initial combustion.

 5,300-Gallon Oil Spill Being Cleaned in South Louisiana - ABC News: The Coast Guard says a south Louisiana pipeline has been secured and authorities are investigating what caused roughly 5,300 gallons of crude oil to leak near Bay Long. The Coast Guard in New Orleans received a report Monday about the leak from a pipeline owned by Harvest Pipeline Company. The pipeline was struck by a Great Lakes Dredge and Dock Company vessel that was doing excavation. An oil spill response organization, ECM Maritime Services, has been contracted to manage cleanup. About 3,000 feet of hard boom have been put out, and sorbent material and skimmers are collecting the oil. The Coast Guard and Louisiana Department of Wildlife and Fisheries are also helping supervise the response. Coast Guard crews have conducted aerial assessments of the site and nearby areas

Oil spill caused by contractor working on island restoration  (AP) — An oil spill found in south Louisiana this week was caused by a contractor working on an environmental restoration project funded after the larger BP oil spill. The Coast Guard learned Monday that roughly 5,300 gallons of crude oil had leaked into Bay Long, part of Barataria Bay. Times-Picayune reports ( an excavating marsh buggy operated by Great Lakes Dredge & Dock Co. accidentally cut through a pipeline and released the oil while rebuilding Chenier Ronquille Island. The $36 million barrier island reconstruction project is funded by part of the $1 billion that BP made available for early Natural Resource Damage Assessment projects a year after the Deepwater Horizon oil rig caught fire and sank in April 2010, releasing millions of barrels of oil into the Gulf of Mexico.

Apache Has High Hopes for New Oil-Field Discovery in Texas - WSJ: Apache Corp. said it has discovered the equivalent of at least two billion barrels of oil in a new west Texas field that has the promise to become one of the biggest energy finds of the past decade. The discovery, which Apache is calling “Alpine High,” is in an area near the Davis Mountains that had been overlooked by geologists and engineers, who believed it would be a poor fit for hydraulic fracturing. It could be worth $8 billion by conservative estimates, or even 10 times more, according to the company. Shares rose by as much as 13% after U.S. markets opened Wednesday. Apache started acquiring mineral rights in the area two years ago and subsequently discovered its potential. The company then quietly went about locking up more land in the field, believed to be up to 450,000 acres overall. Its position now exceeds 300,000 acres, or roughly two-thirds of the field, and is about 20 times the size of Manhattan. The company has begun drilling in the area and says the early wells, which produce more natural gas than oil, are capable of providing at least a 30% profit margin at today’s prices, including all costs associated with drilling. Some are so prolific that they can break even at a price of 10 cents per million British thermal units, according to the company. Natural gas futures closed Tuesday at $2.72. “This is a giant onion that is going to take us years to unveil and peel back,” Apache Chief Executive John Christmann IV said in an interview. “The industry dogma about this area, all the fundamental premises that most people had about it, were just wrong.”It remains to be seen whether Alpine High delivers on its potential; some oil and gas discoveries touted as game-changers have historically produced less than advertised. Some analysts said they were concerned about the need for infrastructure in West Texas to process and ship gas, oil and other products from the discovery. “They are close to the Gulf Coast and to Mexico, where there will be significant demand growth, but this could be big enough that they could see price realization problems,” said R.T. Dukes, an analyst at energy consultancy Wood Mackenzie. Still, the field, which Apache estimates could hold the oil-and-gas equivalent of as much as 8.1 billion barrels of oil, underscores the potential of new drilling methods to unlock vast new resources in North America. The discovery is likely to transform Apache, currently the nation’s sixth-largest independent energy company with a market capitalization of $20.1 billion. Alpine High may now be the biggest asset for Apache, known in the industry for its frugality and record of buying assets from other companies rather than finding its own. The company is planning to direct one-fourth of its capital budget this year toward the field, but will require several years to ramp up production because of the need for pipelines and processing equipment. Apache has so far drilled 19 wells in the area.

See where Apache Corp. says it found billions of barrels of oil - Apache Corp. stock was among the top gainers Wednesday after the oil and gas company revealed an “immense” oil and gas reserve in a relatively unknown corner of west Texas. Apache estimated that its more than 300,000 contiguous acres in the region hold about 3 billion barrels of oil and 75 trillion cubic feet of natural gas. It called the field Alpine High. Alpine High is located in the Delaware Basin, the southwest corner of the Permian Basin. The Permian itself is mostly located in west Texas, with a small area straddling southeastern New Mexico.  Texas estimates the Permian already has produced 29 billion barrels of oil, and says industry experts estimate it to contain “recoverable oil and natural gas resources exceeding what has been produced over the last 90 years.”. Oklahoma has experienced an influx of earthquake activity in the past decade that seismologists have tied to the underground disposal of wastewater from oil and gas drilling. Thus far, however, the Delaware Basin had been the relative slacker in the Permian, which accounted for nearly 20% of total U.S. oil production a few years back. Formations like Spraberry and Wolfcamp had been way more prolific as seen in this map from the Energy Information Administration:

France’s Total Buys Bigger Piece of Barnett Shale in Texas — French oil major Total is taking full control of the Barnett Shale oil-and-gas leases in Texas that it shared with joint-venture partner Chesapeake Energy, after the U.S. shale producer decided to exit the once-prolific gas field to shore up its finances. Total said on Friday it is exercising rights to acquire a 75% share in the Barnett Shale assets to become the sole owner and operator of 215,000 partially developed acres of the field near Fort Worth in North Texas. The move follows Chesapeake’s agreement last month to pay $334 million to Williams Partners to get out of its pipeline contract with the pipeline operator in the Barnett Shale formation. At the time, Chesapeake said it was transferring its interests in the fields to Saddle Barnett Resources LLC, a private equity-backed company based in Dallas. Total, which is pre-empting Saddle’s deal, said its U.S. exploration and production unit will add $420 million to what Williams is receiving to achieve “a fully restructured, competitive gas-gathering agreement,” in addition to paying $138 million to be released from three other contracts. The company said it expects to complete the deal in the fourth quarter, subject to “third-party consent of the arrangement.” “With the new conditions created by the exit of Chesapeake and the associated restructuring of the midstream contracts, we believe that we can extract significant value from the substantial, well-located resource base of the play,” Total E&P USA President José Ignacio Sanz said in a statement. The Barnett Shale was once a big-producing gas field, but in recent years drilling for new wells has waned amid low natural gas prices. At the start of September, there were just three rigs drilling in the Barnett, compared with 202 rigs drilling in the Permian Basin of West Texas,

Permian oil output could grow 300,000 b/d/year at current price range: Pioneer CEO - Production in the Permian Basin, the US' most active oil play, could grow significantly at current or slightly higher prices, but boosting Eagle Ford and Bakken output requires a step change in crude prices, Scott Sheffield, CEO of major Permian player Pioneer Natural Resources, said Thursday. Located in West Texas and New Mexico, the Permian could add 300,000 b/d a year at a $47/b to $57/b WTI price to domestic supply, Sheffield said in webcast remarks at the Barclays 2016 CEO Energy-Power Conference in New York."I don't think the Eagle Ford or Bakken at a price of $47 are going to start up," Sheffield said of those basins respectively sited in south Texas and North Dakota/Montana. "I think [they] will be flat at a $50 price," he said. "Once you get to $55-$60, I think the Eagle Ford and Bakken start up at that time." But Permian production, which is just under 2 million b/d, will grow at $50/b, even though US conventional oil will decline, he added. "You start moving toward $60, and it will take a year to get going, but the US could easily [incrementally] supply 500,000-750,000 b/d" annually, Sheffield said. "At $60, rigs will come back to work and the Eagle Ford and Bakken will take off."

‘Preemption’ Is Major Obstacle Across the Country as Progressive Laws Like Fracking Bans Passed in Liberal Cities Are Immediately Crushed by Right-Wing State Legislatures - When Denton, Texas, passed a fracking ban in November 2014, it was national news. The story seemed out of a movie, a David-and-Goliath tale in which a scrappy band of citizens goes up against big industry and wins. But Frack Free Denton was aware that electoral victory wouldn’t be enough. The activists knew that with a single measure, the Texas state legislature could invalidate their local ban. What’s more, in doing so, the legislature would be acting under a completely legal state prerogative that reminds cities how limited their lawmaking power really is.  Sure enough, despite widespread local support, it only took months to make Denton’s fracking ban history. The GOP-dominated Texas state legislature, under pressure from the oil and gas industry, passed a law forbidding any locality from banning fracking. Denton’s own state representative voted for the measure. “We were so excited it passed, but I think we knew then we were up against a challenge because of the wave of folks who were voted up alongside the ban,” says Hunter. “We got a hard lesson in the state of our democracy, the state of our government.” PREEMPTION” LAWS ARE not new, nor are they necessarily about undoing local legislation. But with some notable exceptions, past preemption laws have generally enforced what can be called “minimum preemption”: They force localities to do something where they might otherwise have done little or nothing. As it’s often said, they set a “floor” for regulation. For instance, the federal government has been setting minimum standards of environmental protection for years, preempting the states from allowing lower environmental standards. Most current preemption laws, by contrast, are what one might call “maximum preemption.” These laws aren’t about setting minimums; instead, they prohibit local regulation. States have prevented localities from creating paid sick leave requirements for businesses, or raising the minimum wage. Many who oppose these measures blame their proliferation on the conservative American Legislative Exchange Council, known as ALEC, which has drafted “model” preemption bills for state lawmakers to use. “Pretty much anything you can think of that matters to the American family is under assault by local preemption,”

 Karnes County, Texas - Leading The Eagle Ford In Spite Of The Downturn -- High-grading is leading the way to honey wells in the core fields in the most productive oil & gas plays. For an example, let’s take a look at oil & gas permitting activity for the last 30 days across the USA, This heat map clearly shows the development of some defined “honey spots” for drillers. We see the dual Permian foci on the Midland and Delaware Basins in West Texas and New Mexico; a continuing Marcellus/Utica concentration of activity in southwestern Pennsylvania and eastern Ohio; Niobrara basin activity tightening up around a few parts of Colorado and Wyoming; the Bakken in western North Dakota; and the ongoing drilling in California. The deepest orange in the southern part of Texas is the honey spot of the Eagle Ford, Karnes County, TX. If we look at Cumulative Production (20:1 BOE) in the Eagle Ford broken down by county for the past five years, we see that Karnes has always been the best yield, followed by Dewitt, LaSalle and Dimmit Counties.Drillinginfo’s DI Index of New Production Capacity, along with its accompanying perspective for the month of October, highlights how much heavy lifting Karnes County is doing vs. the rest of the Eagle Ford – historically Karnes accounts for 15-20% of New Production Capacity, however in September that percentage has spiked to 30%!

Record-tying Oklahoma earthquake felt as far away as Arizona: (AP) — A record-tying earthquake in the edge of Oklahoma's key energy-producing areas rattled the Midwest from Illinois to the southwest part of Texas on Saturday, bringing fresh attention to the practice of disposing oil and gas field wastewater deep underground. The United States Geological Survey said a 5.6 magnitude earthquake happened at 7:02 a.m. Saturday in north-central Oklahoma, on the fringe of an area where regulators had stepped in to limit wastewater disposal. That temblor matches a November 2011 quake in the same region. An increase in magnitude 3.0 or greater earthquakes in Oklahoma has been linked to underground disposal of wastewater from oil and natural gas production. The Oklahoma Corporation Commission, which since 2013 has asked wastewater-well owners to reduce disposal volumes in parts of the state, is requiring 37 wells in a 514 square-mile area around the epicenter of the earthquake to shut down within seven to 10 days because of previous connections between the injection of wastewater and earthquakes. "All of our actions have been based on the link that researchers have drawn between the Arbuckle disposal well operations and earthquakes in Oklahoma," spokesman Matt Skinner said Saturday. "We're trying to do this as quickly as possible, but we have to follow the recommendations of the seismologists, who tell us everything going off at once can cause an (earthquake)." Skinner said the commission's "area of interest" includes another 211 square miles in Osage County. However, he said the commission doesn't know how many wells may be involved because the area is under the jurisdiction of the Environmental Protection Agency, and the commission is working with that agency. "EPA decides on the wells in Osage County. We don't know anything about Osage County, legally we're not even allowed to ask," Skinner said.People in Kansas City and St. Louis, Missouri; Chicago; Gilbert, Arizona; Fayetteville and Little Rock, Arkansas; Des Moines, Iowa; Memphis, Tennessee; and Big Lake in the southwest part of Texas, all reported feeling the earthquake. Dallas TV station WFAA tweeted that the quake shook its studios, too.

Oklahoma Earthquake Felt in Several U.S. States, as Oil Wells Draw Scrutiny - WSJ: A 5.6-magnitude earthquake rattled Oklahoma on Saturday, damaging buildings and tying for the strongest temblor ever recorded in the state, which has experienced a rash of earthquake activity in the past decade that U.S. seismologists have tied to the underground disposal of wastewater from oil and gas drilling. Oklahoma Gov. Mary Fallin said via Twitter TWTR 0.26 % on Saturday afternoon that state regulators were contacting operators of 37 disposal wells in a 500-square-mile area and asking them to shut down following the quake. The earthquake took place around 7:02 a.m. central time near Pawnee, Okla., a town of about 2,200 people roughly 55 miles northwest of Tulsa, according to the U.S. Geological Survey. It was felt widely through the middle of the country, with reports coming from as far as Houston and Kansas City, according to the USGS. There were no reports of serious injuries, but officials reported damage to some buildings in Pawnee. It wasn’t clear whether the temblor was natural or triggered in part by human activity. An assessment deemed six buildings in the Pawnee Nation reservation uninhabitable, Gov. Fallin wrote on Twitter. In rural Pawnee County, three homes were damaged and a homeowner was taken to the hospital after suffering minor injuries in the quake, she wrote. Staff from the Oklahoma Department of Emergency Management were in Pawnee assessing damage to buildings, said Keli Cain, spokeswoman for the department. Residents in Oklahoma City and Stillwater, a city southwest of Pawnee that is home to Oklahoma State University, have also reported building damage via social media, Ms. Cain said. “We’re monitoring social media, and we’ve seen some reports,” she said. The department hadn’t received reports of serious injuries.

Record-equalling quake hits US state of Oklahoma, sparking fears about fracking | One of the strongest earthquakes ever recorded in Oklahoma rattled a state where seismic activity linked to energy production has become a growing concern and sent tremors through six neighbouring states, a federal agency said on Saturday. The quake, which struck 14 km northwest of Pawnee in north-central Oklahoma at 7.02am (1.02am Sunday NZ Time), had a magnitude of 5.6, matching in strength a temblor that hit the state in 2011, the United States Geological Survey reported on its website. There were no immediate reports of injuries in Pawnee, where about 25 percent of the residents are Native Americans. Damage in the town appeared to be minor.The earthquake, which had a depth of 6.6 km, could fuel concerns about the environmental impact of oil and gas drilling, which has been blamed for a spike in minor to moderate quakes in the region. Oklahoma's economy is heavily dependent on energy production, which accounts for one of every four jobs in the state.Pawnee Mayor Brad Sewell said the tremor lasted nearly a minute, far longer than previous ones that lasted only a second or two. Part of the façade of an early 20th-century bank building had fallen into a downtown street, he said. "We have had a spate of quakes over the last several years, but nothing like this," he said. "It was a long, sustained quake."

Oklahoma Quake Matches Record Even After Fracking Waste Restricted – Oklahoma registered one of its biggest earthquakes Saturday even after state regulators have beefed up limits on disposing oilfield waste and the rate of tremors had started to slow somewhat from unprecedented levels last year. The tremor in central Oklahoma was felt from Texas to Illinois, measuring 5.6 in magnitude and tying a state record set in 2011, according to the U.S. Geological Survey. The number of earthquakes measuring 3.0 or higher reached 890 last year, followed by 375 this year through June 22. At that rate, the number of earthquakes would fall to less than 800 this year, still a far cry from only two in 2008. As oil production surged in the state, with the Scoop and Stack areas among the most coveted new plays in the country, so too did the disposal of wastewater from fracked fields that scientists have tied to earthquake activity. Several producers, and now the U.S. Environmental Protection Agency, are facing lawsuits because of seismic activity allegedly linked to oilfield wastewater disposal in Oklahoma and other states. “Without studying the specifics of the wastewater injection and oil and gas production in this area, the USGS cannot currently conclude whether or not this particular earthquake was caused by industrial-related, human activities,” the agency said Saturday in a statement. “However, we do know that many earthquakes in Oklahoma have been triggered by wastewater fluid injection.” Disposal Wells The Oklahoma Corporation Commission, which regulates oil and gas activity in the state, has been issuing restrictions for more than a year aimed at cutting down on the amount of wastewater injected into underground wells. There are about 35,000 active wastewater disposal wells, though only a few dozen have been linked to quakes, according to a Bloomberg Intelligence report in May, citing the USGS. Saturday’s earthquake, near a complex of oil-storage facilities, led the regulator to order the suspension of about 37 wastewater-disposal wells. The commission was contacting the operators of the wells in a 500-square-mile area around the town of Pawnee, Governor Mary Fallin said in a Twitter post. Oil storage and pipeline facilities at Cushing, 25 miles (40 kilometers) south of Pawnee, were undamaged, according to the commission and four of the companies that operate there.

Crude Oil Supply Risks In Cushing - A 5.6-magnitude earthquake struck Oklahoma Saturday. That was tied for the strongest-ever quake recorded in the state. It is the largest one in the continental U.S. so far this year, according to Lucy Jones, a quake expert and seismologist formerly with the U.S. Geological Survey. Its epicenter was just about 25 miles from the key oil hub in Cushing, which currently stores 64 million barrels of crude oil. Oil companies checked-out their facilities in Cushing and reported no damage. However, the Oklahoma Corporation Commission ordered at least 37 wastewater injection wells in the area to immediately shut down. The commission has linked wastewater injection wells to seismic activity.Of the thirteen strongest earthquakes recorded in Oklahoma, seven of them have occurred in 2015-16. The oil-and-gas industry has acknowledged that injecting water underground at high pressure may help trigger movement along geologic fault lines. Injections are believed to weaken fault lines, causing them to break. Wastewater injection wells are a means for the fracking industry to dispose of toxin-laden fracking fluid that is the byproduct of enhanced recovery of oil and gas extraction. Because of the environmental concerns over the practice, companies are looking for an alternative way to dispose of, or recycle, these fluids.

Oklahoma Quake Triggers Close of Fracking Waste-Disposal Wells –  A 5.6-magnitude earthquake struck early Saturday near the town of Pawnee, Oklahoma, close to key oil-storage facilities, leading state regulators to order about 35 fracking waste-disposal wells in the area to be shut down. The Oklahoma Corporation Commission, which regulates the oil industry in the state, is contacting the operators of the wells in a 500-square-mile area around Pawnee, Governor Mary Fallin said in a Twitter post. The complex of oil storage and pipeline facilities at Cushing, Oklahoma, just 25 miles from Pawnee, was undamaged, according to the commission. The quake hit the area about 7:02 a.m. Oklahoma time, the U.S. Geological Survey said in a statement, adding that it was the largest in the state since 2011. The surrounding region of Oklahoma and Kansas -- a center of oil exploration using hydraulic fracturing, or fracking, technology -- has seen close to 80 other magnitude-4 quakes or larger events over the past decade.The surge in earthquake frequencies has been tied to waste water disposal wells used in oil and natural gas drilling operations. Last week, the crude storage levels at Cushing stood at nearly 64 million barrels, according to the Energy Information Administration data.Officials for Enterprise Products Partners LP, Kinder Morgan Inc., Magellan Midstream Partners LP and Enbridge Inc., which operate petroleum terminals, pipelines and storage facilities in Cushing, said their sites sustained no damage and that operations were normal.  A spokesman for the Oklahoma Corporation Commission, Matt Skinner, offered similar comments.

Oklahoma earthquake: 37 wells ordered to shut down after scientists' warning | The Independent: A magnitude 5.6 earthquake in Oklahoma has brought fresh attention to the practice of disposing oil and gas field wastewater deep underground. The United States Geological Survey said the quake happened at 7.02am on Saturday, in north-central Oklahoma, on the fringe of an area where regulators had stepped in to limit wastewater disposal. The shallow quake struck nine miles northwest of Pawnee, where there were no immediate reports of injuries. Damage in the town appeared to be minor. An increase in earthquakes in Oklahoma that are magnitude 3.0 or greater has been linked to underground disposal of wastewater from oil and natural gas production.Saturday's earthquake led the Oklahoma Corporate Commission to order 37 wells in an area around the epicentre of the quake of 514 square miles to shut down within seven to 10 days. "All of our actions have been based on the link that researchers have drawn between the Arbuckle disposal well operations and earthquakes in Oklahoma," spokesman Matt Skinner said Saturday. "We're trying to do this as quickly as possible, but we have to follow the recommendations of the seismologists, who tell us that everything going off at once can cause an [earthquake]."

Oklahoma Earthquake's Magnitude Raised to 5.8 - Oklahoma Earthquake’s Magni: The U.S. Geological Survey on Wednesday revised the official magnitude of the earthquake that shook Oklahoma on Saturday to 5.8 from the initial estimate of 5.6, making it the strongest temblor ever recorded in the state. The USGS said it was updating the strength of the quake near Pawnee, Okla., which damaged some buildings but didn't cause any major injuries, in response to additional analysis of seismic recordings. Such revisions aren't uncommon in earthquake science, as seismologists and geophysicists review more data. But the USGS said it also was raising the official magnitude of a 2011 earthquake near Prague, Okla., to a 5.7-magnitude event, after initially measuring it at 5.6, saying questions about their relative size prompted a re-analysis. “USGS analyses indicate that the two earthquakes are very similar in size—to within typically cited uncertainties of 0.1 magnitude units,” said Gavin Hayes, a USGS research geophysicist. “However, the 2016 Pawnee event is slightly larger than the Prague earthquake in 2011.” The USGS noted that ranking the largest earthquakes in state history is difficult because “seismic instrumentation has vastly improved over the last several decades.” The state also had a sizable earthquake in 1952, and in 1882, before the era of seismic instruments. While Oklahoma has a history of seismic activity, it has stepped up regulation of underground disposal of wastewater from oil and gas production after seeing a dramatic increase in quakes in recent years. . In 2015, the USGS recorded 2,500 quakes with a magnitude of 2.5 or higher in the state, up from just three in 2005.

USGS Upgrades Pawnee, Oklahoma, Earthquake Magnitude to 5.8, Making It Strongest in State's History - A large earthquake that struck northern Oklahoma Saturday morning and rattled most of the Great Plains has been upgraded by the U.S. Geological Survey and is now the strongest tremor to hit the state since records began.  The USGS announced the 5.6 magnitude quake has been upgraded to 5.8, according to a press release sent Wednesday. The decision to upgrade the temblor was made after further studies of the seismic recordings, the USGS also said. Saturday morning's earthquake was reportedly felt in at least seven states and left some structural damage in Pawnee County, especially to older buildings. The tremor struck at 7:02 a.m. CDT and was just 3.3 miles deep, according to the USGS. Almost immediately, state officials ordered the shutdown of 37 disposal wells used for fracking, which has been proven to be responsible for the increase in earthquakes in several states, including Oklahoma. The shutdown affects wells in a 725-square-mile area near the epicenter of Saturday morning's quake.In addition to the upgrade, a different earthquake was downgraded during the analysis, the USGS also said. A 5.7 magnitude tremor that was centered near Prague, Oklahoma, on Nov. 7, 2011 has been downgraded to 5.6, making it the second-largest quake in state history.

Oklahoma Shuts More Oil Fracking Waste Wells as Quake Upgraded - Bloomberg: Oklahoma drillers are being ordered to shut more fracking wastewater wells just as the U.S. Geological Survey is upgrading last weekend’s earthquake to a record magnitude. The Environmental Protection Agency said Wednesday it has ordered the closure of 17 additional disposal sites under its jurisdiction in Osage County. The move follows the suspension of 37 wells by the Oklahoma Corporation Commission and comes on the same day the USGS upgraded the tremor to 5.8 in magnitude, the highest ever for the state, from 5.6 previously estimated. Oklahoma regulators had already been limiting the disposal of oilfield wastewater, which scientists have linked to seismic activity, before the tremor that was felt from Texas to Illinois on Saturday. The number of earthquakes measuring 3.0 or higher reached at least 890 last year, up from just two in 2008, before the state’s fracking boom started. The USGS has not determined an official cause for the earthquake. “At this point, we don’t want to attribute it specifically to any phenomena,” George Choy, seismologist at the U.S. Geological Survey, said Wednesday in a phone interview. “We need to get more data to make sure everything is lined up before we say anything definitive.”The Oklahoma Corporation Commission, which regulates oil and gas activity in the state, has been issuing restrictions for more than a year aimed at cutting down on the amount of wastewater injected into disposal wells. The measures may raise costs for drillers. “In $45 oil, every little bit of cost increase makes a difference,” Chad Warmington, President of the Oklahoma Oil & Gas Association, said Wednesday in an e-mail. “It becomes prohibitively more expensive when you have to truck water for any significant distance versus disposal on the site of your oil and gas production.”

  After Okla. quake, search is on for new ways to use fracked well water - - Saturday's Oklahoma earthquake that shook people from Texas to North Dakota put a new dent in the idea that fracking-linked temblors were too small to matter. Oklahoma and federal officials quickly ordered the closing of water disposal wells that may have caused the largest quake ever measured in the state. And that leaves the question: What else can be done with that wastewater? Industry experts say there are some answers. Some are already being tried. Some could be expensive. But either the water gets managed or there's the risk of shutting down thousands of oil and gas wells in Oklahoma and in other states, including Texas, where scientists have drawn links to earthquakes. "The answers are not easy, by any means. There is a whole lot of economy at stake," Saturday's 5.8-magnitude quake was the biggest ever measured in Oklahoma and mostly shook lightly populated areas. Pawnee was most affected, but other towns reported damage ranging from cracks in walls and foundations to food on grocery shelves tossed to the floor. Two smaller quakes were reported Tuesday. The state ordered 37 water wells to be closed. Federal authorities expanded the closure to 17 wells on Native American land nearby that the state has no authority over. "This was an emergency response," said Matt Skinner, spokesman for the Oklahoma Corporation Commission. "We don't consider this a final step." Oklahoma has experienced a sharper rise than Texas in the number and strength or earthquakes. But both states have experienced significant increases over the past decade, as the number of oil and gas wells has increased. . Geologists estimate that as much as ten times more water comes out of U.S. wells during their lifetimes as oil. And while conventional wells have produced water for years, the boom in fracking has vastly increased the number of active wells in the U.S.

Lloyd’s Wins Right to Fight in N.Y. Over Oklahoma Quake Coverage - Bloomberg: Lloyd’s of London has kept its lawsuit against New Dominion LLC over fracking out of the state where the ground is shaking. A federal judge in New York agreed Wednesday to decide the lawsuit by Lloyd’s seeking to be released from liability for earthquake damage in Oklahoma blamed on fracking. U.S. District Judge Denise Cote in Manhattan said a clause in the Lloyd’s insurance policies requires disputes to be resolved in New York.New Dominion had hoped to litigate the insurance question in its home state of Oklahoma, where it sued in June to try to force Lloyd’s to provide coverage for earthquake claims. The decision comes as Oklahoma drillers are being ordered to shut more fracking wastewater wells and the U.S. Geological Survey upgraded an earthquake last weekend to 5.8 in magnitude, a record for the state. The Environmental Protection Agency said Wednesday it has ordered the closure of 17 additional disposal sites under its jurisdiction in Osage County in Oklahoma. The move follows the suspension of 37 wells by the Oklahoma Corporation Commission. Oklahoma regulators had already been limiting the disposal of oilfield wastewater, which scientists have linked to seismic activity, before the tremor that was felt from Texas to Illinois on Saturday. The number of earthquakes measuring 3.0 or higher reached at least 890 last year, up from just two in 2008, before the state’s fracking boom started. The USGS hasn’t determined an official cause for the earthquake. Arguments in the Lloyd’s case focus on whether pollution insurance policies it sold to the oil company in 2014 cover earthquakes. This year, New Dominion was hit with five lawsuits seeking compensation for damage caused by earthquakes in Oklahoma. The suits blamed the earthquakes on the company’s injection well operations. Injected Chemicals Lloyd’s declined to pay for the damages, saying its insurance only covered the company for injuries caused by pollutants and that the water and chemicals injected into the wells as part of the fracking process didn’t qualify as pollution under the policy.

Fracking Didn't Cause Oklahoma Earthquake - American Thinker - The earth moved for environmental extremists Saturday when a 5.6 magnitude earthquake struck Oklahoma. As soon as the first aftershock, the greenies were in full voice blaming fracking, the technology that has fueled America’s oil and natural gas boom. Oklahoma state regulators ordered 37 disposal wells used by frackers shut down and Green Party presidential candidate Dr. Jill Stein tweeted: Fracking causes polluted drinking water + earthquakes. The #GreenNewDeal comes with none of these side effects, Oklahoma. #BanFracking Hydraulic fracturing, the technical term, does not cause earthquakes nor has there ever been evidence that it contaminates drinking water. Fracking has been used in oil and gas production in Oklahoma since 1949 and now, more than six decades later, the chicken littles of the left are claiming it now causes major destructive earthquakes? As Investor’s Business Daily editorialized:  So desperate have the greenies become to stop the oil and natural gas boom produced by the use of fracking that they resorted to claims that fracking can cause earthquakes. A recent report by the National Research Council dispelled that notion. U.S. Geological Survey seismologist William Ellsworth says he agrees with the research council that "hydraulic fracturing does not seem to pose much risk for earthquake activity." The mixture used to fracture shale is in fact a benign blend of 90% water, 9.5% sand and 0.5% chemicals such as the sodium chloride of table salt and the citric acid of the orange juice you had for breakfast. Shale formations in which fracking is employed are thousands of feet deep. Drinking-water aquifers are generally only a hundred feet deep. There's a lot of solid rock between them….

 Are Induced Earthquakes In Oklahoma Caused By Fracking? USGS Determines 21 US Areas Now At Risk - Induced earthquakes in Oklahoma reached a 5.6 magnitude. A total of 11 quakes were recorded on Saturday. In recent years, earthquakes in the region have become increasingly common. Though there was significant debate about the safety of hydraulic fracturing or fracking, the process gained enough support to proceed in many parts of the United States. Fracking is a highly controversial practice, supported and condemned almost equally. A poll in early 2015 showed a nation evenly divided. It was good for the economy, and no one could really prove it would cause ecological damage. According to the March 2015 Gallop poll, the population of the United States was 40 percent for and 40 percent against fracking, while 20 percent said they were undecided.  Induced earthquakes are earthquakes caused by human actives. The United States Geological Survey, or USGS, stated plainly in a report issued in March that increases in Oklahoma earthquakes are a direct result of fracking-related activities.  Induced earthquakes in Oklahoma are being caused by the practice of disposing of wastewater beneath the Earth’s surface. Wastewater disposal from fracking is commonly hidden away far below ground. That wastewater disposal is the primary cause of increasing seismic activity in Oklahoma and surrounding states, according to the USGS report.  Fracking wastewater disposal methods are causing a significant increase in the number of earthquakes recorded in the central United States. The USGS report records a significant increase in seismic activity in recent years compared to years 1973 to 2008. Induced earthquakes in Oklahoma and other central U.S. states, with a magnitude over 3.0, numbered 1,010 from March 2015 to March 2016. Comparing that to an average of 24 natural quakes in years prior to 2008 shows an alarming escalation, as explained in this passage from the USGS report. “The central U.S. has undergone the most dramatic increase in seismicity over the past six years. From 1973 to 2008, there was an average of 24 earthquakes of magnitude 3.0 and larger per year. From 2009 to 2015, the rate steadily increased, averaging 318 per year and peaking in 2015 with 1,010 earthquakes. Through mid-March in 2016, there have been 226 earthquakes of magnitude 3.0 and larger in the central U.S. region.”

Fracking Takes A Hit -- "There were no reports of injuries, though the earthquake reportedly damaged a 100-year-old historic building in Pawnee," according to 9/3/16 story from UPI. Well, the 100-year-old building may have sustained what is now said to be "cosmetic" damage, but the fracking industry took a much more substantial hit to its reputation last week when frack-heavy Oklahoma was jiggled by a 5.8 magnitude earthquake, the second worst in its history. Hydraulic Fracturing may have invigorated huge swathes of America and basically removed the problem of "energy insecurity" from the American psyche but it remains an embattled technology and last week's earthquake though hardly major (earthquakes tend to be designated "major" around 7.0) gave its armies of enemies material which they will no doubt be using for a long time. As Seeking Alpha puts it in an article titled "Major Earthquake Threatens Fracking," "[t]he 5.60 magnitude earthquake that rattled Oklahoma in the outskirts of Cushing may be felt further than six states away as regulators begin to question the unusually high number of earthquakes occurring since fracking began." "The...incident...may jolt regulators into reconsidering the benefits of fracking. The US Geological Survey recorded seven additional tremors in the aftermath. Oklahoma Governor Mary Fallin issued a state of emergency and oversaw the shutdown of wells in a 725 sq. mile area...While Governor Fallin signed into law a bill preventing towns and cities from banning fracking and the White House's position on this extraction method remains unchanged, it is possible that these stances could be reversed as communities in shale basins tire of the earth shaking."Judging from a cascade of news articles and agitated opinion pieces, the anti-fracking movement certainly seems reinvigorated.

Search is on for ways to use fracked well water, and Texas may have an answer -- Saturday's Oklahoma earthquake that shook people from Texas to North Dakota put a new dent in the idea that fracking-linked temblors were too small to matter. Oklahoma and federal officials quickly ordered the closing of water disposal wells that may have caused the largest quake ever measured in the state. And that leaves the question: What else can be done with that wastewater? Industry experts say there are some answers. Some are already being tried. Some could be expensive. But either the water gets managed or there's the risk of shutting down thousands of oil and gas wells in Oklahoma and in other states, including Texas, where scientists have drawn links to earthquakes.  "The answers are not easy, by any means. There is a whole lot of economy at stake," said John Veil, a consultant who started studying the connections between water and petro-production when he worked for the Argonne National Laboratory. Veil did a study of what is called "produced water" from 2012. He estimates that about 20.3 billion barrels of water came out of onshore wells that year. Much of the waste is a greasy brine carrying the salt of ancient oceans plus toxic minerals dissolved over millions of years. So it can't simply be dumped into a lake or river. Nationally, about 46 percent of that water got recycled directly in the oil fields. A lot of it is used to boost the pressure near conventional wells, which increases the oil and gas flow. Some of can be processed and used to frack another well. Neither of those have been tied to earthquakes in Texas or Oklahoma. Some states re-use much more than others. Ohio, for instance, is recycling almost all of its oilfield water,   But about 47 percent gets injected into wells that are much deeper than the oil formations and underground drinking water reservoirs.  Unless oil and gas operators can get rid of that wastewater, they'll have to close down production. Several companies across the country have developed options beyond injection. Clane LaCrosse, head of Fort Worth-based Bosque Systems, says his company has solutions. His company processes about 30 million barrels of fluid a month in oil fields across the U.S. All of it goes back into the ground for newly fracked wells. And as long drilling stays active in the fields, he says, a lot of the produced water can be reused. "In the Permian Basin, you can reuse 100 percent of the water," he said.

Texas oil and gas regulators slow to react to earthquakes --  Earlier this year, the U.S. Geological Survey raised its official earthquake risk level for Texas, a decision that would have been surprising until a few years ago. But in the last eight years, Texas has experienced more than 150 earthquakes. Startlingly, these earthquakes are man-made, caused by injecting wastewater from oil and gas production into disposal wells. Numerous studies have found that pumping such huge volumes of wastewater into the ground can cause existing faults to move, triggering earthquakes. Frequent earthquakes are a new problem in Texas, coinciding with the growth of fracking — and massive volumes of fracking wastewater requiring disposal. Before 2008, Texas experienced relatively few earthquakes, and those quakes were spread across the state, such as a 1964 quake near the Texas-Louisiana border, quakes in West Texas in 1931 and 1969, and numerous small earthquakes over the decades in the Panhandle.Since the fracking boom, the story has been very different. Researchers at the University of Texas have found that an average of 12 earthquakes of a magnitude 3.0 or higher now shake Texas every year. Recent earthquake activity is concentrated in the Dallas-Fort Worth area, in the middle of the Barnett Shale and a hotspot for fracking and wastewater disposal wells. Earthquakes were reported near the Dallas-Fort Worth Airport beginning in 2008 — the first reported earthquakes in the region since 1950 — while Cleburne, just to the south, experienced 50 quakes in 2009 and 2010.

Texas energy regulators should halt injection well activity that causes earthquakes - Dallas Morning News - Earlier this year, the U.S. Geological Survey raised its official earthquake risk level for Texas, a decision that would have been surprising until a few years ago. In the last eight years, Texas has experienced more than 150 earthquakes. Startlingly, these earthquakes appear to be man-made, caused by injecting wastewater from oil and gas production into disposal wells. Numerous studies have found that pumping such huge volumes of wastewater into the ground can cause existing faults to move, triggering earthquakes.  Frequent earthquakes are a new problem in Texas, coinciding with the growth of fracking -- and massive volumes of fracking wastewater requiring disposal. Before 2008, Texas experienced relatively few earthquakes, and those quakes were spread across the state, such as a 1964 quake near the Texas-Louisiana border, quakes in West Texas in 1931 and 1969, and numerous small earthquakes over the decades in the Panhandle. Since the fracking boom, the story has been very different. Researchers at the University of Texas have found that an average of 12 earthquakes of a magnitude 3.0 or higher now shake Texas every year. Recent earthquake activity is concentrated in North Texas, in the middle of the Barnett Shale, a hotspot for fracking and wastewater disposal wells. Earthquakes were reported near the DFW International Airport beginning in 2008 -- the first reported earthquakes in the region since 1950 -- while Cleburne experienced 50 quakes in 2009 and 2010. Oklahoma in 2014 experienced more earthquakes than California, some causing extensive damage to buildings. Peer-reviewed studies have linked the Oklahoma earthquakes to disposal wells. Just this weekend, Oklahoma regulators ordered 37 disposal wells shut down after a 5.6 magnitude quake -- equal to the strongest in the state's history -- rocked the state and could be felt as far as Dallas and Chicago.  Though regulators in Oklahoma and Ohio have recognized that disposal wells can trigger earthquakes and have closed or limited their use, Texas public officials have been slower to act. The Railroad Commission of Texas, which oversees fracking and disposal wells, has curtailed or ended wastewater injection at only a handful of sites and in general has refused to acknowledge the extensive evidence that high-pressure injection of wastewater into disposal wells can trigger earthquakes.

Permit for exploratory drill near Lake Houston raises concerns about hydraulic fracturing - An oil drilling operation planned near Lake Houston has some residents concerned about the possibility of hydraulic fracturing, and the effects it would have on one of Houston’s main drinking water sources. The company planning the drill and the city of Houston say the use of hydraulic fracturing for this operation is not likely. Tri-C Resources LLC, a privately owned oil and gas exploration company, was issued a permit July 26 by the Texas Railroad Commission to drill a directional exploratory oil well 1.6 miles northwest of Huffman near Lake Houston. Tri-C representatives Cullen Cone and Ben Balagia of Houston confirmed the surface hole location is planned at the southwest corner of Smith Road and East Lake Houston Parkway near Lakewood Heights. Public concern about drilling arises from water and air quality issues associated with hydraulic fracturing, also known as “fracking.” The process involves injecting fluid containing water and chemicals into certain rock formations to increase oil flow and extraction, which can result in negative environmental impacts according to some individuals and organizations including the Environmental Protection Agency.Cone, Tri-C operations engineer, and Balagia, Tri-C business development manager, stated that the company has no plans to conduct any hydraulic fracturing during the drill. Fracking may be considered in the circumstance that what they believe to be sand turns out to be tight shale, but they say that is highly unlikely.

Enable Midstream - In the middle of STACK/SCOOP -- Enable Midstream Partners stands at a crossroads. It has great assets –– natural gas gathering and processing operations in the Anadarko, Arkoma, and Ark-La-Tex basins; a crude oil gathering system in the Williston Basin; and interstate/intrastate gas pipelines that ship natural gas from its gathering regions to the Texas Panhandle and Illinois.  The company also has an excellent position in gathering systems and processing plants in the prolific STACK and SCOOP plays in Oklahoma.  But everything is not rosy.  Earnings from STACK/SCOOP are being offset by production declines in its other areas of operation. On top of that, CenterPoint Energy, which owns 55.4% of Enable’s limited partnership units, is seeking to divest its shares, which would bring a new majority owner into the picture. In today’s blog we review our latest Spotlight analysis. Spotlight is a joint venture of RBN Energy and East Daley Capital Advisors. With the support of Oil & Gas Financial Analytics, Spotlight provides “deep dives” into the fundamentals that shape the outlook for midstream energy companies. In each report, we “spotlight” a midstream energy firm, typically one operating within a master limited partnership (MLP) structure, and provide a comprehensive view of the company’s assets and operations.  Please note that Spotlight should not be viewed as investment advice. Neither RBN Energy nor East Daley Capital is an investment advisor. Spotlight is included as part of our Drill Down report series to RBN Backstage Pass members. For more about Spotlight, see the paragraph at the end of this blog.

Bakken Pipeline System represents latest in trend of combined midstream efforts - Enbridge has abandoned its Sandpiper project and gotten onboard the joint-venture Bakken Pipeline System in a move that is starting to become familiar in the market: midstream companies merging their efforts in order to reduce capacity without giving up a region entirely. Enbridge said late Thursday it is dropping Sandpiper's regulatory application in favor of a buy-in with Marathon -- which would have been a joint-venture partner shipping on Sandpiper -- to Sunoco, Phillips 66 and Energy Transfer's 540,000 b/d joint-venture Bakken Pipeline System. The Bakken Pipeline System is made up of two pipeline projects, the Dakota Access Pipeline and the Energy Transfer Crude Oil pipeline, which will carry crude from North Dakota all the way to the Gulf Coast, passing through Patoka, Illinois, along the way. Enbridge's move bares similarities to the recent combination of the Grand Mesa and Saddlehorn pipelines in the Rocky Mountains -- there wasn't enough market to support two competing pipelines, so the companies instead combined their efforts, Lipow Oil Associates President Andy Lipow said Friday. That reduced the overall capacity entering the market without forcing any of the companies out of the space.Part of the issue is that Enbridge doesn't expect long-term Bakken production to decline; rather, it doesn't expect crude output to rise as much as it once did, Turner, Mason and Co. Executive Vice President John Auers said. "The forecast now is much lower than two or three years ago when they started Sandpiper,"

 Iowa Landowners Sue to Stop Dakota Access Construction, Say Pipeline Provides No Public Service | Democracy Now! (video & transcript)  The Dakota Access pipeline is also facing legal resistance in Iowa, one of four states through which it passes. We go to Des Moines to speak with Bill Hanigan, an attorney representing 15 Iowa landowners who are contesting the project’s use of eminent domain under the guise that it would provide a public service, even as it threatens to pollute the state’s farmland and water supplies.

UN body says Sioux must have say in pipeline project: (AP) — The Standing Rock Sioux Tribe must have a say with regard to a $3.8 billion oil pipeline that could disturb sacred sites and impact drinking water for 8,000 tribal members, representatives of the United Nations Permanent Forum on Indigenous Issues said Wednesday. In a statement, the forum's chairman Alvaro Pop Ac called on the U.S. to provide the tribe a "fair, independent, impartial, open and transparent process to resolve this serious issue and to avoid escalation into violence and further human rights abuses." Dalee Dorough, an Inuit member of the forum, which provides representation at the world body for indigenous peoples around the globe, said failure to consult with Sioux over the project violated the U.N. Declaration on the Rights of Indigenous Peoples. Article 19 of the declaration, which the U.S. endorsed in 2010, says: "States shall consult and cooperate in good faith with the indigenous peoples concerned in order to obtain their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them." "There has been a lack of good faith consultation with the indigenous people who will more than likely be impacted," Dorough said in telephone interview from Anchorage Alaska. "The U.N. declaration is fundamental because President Obama pronounced support for it and that they haven't been consulted consistent with the rights of that declaration is highly problematic." Native Americans from reservations hundreds of miles around have joined the growing protest against the Dakota Access Pipeline, which will pass through Iowa, Illinois, North Dakota and South Dakota, causing the company to temporarily halt construction. Over the past few weeks, nearly 30 protesters have been arrested.

 Native Americans Protesting Pipeline Attacked By “Goon Squad” Using Dogs And Pepper Spray - In a shameful and terrible scene reminiscent of police attacks against civil rights advocates and union busting of the 1920’s, the Dakota Access pipeline company dispatched its “goon squad” which unleashed attack dogs and pepper spray, injuring several Native American protesters. What began as a peaceful protest deteriorated into a new and shameful moment in today’s America, symbolized quite fittingly with images of Native Americans’ blood in the teeth of Corporate America’s attack dogs. The latest outrage against Native Americans reportedly occurred on Saturday when the Dakota Access Pipeline Company attacked protesters opposed to construction of the $3.8 billion dollar pipeline linking North Dakota’s Bakken Oilfield to Illinois. Democracy Now! provided on the ground footage of the confrontation that injured several and shows to many a telling picture of how Dakota Access (a wholly owned subsidiary of Energy Transfer Partners) approaches those who object to its corporate interests. The demonstration began with a gathering of perhaps a hundred or more demonstrators advocating their opposition to the pipeline, standing at a road adjacent to a line of bulldozers clearing earth for future construction. Many of those in attendance expressed their surprise at how suddenly construction began, considering the pending legal challenges facing the project. The firm hired security guards and even went so far as to have a helicopter circling the vicinity.A few men in hard hats began talking to some who crossed over but, as shown in the below video, one of the construction workers threw a demonstrator to the ground–sparking a confrontation. Later, the bulldozers pulled back but the company’s “security team” called in reinforcements armed with attack dogs and pepper spray to intimidate and push back the demonstrators. This led to many being bitten and sprayed. One person reported the dogs were so out of control, that even some of the construction workers were bitten.

Video: Hired Dakota Access oil pipeline security officers attack Native American protesters with dogs and pepper spray – ‘I saw dogs biting people indiscriminately’ –  several videos - On Saturday, 3 September 2016, water protectors from the Red Warrior Camp near the Standing Rock Sioux Reservation went to a construction site for the Dakota Access oil pipeline. There, they said, they were confronted by guard dogs and pepper spray, wielded by private security guards employed by Energy Transfer Partners, the pipeline builder’s parent company. Photographer Matika Wilbur, of Project 562 fame, was at the scene and compiled this video of some of the events of that afternoon. One protester said, "They set the dogs on us, and they started spraying … Before I got sprayed, I saw dogs biting people indiscriminately."

Sacred burial sites desecrated by Dakota Access pipeline construction – ‘This demolition is devastating’  (Native News Online) – Sacred places containing ancient burial sites, places of prayer and other significant cultural artifacts of the Standing Rock Sioux Tribe were destroyed Saturday by Energy Transfer Partners, Tribal Chairman David Archambault II said. “This demolition is devastating,” Archambault said. “These grounds are the resting places of our ancestors. The ancient cairns and stone prayer rings there cannot be replaced. In one day, our sacred land has been turned into hollow ground.” The desecration came one day after the Tribe filed court documents identifying the area as home to significant Native artifacts and sacred sites on Friday, before the Labor Day weekend. Construction crews removed topsoil across an area about 150 feet wide stretching for two miles, northwest of the confluence of the Cannon Ball and Missouri Rivers.  “I surveyed this land and we confirmed multiple graves and specific prayer sites,” said Tim Mentz, the Standing Rock Sioux’s former tribal historic preservation officer. “Portions, and possibly complete sites, have been taken out entirely.”

What Dakota Access Destroyed: Standing Rock Former Historic Preservation Officer Explains What Was Lost [Video] This interview was recorded on September 3, 2016. Former Standing Rock Sioux Tribal Historic Preservation Officer Tim Mentz explains the destruction of burial grounds and sacred sites by Dakota Access Pipeline LLC. This sacred site is what people were trying to protect when Energy Transfer Partners brought in aggressive dogs to attack unarmed people. “This demolition is devastating,” said Standing Rock Sioux Tribe Chairman David Archambault II. “These grounds are the resting places of our ancestors. The ancient cairns and stone prayer rings cannot be replaced. In one day, our sacred land has been turned into hollow ground.”

Did the Dakota Access Pipeline Company Deliberately Destroy Sacred Sioux Burial Sites?: Only hours after lawyers representing the Standing Rock Sioux Tribe filed evidence in federal court documenting how some of the Dakota Access pipeline's proposed route would go through a sacred burial site, the company unexpectedly began working on that very site. As bulldozers cleared earth, hundreds of Native Americans from many different tribes rushed onto the construction site to protect the sacred site. In response, the company's security forces attacked the Native Americans with dogs and pepper spray. Now the tribe's lawyer is requesting an emergency temporary restraining order to halt construction on this area of the pipeline. For more, we speak with Jan Hasselman, staff attorney with Earthjustice, who is representing the Standing Rock Sioux Tribe at today's hearing in federal court. And we speak with Dave Archambault, the chairman of the Standing Rock Sioux Tribe.

Oil pipeline protest turns violent in southern North Dakota - CBS News: - A protest of a four-state, $3.8 billion oil pipeline turned violent after tribal officials say construction crews destroyed American Indian burial and cultural sites on private land in southern North Dakota. Morton County Sheriff’s Office spokeswoman Donnell Preskey said four private security guards and two guard dogs were injured after several hundred protesters confronted construction crews Saturday afternoon at the site just outside the Standing Rock Sioux reservation. One of the security officers was taken to a Bismarck hospital for undisclosed injuries. The two guard dogs were taken to a Bismarck veterinary clinic, Preskey said.Tribe spokesman Steve Sitting Bear said protesters reported that six people had been bitten by security dogs, including a young child. At least 30 people were pepper-sprayed, he said. Preskey said law enforcement authorities had no reports of protesters being injured. There were no law enforcement personnel at the site when the incident occurred, Preskey said. The crowd dispersed when officers arrived and no one was arrested, she said. The incident occurred within half a mile of an encampment where hundreds of people have gathered to join the Standing Rock Sioux Tribe’s protest of the oil pipeline that is slated to cross the Missouri River nearby. The tribe is challenging the Army Corps of Engineers’ decision to grant permits for Dallas-based Energy Transfer Partners’ Dakota Access pipeline, which crosses the Dakotas and Iowa to Illinois, including near the reservation in southern North Dakota. A federal judge will rule before Sept. 9 whether construction can be halted on the Dakota Access pipeline. Energy Transfer Partners did not return phone calls and emails from The Associated Press on Saturday seeking comment.

 Dakota Access Pipeline Saga Turns Violent -- The fight over the fate of the 1,168-mile Dakota Access pipeline (DAPL) intensified on Saturday, when a clash between private security agents defending the construction site and Native American protestors led to several injuries for both parties. A crew from Democracy Now! posted a video of the incident on YouTube, which showed the mouth of one of the several guard dogs, reportedly managed by private security personnel, covered with the blood of a protestor. A total of six people - including a young child – were bitten by dogs, according to Steve Sitting Bear, a spokesperson from the Standing Rock Sioux Reservation, who also said the private guards pepper-sprayed at least 30 protestors. Four private security agents and two guard dogs also suffered injuries, according to the Morton County sheriff’s office spokesperson Donnell Preskey. One member of the private security team sought medical attention at the Bismarck hospital due to undisclosed injuries, the Associated Press reported. In what has become the largest gathering of Native Americans in more than 100 years, a coalition of dozens of tribes across the country oppose the pipeline’s construction, citing concerns that it would put the Missouri River – as well as the network of lakes and tributaries that the “Big Muddy” is connected to - at risk of contamination via oil spill and lead to the destruction of culturally significant sites for the Sioux tribes in the area. "This is the first time the seven bands of the Sioux have come together since [the Battle of] Little Bighorn [in 1876]," Hawste Wakiyan Wicasa, a Native American man living in a tent at protest camp in the Standing Rock Sioux Reservation, told the BBC. "Now, we have no weapons, only prayers. We are here for what our ancestors fought and died for. We have endured 250 years of betrayal by the white man.”    The Standing Rock tribe filed the injunction as part of a larger lawsuit against the Corps for authorizing the pipeline’s construction permits in violation of the Clean Water Act, National Historic Preservation Act and the National Environmental Policy Act.

Company Led by Donald Trump’s Energy Aide Says Its Oil Will Flow Through Dakota Access Pipeline – Steve Horn -  Continental Resources — the company founded and led by CEO Harold Hamm, energy adviser to Donald Trump's presidential campaign and potential U.S. Secretary of Energy under a Trump presidency — has announced to investors that oil it obtains via hydraulic fracturing (“fracking”) from North Dakota's Bakken Shale basin is destined for transport through the hotly-contested Dakota Access pipeline. The company's 37-page September 2016 Investor Update presentation walks investors in the publicly-traded company through various capital expenditure and profit-margin earning scenarios. It also features five slides on the Bakken Shale, with the fifth one named “CLR Bakken Differentials Decreasing Through Increased Pipeline Capacity” honing in on Dakota Access, ETCOP and how the interconnected lines relate to Continental's marketing plans going forward. In a section of that slide titled, “Bakken Takeaway Capacity” a bar graph points out that the opening of Dakota Access would allow more barrels of Continental's Bakken fracked oil to flow through pipelines.  Dakota Access is slated to carry the fracked Bakken oil across South Dakota, Iowa and into Patoka, Illinois. From there, it will connect to the company's Energy Transfer Crude Oil Pipeline (ETCOP) line, which terminates in Nederland, Texas at the Sunoco Logistics-owned refinery.  Previously, Harold Hamm was as an outspoken supporter of TransCanada's Keystone XL pipeline, deploying the lobbying group he founded named the Domestic Energy Producers Alliance to advocate for KXL and a Bakken on-ramp which would connect to it. Once he realized the northern leg was doomed politically, Hamm began singing a different tune on Keystone.  “We’re supporting other pipelines out there, we’re not waiting on Keystone. Nobody is,” Hamm, also an energy adviser to Mitt Romney’s 2012 presidential campaign, told Politico in November 2014. “That thing … needed action on it six years ago. I just think it’s too late and we need to move on.” One of those 'other pipelines' Hamm appears to have taken an interest in is Dakota Access (DAPL). Although to date, neither Hamm nor Trump have commented publicly on the DAPL project. Continental Resources told DeSmog that it does not comment on pipeline shipping contracts.

Judge grants partial stop on North Dakota pipeline work - — An American Indian tribe succeeded Tuesday in getting a federal judge to temporarily stop construction on some, but not all, of a $3.8 billion four-state oil pipeline, but its broader request still hangs in the balance. U.S. District Judge James Boasberg said Tuesday that work will temporarily stop between North Dakota’s State Highway 1806 and 20 miles east of Lake Oahe, but will continue west of the highway because he believes the U.S. Army Corps of Engineers lacks jurisdiction on private land. He also said he will rule by the end of Friday on the Standing Rock Sioux Tribe’s challenge of federal regulators’ decision to grant permits to the Dallas, Texas-based operators of the Dakota Access Pipeline, which will cross North Dakota, South Dakota, Iowa and Illinois. A weekend confrontation between protesters and construction workers near Lake Oahe prompted the tribe to ask Sunday for a temporary stop of construction. Four private security guards and two guard dogs received medical treatment, officials said, while a tribal spokesman noted that six people — including a child — were bitten by the dogs and at least 30 people were pepper-sprayed. Dakota Access attorney Bill Leone said during Tuesday’s hearing that if it weren’t for the stoppages, the section in question would be finished by the end of this week. Standing Rock Sioux tribal chairman Dave Archambault II issued a statement after the ruling, saying: “Today’s denial of a temporary restraining order ... west of Lake Oahe puts my people’s sacred places at further risk of ruin and desecration.” Attorney Jan Hasselman with Earthjustice, who filed the broader lawsuit on behalf of the tribe, noted the tribe will “know more by the end of the week about where we’re heading.”

Corps won't oppose tribe's request to stop work on pipeline (AP) — The Army Corps of Engineers won’t oppose the Standing Rock Sioux tribe’s request for a temporary work stoppage on part of the Dakota Access Pipeline. The tribe has requested a halt to the construction of a 2-mile stretch of the pipeline near Lake Oahe, North Dakota, to prevent the destruction of sacred and culturally significant sites. A hearing is scheduled Tuesday in Washington, D.C. A protest of the $3.8 billion oil pipeline from North Dakota to Illinois turned violent on Saturday. Court documents filed Monday say the Corps “acknowledges that the public interest would be served by preserving peace near Lake Oahe.” The pipeline company hasn’t responded to the tribe’s motion. The judge will also consider the tribe’s challenge to permits for the pipeline granted by the Corps. A decision is expected by Friday.

 Jill Stein Spray Paints a Bulldozer and More Protesters Lock Down at #NoDAPL - Over two thousand Natives have gathered in Standing Rock, North Dakota, in what some are calling the largest Indigenous convergence in more than a century. More than 100 nations are represented at multiple camps, with Natives travelling to Standing Rock from reservations and cities around the country, all with one aim: to thwart construction of the Dakota Access pipeline. If constructed, the Dakota Access pipeline would transport crude oil from the North Dakota Bakken region through South Dakota and Iowa into Illinois -- crossing the Missouri in treaty lands. On Tuesday, Green Party Presidential Candidate Jill Stein also joined protesters on the frontline, speaking alongside Indigenous movement leaders and vandalizing a bulldozer as protesters cheered. Stein spray-painted the words "I approve this message" on a piece of equipment that had been shut down by protesters.  Morton County Sheriff Kyle Kirchmeier said Tuesday that Stein would be charged with trespassing and vandalism.  "This is a human-rights crisis," Stein stated on Twitter.   Since April 1, Natives have encamped and held space along the proposed route of the Dakota Access pipeline. As the legal battles around the pipeline continue to unfold in court, Natives who have converged in Standing Rock are escalating their tactics to stop construction. Last week, a Native man halted pipeline construction for 6.5 hours by locking himself to a piece of construction equipment with a blockade apparatus. Over the weekend, a large group of Natives, including families with children, was attacked by dogs and pepper-sprayed by pipeline security for stepping into a work area.

Green Party candidate faces charges in graffiti protest  (AP) — Authorities say they will charge Green Party presidential candidate Jill Stein, who is accused of spray-painting construction equipment during a protest against the Dakota Access Pipeline in North Dakota. Morton County Sheriff Kyle Kirchmeier said Tuesday that Stein will face trespassing and vandalism charges. A spokeswoman for Stein says activists invited her to leave a message at the protest site Tuesday. Stein sprayed “I approve this message” in red paint on the blade of a bulldozer. As of late Tuesday, Stein was not arrested or charged in the incident. The Standing Rock Sioux Tribe is trying to stop construction of a section of the pipeline that tribal leaders say would violate sacred and culturally sensitive grounds. Angry protesters faced off with construction workers at the site on Saturday.

 The Latest: North Dakota activates Guard for protests - Gov. Jack Dalrymple is activating the North Dakota National Guard ahead of a federal judge’s impending ruling on a request by the Standing Rock Sioux to stop the four-state Dakota Access oil pipeline. Dalrymple says a handful of Guard members will help provide security at traffic checkpoints near the site of a large protest. Maj. Gen. Alan Dohrmann, the head of the Guard, says another 100 Guard members will be on standby if needed to respond to any incidents. U.S. District Judge James Boasberg is expected to rule by Friday on the tribe’s request to temporarily stop construction on the Dakota Access pipeline. The tribe has been leading a protest for weeks at a site where the route passes near its reservation near the North Dakota-South Dakota border. The protest has included tense confrontations at times, and violence broke out Saturday between private security guards and protesters. North Dakota’s chief archaeologist plans to inspect an area along the route of the $3.8 billion Dakota Access pipeline where Standing Rock Sioux officials say they’ve identified cultural artifacts. Paul Picha (PEE’-kuh) told The Associated Press that the trip likely won’t happen until next week. If any artifacts are found, pipeline work would cease. Picha says state officials earlier surveyed the route, but not the disputed site, which is on private land west of State Highway 1806.

Green Party candidate Jill Stein wanted on trespassing, mischief charges after oil pipeline protest -- Green Party presidential candidate Jill Stein visited several places in the Chicago area Thursday, even as a warrant has been issued for her arrest.But Stein won't be there for long; a warrant is out her arrest. Stein tweeted a photo Wednesday that shows her spray-painting a bulldozer at an oil pipeline protest in North Dakota. I hope ND presses charges against the real vandals who bulldoze sacred burial sites. #NoDAPL "Our lawyers are working with legal authorities in North Dakota. We will participate respectfully with dignity in the legal system," Stein said. Court records show Stein was charged Wednesday in Morton County with misdemeanor counts of criminal trespass and criminal mischief. The same charges have been filed against her running mate, Ajamu Baraka. Activists invited Stein to leave a message at the protest site near the Standing Rock Sioux Tribe's reservation on Tuesday, Figueroa said, and Stein sprayed "I approve this message" in red paint on the blade of a bulldozer. A court document shows Baraka painted the word "decolonization" on a piece of construction equipment. Morton County Sheriff's Office spokesman Rob Keller said the warrant has been filed and if authorities were to come across Stein, "they would arrest her."

Who’s Banking on the Dakota Access Pipeline? - When the Army Corps of Engineers issued a permit for the 1,100-mile Dakota Access Pipeline in July, executives at the corporations behind the plan probably thought their path forward was clear. They’d moved easily through the permit process, seemingly dodging the concerns of people affected by the pipeline, and were ready to go ahead with construction.  But the communities in the pipeline’s path, especially local tribes, had other ideas. Thousands of people, mostly Native Americans, have converged at the Standing Rock Sioux Reservation in North Dakota in an effort to stop the pipeline from being built. The Standing Rock Sioux call the pipeline a black snake, and they know that if it were to rupture and spill — a serious risk, given the well-documented history of pipeline leaks in the U.S. — it could poison their drinking water and pollute their sacred land. Powerful oil and gas companies are taking appalling steps to override the Sioux’s objections, using their immense financial resources to push for building this pipeline, which will further line their pockets. But behind the companies building the pipeline is a set of even more powerful Wall Street corporations that might give you flashbacks to the 2007 financial crisis. Here are the financial institutions banking on the Dakota Access pipeline: (graphic) Seventeen financial institutions have loaned Dakota Access LLC $2.5 billion to construct the pipeline. Banks have also committed substantial resources to the Energy Transfer Family of companies so it can build out more oil and gas infrastructure:

All told, that’s $10.25 billion in loans and credit facilities from 38 banks directly supporting the companies building the pipeline. These banks expect to be paid back over the coming decades. By locking in widespread drilling and fracking in the false name of U.S. energy independence and security, the banks are increasing our disastrous dependence on fossil fuels.

Judge Rules That Construction Can Proceed On Dakota Access Pipeline - That's the result of two separate developments today – a federal court decision, and a statement by three federal agencies.A federal judge denied the Standing Rock Sioux Tribe's request for an injunction that sought to temporarily stop construction on the pipeline, set to carry crude oil across four states. Immediately after the ruling, the federal agencies announced a halt to work in one area significant to the tribe.The Dakota Access Pipeline route crosses under the Missouri River near the Standing Rock Sioux Reservation, which straddles the Dakotas. The tribe says this puts its drinking water and sacred lands at risk. Outrage over the pipeline has galvanized Native American tribes and environmentalists across the U.S.The Standing Rock Sioux tribe says it wasn't adequately consulted by the federal agency that authorized permits for the pipeline, and sued the U.S. Army Corps of Engineers in July In Friday's ruling, U.S. District Judge James E. Boasberg acknowledged that "the United States' relationship with the Indian tribes has been contentious and tragic." But he went on to say that the Army Corps "likely complied" with its obligation to consult the tribe, adding that the tribe "has not shown it will suffer injury that would be prevented by any injunction the Court could issue." On the heels of that ruling, however, the Justice Department, the Department of the Army and the Interior Department announced that construction in an area of Army Corps' land that is particularly significant to the tribe will not go forward pending further evaluation. "The Army will not authorize constructing the Dakota Access pipeline on Corps land bordering or under Lake Oahe until it can determine whether it will need to reconsider any of its previous decisions regarding the Lake Oahe site under the National Environmental Policy Act (NEPA) or other federal laws," the statement read

US Government Voluntarily Halts Construction On Portion Of The Dakota Oil Pipeline -- A federal judge denied Friday a Native American tribe’s attempt to halt construction on part of the Dakota Access Pipeline, which would transport millions of gallons of crude oil from North Dakota to Illinois each day. But the US Government issued a statement Friday saying they are voluntarily stopping construction until the land under a lake near the tribe’s reservation is assessed because “important issues raised by the” tribe remain. The Standing Rock Sioux Tribe filed a lawsuit against the US Army Corps of Engineers in July attempting to stop the construction, arguing that the pipeline “crosses areas of great historical and cultural significance,” and “crosses waters of utmost cultural, spiritual, ecological, and economic significance.” The tribe argued that the US Army Corps violated regulations with it approved the pipeline and therefore construction should be stopped. The court “concludes that the Corps has likely complied with the [National Historic Preservation Act] and that the Tribe has not shown it will suffer injury that would be prevented by any injunction the Court could issue,” the judge’s opinion reads. A major concern for the tribe was the fear than an oil spill would contaminate drinking water since the pipeline would run beneath a lake near the tribe’s reservation. On Friday, the US government said it will not authorize construction of the pipeline bordering or under Lake Oahe until “it can determine whether it will need to reconsider any of its previous decisions regarding the Lake Oahe site under the National Environmental Policy Act (NEPA) or other federal laws.”

Feds halt work on part of oil pipeline despite court ruling | Boston Herald: — An American Indian tribe's attempt to halt construction of an oil pipeline near its North Dakota reservation failed in federal court Friday, but the government ordered work to stop on one segment and asked the company to "voluntarily pause" work on a wider swath that tribal officials say holds sacred artifacts. The Standing Rock Sioux, whose cause has drawn thousands to join their protest, had challenged the Army Corps of Engineers' decision to grant permits at more than 200 water crossings for the $3.8 billion Dakota Access pipeline. Tribal leaders say the project violates several federal laws and will harm water supplies. The tribe also alleges that ancient sites have been disturbed during construction. U.S. District Judge James Boasberg in Washington denied the tribe's request for a temporary injunction in a 58-page opinion. A joint statement from the Army and the Departments of Justice and the Interior said construction "bordering or under Lake Oahe will not go forward at this time" and asked the pipeline builder, Energy Transfer Partners, to "voluntarily pause" work 20 miles to the east and west of the lake while the government reconsiders "any of its previous decisions." The statement also said the case "highlighted the need for a serious discussion" about nationwide reforms "with respect to considering tribes' views on these types of infrastructure projects." Attorney Jan Hasselman with the environmental group Earthjustice, who filed the lawsuit in July on behalf of the tribe, said before the ruling that any such decision would be challenged. "We will have to pursue our options with an appeal and hope that construction isn't completed while that (appeal) process is going forward," he said. "We will continue to pursue vindication of the tribe's lawful rights even if the pipeline is complete."

Dakota Pipeline Will Proceed As Feds Undertake Smoke and Mirrors Policy Reconsideration - Jerri-lynn Scofield - The Department of Justice, the Department of the Army, and the Department of the Interior waded into the controversy over construction of the Dakota Access oil pipeline (DAPL) yesterday, shortly after U.S. federal court judge James E. Boasberg denied a request for a preliminary injunction to halt its construction in his Standing Rock Sioux Tribe v U.S. Army Corps of Engineers ruling.   DAPL is designed to transport light sweet crude oil from the Bakken Shield in North Dakota — an area not served by existing pipelines — through South Dakota, Iowa, and Illinois. Oil from this source is currently largely shipped by train. Those behind the project emphasize that it represents a $3.78 billion investment and will create 8,000-12,000 jobs. From the joint statement by the three federal agenciesThe Army will not authorize constructing the Dakota Access pipeline on Corps land bordering or under Lake Oahe until it can determine whether it will need to reconsider any of its previous decisions regarding the Lake Oahe site under the National Environmental Policy Act (NEPA) or other federal laws. Therefore, construction of the pipeline on Army Corps land bordering or under Lake Oahe will not go forward at this time. The Army will move expeditiously to make this determination, as everyone involved — including the pipeline company and its workers — deserves a clear and timely resolution. In the interim, we request that the pipeline company voluntarily pause all construction activity within 20 miles east or west of Lake Oahu.”   The three agencies clearly anticipated that Judge Boasberg’s decision would not grant the tribe the injunctive relief it asked for and thereby halt the pipeline’s construction. So, they almost certainly prepared this statement to deflect protests that have arisen over construction of the pipeline, spearheaded by the Standing Rock Sioux tribe and that have drawn participants from more than 250 tribes and various environmental organisations. The statement has been well-received by the tribal leadership. “A public policy win is a lot stronger than a judicial win,” said Standing Rock Sioux Tribal Chairman Dave Archambault II.  The key question is, how much of a win does the agency statement actually represent? Well, as with so many other aspects of policy during the Obama administration, the devil is truly in the details. So, while headlines are declaring the pipeline blocked — and it certainly looks like construction in a small portion of it will be delayed, for the time being — but please be aware of the following points. First, the three agency decision only halts construction in a limited area, and only if the pipeline company elects to “voluntarily” comply. Second, federal regulatory authority over construction of the DAPL is limited– and much more so than you might expect.  [and] if you thought that the federal government was looking out for the public interest here, you would be wrong. To quote from Judge Boasberg’s ruling (p.2): Domestic oil pipelines, unlike natural-gas pipelines, require no general approval from the federal government. In fact, DAPL needs almost no federal permitting of any kind because 99% of its route traverses private land. Let’s just pause here to take that statement in.

Bakken Update: Significant Oil Production Increases Seen In Subpar Bakken Geology Due To Mega-Fracs -  Summary

  • Enhanced completions continue to improve initial production rates in US unconventional plays.
  • Mega-fracs were only used sparingly in 2015, but still improved 270-day production year over year by 22%.
  • As oil prices improve, we will find that improvements in well design provide a much larger footprint of development in US plays.
  • If correct, production increases could be much more substantial at lower prices than analysts expect.

Mega-fracs continue to improve unconventional production in the US. The changes to well design are significant, and many do not understand how much it may be changing the world oil markets. OPEC has tried to crush the US oil business, and spent a significant number of calendar days during this process. In the past, the Saudis had done an excellent job of evaluating breakeven prices of other plays. As the low cost producer of crude, it used this to push others out of business when too much production entered the market. I'm not saying this is wrong or right, as I believe in supply and demand. The point I would like to make, is this may not work. Current technologies are improving oil extraction at a much faster rate than anyone has expected. We believe this will continue for several reasons.

 Judge puts hold on plan to open California lands to fracking   (AP) — A federal judge on Tuesday tentatively rejected a plan by the federal Bureau of Land Management to open more than 1,500 square miles of lands in central California to oil drilling and fracking. The BLM failed to take a "hard look" at the environmental effects of the estimated 25 percent of new wells that would be devoted to fracking, U.S. District Judge Michael W. Fitzgerald wrote in the ruling. The process, formally known as hydraulic fracturing, uses high-pressure mixtures of water, sand and chemicals to extract oil and gas from rock. Fitzgerald ruled that the BLM must provide more study on the effects fracking will have in the area. He gave the agency's attorneys until Sept. 21 to argue why he should not issue an injunction stopping the plan. The ruling came in a lawsuit brought by a pair of environmental groups, the Center for Biological Diversity and Los Padres ForestWatch. "This is a huge victory in the fight to protect our water and wildlife from fracking pollution and dangerous drilling," Brendan Cummings, director of the Center For Biological Diversity, said in a statement. "As California struggles against drought and climate change, we've got to end fracking and leave this dirty oil in the ground." After-hours phone and email messages left seeking reaction from the Bureau of Land Management and the Western States Petroleum Association, an oil-industry group, were not immediately returned. The land involved in the decision is about 1.1 million acres of public lands and federal mineral estate in the mostly agricultural central valley, the southern end of the Sierra Nevada, and parts of the central coast.

2 Pipeline Companies, Enbridge and Spectra Energy, to Merge -  Two pipeline companies agreed on Tuesday to merge in a deal that could create the largest energy-infrastructure company in North America.The companies, Enbridge and Spectra Energy, signed a stock-for-stock deal, where Enbridge shareholders will own about 57 percent of the combined company and Spectra’s will own 43 percent, according to a statement released by the companies on Tuesday.Spectra shareholders will get 0.984 shares of the combined company for each share they own, valued at about $40.33 a share, based on share prices on Sept. 2. The transaction values Spectra’s common stock at about $28 billion.Pipeline companies help transport oil, natural gas and other liquids across the country. Pipeline companies had traditionally been seen as an energy investment relatively immune from the price swings of the commodities they carry because they lock in long-term contracts. But after a plummet in energy prices last year, investors became skittish about pipelines as well because many of their customers were on the brink of bankruptcy.The pipeline industry’s stock prices have been recovering, but the ability to combine gives these companies the chance to bulk up and diversify their offerings. Enbridge and Spectra will also have a utility portfolio and midstream energy business after they combine. Their customer base is largely low risk, the companies said, with 93 percent of customers holding investment grade or equivalent ratings.  “Bringing Enbridge and Spectra together makes strong strategic and financial sense, and the all-stock nature of the transaction provides shareholders of both companies with the opportunity to participate in the significant upside potential of the combined company,” Al Monaco, president and chief executive of Enbridge, said in Tuesday’s statement.After the transaction closes, Mr. Monaco will continue in that role, while Gregory L. Ebel, Spectra’s president and chief executive, will serve as nonexecutive chairman. The headquarters will be in Calgary, where Enbridge is based.

How Enbridge and Spectra Inked a Clean Pipe Deal - WSJ: Pipeline companies can’t always handle the pressure. Investor demand for chunky, rising payouts became a challenge as volumes, hydrocarbon prices, and even customers’ creditworthiness sank over the past two years. Their response, a wave of proposed mergers, has seen as many failures as successes. The latest, a $28 billion proposed deal between announced Tuesday between Canada’s Enbridge Inc. and Texas-based Spectra Energy Corp. looks like an example of the latter. The proof was in Spectra’s share price, which jumped above the original $40.33 value of the all-share offer to as much as $42.33 early Tuesday afternoon. That reflected a rise in Enbridge’s shares and a merger arbitrage spread of less than 5% for a deal expected to close in early 2017. Traders clearly are betting that antitrust and financing concerns are minimal and that the premium paid for Spectra was modest considering potential synergies.Complexity and commodity exposure, not size, have been the obstacle to getting deals done. The resulting company would be the largest energy infrastructure company in North America, but there is limited overlap and little financing or tax risk. Two years into the energy slump, there have been plenty of approaches that didn’t lead to deals and one spectacular failure, the megamerger of Energy Transfer Equity and Williams Cos. The big cash sweetener that Energy Transfer threw in to secure agreement would have meant a hefty cut to payouts at the combined firm. It also created a tax complication that Energy Transfer’s management used as an excuse to drop its offer. A chastened Williams later rejected an overture from Enterprise Products Partners.

 US natural gas production stable for Q3, Q4, despite Hermine: EIA - Despite some impacts to natural gas production in the Gulf of Mexico from Hurricane Hermine in August, the Energy Information Administration Wednesday held steady its overall projections for third and fourth quarter US production. "Hurricane Hermine led to the evacuation of several offshore oil and natural gas production platforms and caused some shut-in production," EIA Administrator Adam Sieminski said in a statement about the agency's September Short-Term Energy Outlook. "The hurricane-related shut-ins contributed to estimated Gulf of Mexico natural gas production in August that was 5% lower than the July level, but overall US production was still up slightly." According to the September outlook, gas marketed production in June averaged 77.5 Bcf/d, down 2.7 Bcf/d from record daily averages seen in February. But the agency said preliminary daily data from third-party sources suggests production rose in July and August. The agency's estimates for marketed gas production remained the same as August's projections for the third and fourth quarters, but EIA lowered its estimate for the full year 2016 by 7 MMcf/d to 79.21 Bcf/d.

EIA's Short Term Energy Outlook; US Gasoline To Set Records; US On Glide Path To Net Exporter Of Natural Gas By 2Q17 -- September 7, 2016

  • U.S. retail gasoline prices are expected to continue falling through the end of 2016, even though gasoline demand this year is expected to be the highest ever.
  • The average pump price for December is on track to be the lowest for the month in eight years. [Prices would be still lower if it weren't for ethanol mandates.]
  • Gasoline retail prices are down this year because of a combination of modest crude oil prices and abundant supplies of gasoline from high levels of refinery production.
  • The decline in U.S. oil production this year and in 2017 is not expected to be as steep as in previous forecasts, because of improved drilling rig efficiencies and more rigs drilling.
  • Builds are expected in global oil inventories during the second half of 2016. However, the pace of builds will be slower than in 2015 and early 2016, but this should still limit upward pressure on oil prices in the months ahead. [Great news for consumers.]
  • Drawdowns in global oil inventories are expected to start in mid-2017, which will contribute to higher oil prices in the second quarter of next year. [Self-fulfilling prophecy.]
  • After a brief slowdown in early 2016, U.S. natural gas production is expected to increase during the second half of this year and continue rising through 2017.
  • The United States is on track to become a natural gas net exporter in the second quarter of next year.
  • Hurricane Hermine led to the evacuation of several offshore oil and natural gas production platforms and caused some shut-in production. The hurricane-related shut-ins contributed to estimated Gulf of Mexico natural gas production in August that was 5% lower than the July level, but overall U.S. production was still up slightly.

EIA: "The average pump price for December is on track to be the lowest for the month in eight years" --The EIA released the Short-Term Energy Outlook yesterday. From the STEO:

• Benchmark North Sea Brent crude oil spot prices averaged $46/barrel (b) in August, a $1/b increase from July. This was the fourth consecutive month in which Brent spot crude oil prices averaged between $44/b and $49/b.
• Brent crude oil prices are forecast to average $43/b in 2016 and $52/b in 2017. West Texas Intermediate (WTI) crude oil prices are forecast to average $1/b less than Brent in 2016 and 2017.
• U.S. regular gasoline retail prices are expected to decline from an average of $2.18/gallon (gal) in August to $1.92/gal in December. For the year, U.S. regular gasoline retail prices are forecast to average $2.08/gal in 2016 and $2.26/gal in 2017.
• U.S. retail gasoline prices are expected to continue falling through the end of 2016, even though gasoline demand this year is expected to be the highest ever.
NYMEX October gas futures settle at $2.806/MMBtu, up 13 cents - Natural Gas | Platts News Article & Story: The NYMEX October natural gas futures contract settled at $2.806/MMBtu Thursday, up 13 cents, as the market reacted to a smaller-than-expected weekly gas storage injection. The US Energy Information Administration reported a weekly natural gas storage injection of 36 Bcf for the week ended September 2. The injection was below the expectations of analysts surveyed by S&P Global Platts, who were expecting a storage build of around 41 Bcf. Additionally, the weekly build was below the 78-Bcf prior-year injection as well as the 64-Bcf five-year average injection. Looking deeper into storage injection season, Gene McGillian, senior analyst at Tradition Energy, said the market will be waiting to see if storage injections increase as temperatures drop to seasonal levels, and if at the end of the storage injection season there is a lot of gas in the ground that could weigh on the market. "We continue to see room for a downward correction linked to the seasonal decline in power sector demand, but the constructive storage trend represents a challenge to that view," Citi Futures Tim Evans said in a market note Thursday morning.The latest weekly EIA report marks the 18th consecutive injection that came in below both the prior year and five-year average. Total US power demand is forecast to average around 30.3 Bcf/d over the next week, in line with the prior-week average, according to data from Platts Analytics' Bentek Energy. Looking ahead to the eight- to 14-day range, power demand is expected to ease, falling by 1.5 Bcf/d to average around 28.8 Bcf/d. The October contract traded in a range between $2.679/MMBtu and $2.821/MMBtu. Ukraine since November 2015 has been importing European gas only, but throughput capacity of these pipelines will probably not be enough to boost reserves to 17 Bcm by November 1. Ukraine had 12.56 Bcm of gas in its underground storage facilities as of September 1, according to Naftogaz. Taking into account imports from Europe and domestic gas output, Ukraine will be able to store up to 16.5 Bcm by November 1. This means that Ukraine may need to import at least 500 million cu m of gas from Russia by November 1 to meet the target.

  Hillary Clinton Raises More Than Donald Trump From Oil Industry - WSJ: —Democratic presidential candidate Hillary Clinton has raised significantly more money than Donald Trump in the heart of the Republican fundraising territory—the oil and gas industry. Individuals who work for oil and natural-gas companies donated $149,000 to Mr. Trump’s GOP campaign through July 30, the end of the most recent fundraising period, compared with $525,000 to Mrs. Clinton. The industry’s executives and employees also have donated $470,000 to a fundraising account Mr. Trump established with the Republican National Committee, compared with $650,000 to a similar account Mrs. Clinton set up with the Democrats, according to new calculations provided to The Wall Street Journal by the nonpartisan Center for Responsive Politics. Taken together, oil and gas donors have contributed roughly twice as much to support Mrs. Clinton’s campaign as Mr. Trump’s. Election rules bar corporations from giving directly to candidates, but donations from an industry’s employees can provide a reflection of where it stands.At Exxon Mobil Corp. XOM -0.37 % , the world’s largest publicly traded oil company, employees have made 175 donations to Mrs. Clinton’s campaign, totaling roughly $18,000, while Mr. Trump’s campaign has received just one donation from an Exxon employee. At the American Petroleum Institute, the oil industry’s Washington lobbying group, no one has contributed to Mr. Trump. (These figures include donations of $200 or more.) Mr. Trump’s supporters noted that Mr. Trump paid for much of his Republican primary campaign out of his own pocket, and they said that he is picking up the pace of his fundraising. Still, Mr. Trump’s fundraising deficit among oil and gas donors is notable, because the industry has for decades been one of the GOP’s biggest backers. Since 1989, the industry has pumped $500 million into U.S. elections, with 60% of that going to the Republican Party and its candidates, according to the Center for Responsive Politics.

Trump's energy plan overstates benefits of more drilling: economists -- Donald Trump has promised to roll back regulations and unleash an energy revolution in America — but economists have their doubts about the plan. The Republican presidential candidate says he will boost America's economic output, create millions of new jobs, and put coal miners back to work. But the windfalls Trump touts originate from a report commissioned by a nonprofit with ties to the energy industry and whose findings rely on a forecasting model that often overstates the benefits of increased drilling, according to economists who have researched the U.S. shale oil and gas revolution. ... While outlining his economic blueprint last month, Trump said that lifting restrictions on oil and gas would increase GDP by more than $127 billion, add about 500,000 jobs, and increase wages by $30 billion each year over over the next seven years. Those figures come from the Institute for Energy Research, a nonprofit that advocates for a free-market approach to energy. It typically casts fossil fuels as the most economic form of energy generation, promotes research that says green energy jobs are unsustainable, and claims there is an "enormous volume of sensationalized, simplistic and often plain wrong information" on climate change. ... The IER study does not actually attribute the gains to a lifting of restrictions, as Trump indicated, but to opening all federal lands to oil, gas, and coal leasing. It is currently barred or temporarily blocked in some parts of the U.S. lower 48, the outer continental shelf, the Gulf of Mexico, and the Arctic National Wildlife Refuge. ... The IER report uses a method of forecasting called the input-output model, which is frequently used by consultants and government agencies to make projections about the effects of economic activity. But a number of economists say that model is not well-suited to predicting how more drilling will produce windfalls in other sectors, and academics are skeptical of the method because the results, or outputs, rely so heavily on the assumptions, or inputs.

Donald Trump’s oil man urges Russia and Opec to cut output - Harold Hamm, Donald Trump’s top energy adviser, has urged Russia and Opec to rein in oil production in an effort to raise prices, saying US companies have already lowered output during a two-year price war that has upended the energy industry. Mr Hamm, a billionaire pioneer of the North American shale boom who has been tipped as a potential energy secretary should Mr Trump win the US presidential election, said Opec and Russia should agree to freeze production when they meet this month to discuss ways to stabilise the market.His comments mark a rare backing from someone advising a US presidential candidate for market intervention by Opec, which is still closely associated in the US with the Arab oil embargoes of the 1970s. This week Russia, the largest oil exporter outside Opec, signed a pact with Opec kingpin Saudi Arabia to work together in the oil market. “I think it would be high-time for them to come to an agreement,” Mr Hamm told the Financial Times at a conference in Singapore. “US producers have cut back, we’ve done our part. It would finally make sense for a freeze in production to be implemented.” As the founder and chief executive of Continental Resources, one of the largest US shale producers, Mr Hamm would stand to gain personally from any effort to raise oil prices. Opec ministers are due to meet Russian officials in Algiers this month to discuss a possible output freeze, with the aim of raising or at least stabilising oil prices, which fell below $30 a barrel at the beginning of this year amid a long-running glut. Mr Hamm’s comments may also reflect a growing dichotomy in the US. While low prices have long been feted as a boon for consumers, the oil price crash has been painful for energy-producing states such as Texas and North Dakota. Lower prices have also slowed plans to wean the US off imported oil, with domestic production falling and drivers turning back to gas-guzzling cars.

House votes for online lease sales for offshore drilling  - The House voted Tuesday to mandate that the federal government move to an internet-based auction system for offshore drilling rights. The bill from Reps. Garret Graves (R-La.) and Alan Lowenthal (D-Calif.) aims to increase efficiency and modernize the auction system that the Bureau of Ocean Energy Management (BOEM) uses to sell rights offshore to oil and natural gas companies. The legislation passed by voice vote Tuesday with no objections stated on the House floor. Federal officials have for years held biennial in-person auctions with paper bids read orally, but last month, they started broadcasting the events online. The bill, dubbed the Innovation in Offshore Leasing Act, would give BOEM a year to move the entire system, including bid submissions, onto the internet. In moving the events online, the government would thwart environmental activists who have started to protest at lease sale events. Government and industry representatives say the protests, organized under the Keep it in the Ground movement, have been extraordinarily disruptive to auctions. “What this bill is designed to do is to bring us into the 21st century, to allow for potential bidders to go online to broaden access, to allow for the taxpayers’ resource, for the American public’s resource, to have more bidders, to have more competition, to ultimately make sure that the full value of that resource is realized by taxpayers,” Graves said on the House floor.

Anticosti fracking could cause earthquakes, expert says -  CBC News: A 5.6-magnitude earthquake that shook the U.S. Midwest on Saturday is being linked to the same kind of fracking proposed for Anticosti in the Gulf of St. Lawrence. Maurice Lamontagne, a seismologist with the Geological Survey of Canada, said the earthquake in and around Oklahoma was caused by fractures in the bedrock due to fracking. He said it's something that has been happening recently in British Columbia and Alberta and could happen on Anticosti if a fracking project there goes ahead. The Quebec government quietly issued drilling permits on the island to oil company Hydrocarbures Anticosti earlier this summer. The company, which is a joint venture between the Quebec government and several other oil companies, said last month it would begin preparing several sites for hydraulic fracking. But if the fracking operation gets off the ground, and wells become widespread on the island, Lamontagne said it could become the site of the same type of earthquake that shook Oklahoma. "If there were an earthquake it would be extremely local," Lamontagne said. "It would be very close to the site of injection."

 Suncor Energy Seeks Permission to Abandon Some Oil-Sands Assets - WSJ: — Suncor Energy Inc., Canada’s largest oil producer, is in talks with government officials for permission to “strand,” or abandon, some high cost and greenhouse gas-intensive crude-oil deposits, the company’s chief executive said Wednesday. The Calgary-based company is seeking an easing of rules designed to maximize oil-sands production from leases on government land, CEO Steve Williams said at a Barclays BCS 1.76 % energy conference in New York, reiterating a strategy he first announced in July. “We’ve begun to have conversations with the government of Alberta and the current regulators about the design of their policy, which actually requires the maximum amount of resource to be extracted regardless of the economic or environmental value,” he said. The request comes as Suncor and other oil producers struggle to cut costs amid slumping commodities prices. Oil sands are one of the world’s most expensive and are also among the most carbon dioxide-intensive forms of crude-oil extraction. The cost of that carbon is becoming a bigger barrier for oil-sands producers, as the province is set to double its so-called carbon tax on them, and has vowed to cap greenhouse-gas emissions from oil-sands operators at 100 million metric tons. Oil-sands producers currently emit 70 million metric tons of greenhouse gas a year—about a quarter of the province’s overall emissions. Those efforts to curb emissions have made Alberta a test case for energy companies’ attempts to reduce their carbon footprint. But the policy also calls into question the ability of major oil companies to fully develop their leases in the Canadian oil sands, the world’s third-largest oil reserves, over the long term.

Statoil Renews Push into Arctic Oil Basins - WSJ: Norway’s Statoil AS STO 0.49 % A said Tuesday that it was pushing deeper into the Arctic, shopping for Barents Sea drilling licenses in a bid to add resources and maintain output over the coming decades. The 67% state-owned company said it had acquired stakes in four licenses in Norway’s far north from Tullow Oil TUWOY 0.68 % PLC, after entering or boosting its holdings in five other Arctic licenses in the past months, through deals with companies including OMV AG OMVKY 3.30 % and ConocoPhillips, COP 1.17 % at undisclosed prices. “We’re doing this in a very countercyclical manner, meaning that we were able to pick up these licenses at what we consider to be very attractive terms,” Jez Averty, Statoil’s head of exploration in Norway and the U.K., told The Wall Street Journal in an interview Tuesday. As part of the deal with Tullow, Statoil increased its stake in the 241-million-barrel Wisting discovery in the Hoop area of the Barents Sea to 35% from 15%, enlarging its footprint in one of the most promising provinces in Norway’s far north, Mr. Averty said. “The Wisting discovery has opened up a new petroleum province in the Barents Sea,” he said. “What we’re looking to do is to establish ourselves as one of the leading companies in that area.” As production in the mature North Sea depletes, the Barents Sea may hold the key to maintain Statoil’s output in the coming decades. The Arctic basin has been drilled since the 1980s, but at a slow pace. Companies are still hoping for huge finds in the Barents Sea, unlike in the North Sea where they are now mainly looking for smaller discoveries near existing infrastructure, Mr. Averty said.Despite a disappointing drilling campaign in 2013 and 2014 to find additional resources near the Johan Castberg discovery in the Barents Sea, Statoil is pushing ahead with a significant drilling campaign in the sea area next year—including the northernmost well ever drilled off Norway in the Korpfjell prospect, 420 kilometers (261 miles) north of the northern coastline.

Argentina to receive 12 LNG vessels in September: Enarsa - Argentina is scheduled to receive 12 ships carrying LNG in September, state energy company Enarsa said Friday. It also said it had canceled one LNG cargo and deferred three others due in August into 2017. Enarsa said that a rise in temperatures for the first three weeks of August -- the last month of winter in the Southern Hemisphere -- prompted the changes, since the warming weather meant lower gas demand than previously anticipated. "For this reason [higher temperatures], and because there is no place to store LNG, Enarsa had to cancel the import of LNG shipment and reprogram another three for 2017" the company said. Currently, LNG shipments are automatically injected into the national gas network to meet existing demand, the company said.For September, Enarsa said it would receive 12 vessels with LNG, arriving at Bahia Blanca and Escobar ports. Big suppliers have been and continue to be BP, Glencore, Gazprom, Shell and Trafigura, among others.

Japan buyers pay $5.40/MMBtu for spot LNG cargoes delivered in Aug: METI - Natural Gas | Platts News Article & Story: The average price Japanese LNG buyers paid for spot cargoes delivered into Japan in August was $5.40/MMBtu, down 10% from $6/MMBtu in July, data released by the Ministry of Economy, Trade and Industry showed Friday. METI however, did not publish the average price for spot cargoes contracted in August due to a lack of reported trades. The ministry releases two sets of prices every month.The latter is calculated by the ministry by collecting data from utilities and other LNG buyers, but the delivery months of the cargoes into Japan are not disclosed. The Platts JKM for cargoes delivered in August averaged $5.273/MMBtu. The assessment period started June 16 when August JKM stood at $5.05/MMBtu, and ended on July 15 with the JKM at $5.55/MMBtu, partly due to firm demand. The JKM also averaged $5.582/MMBtu during the month of August, which reflects spot deals done for September and October. One is the average delivery price and the other is the simple average of contract prices.

Ukraine set November 1 as new deadline to collect 17 Bcm of gas - Natural Gas | Platts News Article & Story: Ukraine extends the deadline for gas accumulation in its underground storage facilities by two weeks to November 1 from October 15 as it seeks to collect more gas, according to a government resolution published Friday. The government last week set a new target to accumulate 17 Bcm of gas by the start of the high-demand season. The resolution urges the energy and coal industry ministry, the finance ministry, the economy ministry and Naftogaz Ukrayiny to draft and approve by September 15 a new gas accumulation schedule. The new forecast suggests that Ukraine will have to accelerate imports of gas within weeks, and perhaps to resume imports of Russian gas to meet the target.

 LNG exports from Australian Gladstone port hit all-time high of 1.51 mil mt in Aug - LNG exports from Australia's Gladstone Port in Queensland edged up 5% from July to an all-time high of 1.51 million mt in August, data from the Gladstone Ports Corporation showed Tuesday. This is the first time in record that LNG exports from the port, which is home to three LNG wharves -- Australia Pacific LNG, Gladstone LNG and Queensland Curtis LNG -- has breached the 1.50 million mt mark, GPC said. Exports were between 1.43 million-1.50 million mt since May when Santos announced its GLNG Train 2 had started production. Over January-April, LNG exports from Gladstone had averaged at 1.24 million mt/month, data showed. Shipments to the port's biggest export destination, China, were stable compared to July, the data showed.Volumes shipped to China in August edged up to 667,957 million mt, from 663,878 million mt in July, after having surged to 922,754 million mt in June, the data showed. South Korea, which has been the second biggest receiver of Gladstone LNG in 2016 with a year-to-date average of 229,573 million mt/month, saw volumes rise 6% month on month to 182,963 million mt in August, but its volumes continued to lag behind the January-March average of 333,796 million mt/month. Exports to South Korea fell below 200 million mt/month in April and have not gone above that since.

11,700 Petrobras Employees Sign Up To Get Fired -- Over 11,700 Petrobras employees signed up to get fired through the Brazilian energy firm’s voluntary dismissal program, according to a new report by Bloomberg. The government-owned company set up the program to reduce debt and reduce operational costs by $10 billion in the coming years as global oil prices stay low.  Petrobras workers had until August 31st to sign up for the voluntary dismissal program,through which they would be eligible for severance benefits. Paying out the benefits for the 12,000 workers the company plans to let go will cost $1.23 billion, an official statement said Friday. So far, the company has pulled out of major investments and stabilized fuel prices in Brazil in order to keep revenues up as the bear market for oil passes. President Michel Temer - who replaced Dilma Rousseff after she was officially removed from office earlier this week - has vowed to limit government meddling in the affairs of the national energy company. Instead, Temer has called for liberal policies that lower industry costs and increase competition between rival firms. Temer has also been named in a major national corruption scandal involving Petrobras’ management and a web of kickbacks and campaign donations. A major Brazilian oil union has said the mass firings have caused a massive brain drain within the company. Experienced workers are needed to extract resources from the deep waters of the Atlantic Ocean, union leaders argue. "The company is giving up a work force of 20,000 in only two, three years. You would need more than a decade to restore this kind of knowledge," Jose Maria Rangel, from the oil workers’ federation, told Bloomberg in an interview.

Nigeria's NNPC says unrest in Niger Delta could cripple oil producing region -  State-owned Nigerian National Petroleum Corp said on Sunday that security challenges in the oil producing Niger Delta region, where production facilities have been hit by militants, could cripple the company and the Nigerian economy, if the unrest is not urgently checked. "If the current situation [in the delta] remains unchecked, it could lead to the crippling of the Corporation and the nation's oil and gas sector, the mainstay of the Nigerian economy," NNPC said in a statement. Nigeria has already slipped into a recession, as its oil output slumped to 1.69 million b/d in the second quarter of this year due to renewed militancy in the Niger Delta, according to data released August 31 by the National Bureau of Statistics. "Insecurity is threatening production and damaging the Niger Delta environment. There is the urgent need for government and security agencies to refocus as well as engage the various host communities ... toward finding a lasting solution to the present unrest," NNPC said.NNPC, which manages government interest in joint venture oil businesses with foreign companies, recorded a deficit of Naira 26.51 billion ($84 million) in June due to attacks on oil pipelines, S&P Global Platts previously reported.

Dick Cheney To Be Charged in $180 Million Bribery CaseNigeria's anti-corruption police said on Thursday they planned to file charges against former U.S. Vice President Dick Cheney in a $180 million bribery case involving a former unit of oil services firm Halliburton. The Economic and Financial Crimes Commission (EFCC) on Tuesday summoned the country chief of Halliburton and last week detained 10 Nigerian and expatriate Halliburton staff for questioning after raiding itsLagos office. "We are filing charges against Cheney," EFCC spokesman Femi Babafemitold Reuters, but declined to give any further details on what the charges were, or where they would be filed. Houston-based engineering firm KBR, a former Halliburton unit, pleaded guilty last year to U.S. charges that it paid $180 million in bribes between 1994 and 2004 to Nigerian officials to secure $6 billion in contracts for theBonny Island liquefied natural gas (LNG) project in the Niger Delta. KBR and Halliburton, which was once headed by Cheney, reached a $579 million settlement in the United States but Nigeria, France and Switzerland have conducted their own investigations into the case. Halliburton split from KBR in 2007 and has said that its current operations in Nigeria are unrelated.

Limited Spare Capacity Could Lead To An Oil Price Spike - Oil prices have continued to languish below $50 per barrel as a glut of crude oil and gasoline persist even as global demand continues to rise. The IEA still predicts that oil consumption will expand by another 1.4 million barrels per day in 2016, while production stagnates. That dynamic suggests that the market is converging towards some sort of balance, although the speed with which that takes place is hotly debated.  But in the short-term the record levels of crude oil and refined products sitting in storage have prevented oil prices from rebounding. The U.S. had 525 million barrels of crude oil inventories at the end of August and 232 million barrels of gasoline. Both figures are sharply higher than the running five-year average and higher than even year-ago levels. And inventories are only down slightly from their peaks hit earlier this year. Until oil and refined product inventories start to draw down much more forcefully, oil prices will struggle to rise above, say, $50 per barrel.  While extraordinary levels of crude oil and gasoline inventories seem to point to a frustratingly oversupplied market, there is a case to be made that the world could soon suffer from the opposite problem. Several oil analysts believe that the near record low for spare production capacity around the world actually suggests that the oil market is a lot tighter than it seems at first glance. “Yes, storage tanks are higher than they’ve ever been, but you’ve got to consider that collectively with how much spare capacity that you have,” said Jackie Forrest, vice-president of energy research at ARC Financial Corp., according to The Financial Post. Most of the world’s spare capacity is located in Saudi Arabia, the one country that has the ability to substantially ramp up or down output over the course of a few weeks. But Saudi Arabia, in a battle for market share, ratcheted up production to a record high this summer, exceeding 10.6 million barrels per day, which dumped more supply on the market but left it with less spare capacity. OPEC as a whole has pushed output to a record high. The IEA and the EIA both estimate that OPEC’s spare capacity has dipped to just 1.4 million barrels per day, about half of what it was a few years ago and extraordinarily low by historical standards. The last time spare capacity was this low, it was between 2004 and 2008, a period of time that saw a dramatic run up in oil prices.

Putin Pushes for Oil Freeze Deal With OPEC, Exemption for Iran - Bloomberg: Vladimir Putin said he’d like OPEC and Russia, producers of half of the world’s oil, to reach a deal to freeze supply and expects the dispute over Iran’s participation can be resolved. “From the viewpoint of economic sense and logic, then it would be correct to find some sort of compromise,” Putin said in an interview in Vladivostok. “I am confident that everyone understands that. We believe that this is the right decision for world energy.”While talks collapsed in April over whether Iran should join in, countries now recognize the nation -- freed just months ago from international sanctions -- should be allowed to continue raising production, Putin said. The Russian president said he may recommend completing the plan when he meets with Saudi Deputy Crown Prince Mohammed bin Salman at the Group of 20 summit in China next week. Oil rallied more than 10 percent last month on speculation the Organization of Petroleum Exporting Countries will reach an accord with non-members at an informal meeting in Algiers this month. The prolonged slump in crude prices -- stuck at half the levels seen two years ago -- is battering the economies of producer nations, giving oil-market rivals cause to cooperate. “I would very much like to hope that every participant of this market that’s interested in maintaining stable and fair global energy prices will in the end make the necessary decision,” said Putin. Prince bin Salman “is a very reliable partner with whom you can reach agreements, and can be certain that those agreements will be honored,” he said.

Oil price jumps on Russian and Saudi plans - BBC News: The price of oil jumped after Russia and Saudi Arabia agreed to discuss ways to stabilise the oil market. The announcement was made by the countries' energy ministers, Alexander Novak and Khalid al-Falih. The price of Brent crude initially jumped by 5% but then fell to to stand 1.6% higher at $47.56 a barrel. A statement said the plan was to support the "stability of the oil market ... ensuring a stable level of investment in the long term". At the start of 2016 the price of oil fell to its lowest level in nearly 13 years due to a production glut and is still far below the $110 a barrel price hit just two years ago. Mr Novak said the agreement, which might include attempts to limit oil output, was a "historical moment" between members of Opec, the oil producers' cartel, and non-members such as Russia. He added that Russia was willing to join an oil output "freeze". 'Getting better' The outline agreement, to set up a joint task force, was announced at a news conference at the G20 summit in the eastern Chinese city of Hangzhou. However, Saudi Arabia's Mr al-Falih said that freezing output was not "necessary" now. "Freezing [production levels] is one of the preferred possibilities, but it's not necessary today," he said after the cooperation agreement was unveiled.

Oil Soars Ahead Of Disappointing Saudi, Russian "Joint Statement" Which Fails To Freeze Oil Output -  As the G-20 summit drew to its conclusion, a moment of sheer drama erupted earlier this morning as oil exploded higher following speculation Saudi Arabia was prepared to make a “significant” joint announcement with Russia (the market promptly assumed this meant a preliminary oil production freeze) following discussions over promoting market stability. As the chart below shows, oil futures soared by several dollars in a matter of minutes, after Saudi Arabia and Russia agreed to work together to stabilize prices following Sunday’s meeting between Deputy Crown Prince Mohammed bin Salman and President Vladimir Putin. Saudi Energy Minister Khalid Al-Falih will make the announcement at the G20 summit in China on Monday, according to his chief of staff. Crude rose the most in two weeks on Friday as Putin said he’d like OPEC and Russia to agree to an output freeze. “The market seems to be positioning for the vague possibility of a substantial statement” by Saudi Arabia, Axel Herlinghaus, senior commodities analyst at DZ Bank AG said by e-mail. And sure enough, this is what happened in advance of the announcement: The actual announcement, however, when delivered was somewhat disappointing as Russia and Saudi Arabia announced they have signed a joint statement aimed at stabilizing the crude market, which would see the two nations create... working groups and monitor the market. In other words, more of the same.  The document was signed by Russian Energy Minister Alexander Novak and Saudi Minister of Energy, Industry and Mineral Resources Khalid Al-Falih. According to the painfully vague "agreement", the two countries will develop cooperation in the oil and gas sector to implement new technologies, and could create a joint database on advanced energy technologies. Russia and Saudi Arabia would also set up a working group to monitor the crude market and hammer out recommendations for providing its stability. According to the statement, the first working group meeting will be held in October. The energy ministers of the two countries will meet in October in Algeria, and in November in Vienna.

Oil pares gains after Saudi, Russia sign pact | Reuters: Crude oil futures pared gains on Monday after top producers Russia and Saudi Arabia confirmed they had agreed to cooperate on stabilizing the oil market, including limiting output. Brent crude futures for November delivery were up 44 cents per barrel at $47.27 a barrel at 9.13 a.m. ET. They earlier hit a session high of $49.40 in anticipation of the Russia-Saudi deal. U.S. crude for October delivery was up 60 cents at $45.04 a barrel, after reaching a high of $46.53 a barrel earlier. Saudi Arabia and Russia said on the sidelines of the G20 summit in China they had signed an agreement to set up a task force to review oil market fundamentals and to recommend measures and actions that would secure market stability. Russian Energy Minister Alexander Novak said the two countries were moving to a strategic energy partnership and a high level of trust would allow them to address global challenges. Saudi energy minister Khalid al-Falih told a UAE-based television channel he was optimistic about cooperation with other producers ahead of a meeting this month in Algiers, adding freezing production was not the only solution. Saudi deputy crown prince Mohammed bin Salman told Russian President Vladimir Putin on the sidelines of the same summit that cooperation between the two countries would bring benefit to the global oil market.

Crude Retraces Saudi-Russia Hope Spike As Traders Slash Bullish Bets By Most In 2 Years Having spiked over 5% on hopes of a "significant" announcement at a joint Russia-Saudi statement at the G-20 meeting, bulls were quickly disappointed, sending WTI back to a $44 handle as the two nations stopped short of taking any concrete steps to limit output.  The inability to hold these gains on an illiquid day (with a US holiday) confirms the short-squeeze ammo is out. Furthermore 'longs' are losing faith as leveraged speculative positioning plunged by the most in over 2 years last week. With that hope blown out of the water, we suspect 2015's analog will continue as the glut remains bigger than ever and positioning technicals now worn out... Charts: Bloomberg

Is The Saudi-Russia Deal For Real?  --The main news at the start of this week was the announcement from Russia and Saudi Arabia that they would cooperate to stabilize the oil markets. On the sidelines of the G20 summit in China, Russia and Saudi Arabia said that they would setup a “working group” to advance cooperation on reducing volatility in the oil markets. The accord raised some new questions even as the two countries promised closer coordination. They did not explicitly state that they would support a production freeze in Algeria in a few weeks, although there have been signals from both sides that they would be pleased with such an outcome. Oil prices rocketed upwards in the early hours on Monday, surging more than 5 percent. But oil prices retreated after the oil ministers from both countries failed to clarify the significance of their cooperation. Russia’s oil minister appeared more willing to back a freeze deal, but his Saudi counterpart seemed to suggest that a freeze is not necessary. Even as the promise of closer cooperation raises the chances that OPEC and Russia could reach a production freeze deal at the end of the month, oil prices fell during midday trading on Tuesday after the markets continued to doubt the significance of the Russian-Saudi announcement.  Earthquake in Oklahoma suspected to be linked to oil drilling. A large 5.6-magnitude earthquake struck Oklahoma over the weekend, a magnitude that is tied for the strongest quake to ever hit the state. No major injuries were reported, but the U.S. Geological Survey is investigating whether or not the event can be definitively linked to the use of disposal wells. Oklahoma has been dealing with an upsurge in seismic activity in recent years, a trend that is thought to be instigated by the proliferation of wastewater disposal wells. In 2005, Oklahoma only had three earthquakes with a magnitude of 2.5 or greater. By 2015, that figure exploded to 2,500. In response to the quake this past weekend, state regulators ordered the shutdown of 37 disposal wells.U.S. natural gas production declines. Four consecutive months of declining natural gas production raises the prospect of a much tighter market than previously anticipated. While gas inventories are still at a record high for this time of year, they have been rising much slower than expected and even declining at times this summer. As the WSJ notes, one extremely cold winter could erase the supply surplus and push up natural gas prices. Higher natural gas prices would affect an array of industries, including power generation, petrochemical production, and other industries that use gas as an input.

Oil Edges Lower After Output-Freeze Hopes Dashed - WSJ: Oil prices traded near flat Tuesday on skepticism that major producers can reach a deal to freeze production, which would reduce the global oversupply of crude. Prices erased earlier losses after a data provider reported a decline in crude supplies in a key U.S. storage hub. U.S. crude for October delivery recently fell 7 cents, or 0.2%, to $44.38 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 81 cents, or 1.7%, to $46.82 a barrel on ICE Futures Europe. Prices surged briefly Monday morning following talks between Russia and Saudi Arabia, on the hopes that the two major producers would announce a joint initiative to freeze or reduce output. However, the countries made only vague promises of greater cooperation. Saudi Arabia and Russia agreed to form a working group to monitor the oil market, but “whether or not this so-called pact will eventually turn out to be something where both of these major oil producers will do something to limit production is a major question,” said Dominick Chirichella, analyst at the Energy Management Institute, in a note.The Organization of the Petroleum Exporting Countries is set to meet later this month to discuss a coordinated output agreement. But several members of the group, including Iran, Nigeria and Libya, are looking to increase output from current levels and will likely be unwilling to freeze production, analysts say. Gatherings of large producers in the past two years have failed to yield any coordinated agreements.

Oil Slide Stalls As Saudi Hints At Massive Budget Cuts -- WTI crude has dropped back to a $43 handle this morning - erasing the Saudi-Russia statement hype ramp - after China inventories and disappointing 'freeze' talk but for now the plunge has stalled as Saudi Arabia is set to review thousands of contracts aiming to cancel up to $20 billion of projects. This suggests hope for higher oil prices (improved revenues) are fading. Crude resumed its fall…As Bloomberg reports, Saudi Arabia is intensifying efforts to shrink the highest budget deficit among the world’s biggest 20 economies, aiming to cancel more than $20 billion of projects and slash ministry budgets by a quarter, people familiar with the matter said. The government is reviewing thousands of projects valued at about 260 billion riyals ($69 billion) and may cancel a third of them, three people said, asking not to be identified as the discussions are private. The measures would impact the budget for several years, two of the people said. A separate plan includes merging some government ministries and eliminating others, two people said, also speaking on condition of anonymity. The world’s biggest oil exporter has taken unprecedented steps to rein in a budget shortfall that ballooned to 16 percent of gross domestic product last year, curtailing fuel and utility subsidies as well as cutting billions of dollars in spending. The International Monetary Fund expects the shortfall to drop to below 10 percent of GDP in 2017. The Finance Ministry declined to comment, while officials at the Ministry of Economy and Planning weren’t available for comment when contacted by Bloomberg. Several senior government officials are accompanying Deputy Crown Prince Mohammed bin Salman on an Asian tour. Notably, expectation for a Riyal devaluation/depegging appear to have faded dramatically (a positive response to these budget decisions?)

Saudi Arabia Raises Pricing for October Crude to Asia on Demand - Saudi Arabia, the world’s largest crude exporter, raised pricing for October oil sales to Asia and the U.S. in a sign of strengthening demand.State-owned Saudi Arabian Oil Co., known as Aramco, increased its official selling price for Arab Light crude to Asia by 90 cents a barrel, to 20 cents below the regional benchmark, it said Sunday in an e-mailed statement. The company had been expected to raise Arab Light prices by 50 cents a barrel, to 60 cents less than the benchmark for Asian buyers, according to the median estimate in a Bloomberg survey of seven refiners and traders in the region. Brent crude has dropped about half from its average price in 2014, when Saudi Arabia led the Organization of Petroleum Exporting Countries to maintain production to drive out higher-cost suppliers. The group decided at a June 2 meeting in Vienna to stick to its policy of unfettered production, with ministers united in their optimism that global oil markets are improving. OPEC will meet again this month in Algiers. Saudi Arabia won’t boost output to its full 12.5 million barrel-a-day capacity and flood the market, the kingdom’s Energy Minister Khalid Al-Falih said last week. Saudi Arabia isn’t concerned about global demand in spite of a drop in prices and a slower economy, Al-Falih said in an interview with Al-Arabiya television while on a state visit to Asian nations including China and Japan. Saudi Aramco raised pricing for all other crude grades to Asia by a range of 70 to 95 cents a barrel against the benchmark, while it boosted pricing for all grades to the U.S. by a range of 20 to 30 cents. The company cut all prices to Northwest Europe and the Mediterranean region.

Art Berman: Oil Is Heading Lower Near-Term Before "Economically-Crippling Moon-Shot" -- This week’s marked sell-off in crude oil prices came as no surprise to petroleum geologist Art Berman, who has been predicting the price decline for weeks now. More to the point, Berman says it’s not over yet and lower oil prices are still to come. Berman gave an excellent long-form interview for this week’s MacroVoices podcast. Berman begins by observing that it’s Labor Day weekend – the end of summer driving season and historically speaking, what should be the end of a period of seasonal de-stocking of crude oil inventories, which is critically important to make room for the storage demands that predictably come during fall refinery maintenance. But Berman shows that nation-wide crude oil inventories have actually INCREASED to the tune of 6.46mm barrels over the last 6 weeks, a period when inventory levels historically move in the opposite direction! Berman then introduces his Comparative Inventory charts, which measure inventory growth relative to historical norms, effectively factoring out seasonality effects from the data. Seen in this view, the build in inventory over the last 6 weeks is actually 16mm barrels above and beyond seasonally adjusted historical norms, completely anomalous given this time of year: “This has really been a surprising development and this translates into really huge changes in comparative inventory. So, we’re adding millions of barrels a week in terms of comparative inventory, it amplifies that effect, and I think in a lot of ways that helps to put to put the downward price into some context. It also helps to understand how totally artificial this latest price rally has been about sentiment and hope that maybe OPEC is going to do something.”

Crude Spikes After Massive Inventory Drawdown (Most Since Jan 1999) -- Following last week's 2nd build in a row (and 5th of last 6), API reports crude inventories collapse over 12 million barrels - the most since Jan 1999 (against expectations of a 905k barrel build). Crude had rallied on the day early hovering aroung $45.50 for a few hours before the data hit, but spiked above$46 after the print. API:

  • Crude -12.08mm (exp +905k)
  • Cushing -0.7mm (exp -900k)
  • Gasoline -2.388mm (exp -750k)
  • Distillates +944k

The biggest crude inventory draw since Jan 1999... We presume this massive drop is some reflection of the shut-ins from the Gulf thanks to the storms. NOTE - in 2013, there was a 10mm-plus barrel draw during a heavy storm season in The Gulf and also in 2009 during a heavy storm season.  Now all eyes will be on tomorrow's DOE data - better not disappoint after this. After treading water for the last 5 hours - very oddly - crude's reaction to the API data was expectedly a knee-jerk higher towards the Saudi-Russia statement failure highs...“We’ll need to see a significant shock to the market to break out of this range over the next several weeks” leading up to OPEC talks later this month, Michael Tran, a commodities strategist at RBC Capital Markets in New York, says by phone, and we may have just got it.

 Oil rises, but doubt over output deal tempers rally: Oil prices edged 1 percent higher on Wednesday in a volatile session as the market weighs the prospect of higher supplies against the possibility that the world's top producers could agree on a production freeze. Brent futures rose 68 cents, or 1.44 percent, to $47.94 a barrel, by 2:36 p.m. ET. U.S. crude rose 67 cents, or 1.49 percent, to $45.50 per barrel."The market is trying to establish a balance in the mid $40s with supply being relatively high internationally versus the prospect that OPEC and non-OPEC members might come to an agreement that would support markets," said Tony Headrick, energy analyst at CHS Hedging LLC in St Paul, Minnesota. Oil hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market. Prices have since fallen due to uncertainty over a deal, particularly after a meeting in Doha in April among the world's largest producers to discuss output ended in failure. The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia are expected to discuss an output freeze at informal talks in Algeria on Sept. 26-28. "I think we're going to be headline driven for a while. Generally, I think we'll see lower prices going forward. The upcoming meeting isn't going to do very much. If OPEC freezes at these levels, these are record levels," said

How The Hanjin Bankruptcy Could Impact Oil Prices - The bankruptcy of South Korean shipping company Hanjin is leaving investors scrambling. Recently, the courts in South Korea were asked to decide whether the shipping company should be liquidated, or given a new lease on life via restructuring according to a Wall Street Journal Article reported last week. With limited options available to Hanjin, the company is potentially a concern for investors in the oil and transportation sectors. Global trade has slowed in recent years, yet the pricing of cargo shipments remained constant. If Hanjin was to close its doors and go bankrupt, price hikes could occur to anything shipped overseas. The South Korean shipping company is one of the largest shipping lines in the world, and if they were to go bankrupt, the consequences would likely be severe capacity issues, and strains on other shipment companies. With cargo space at a premium, shipping lines are calling for price increases that should have been implemented years ago. Additionally, large customers who use Hanjin to ship goods may have to turn around and use other transportation methods. It’s unclear how the situation will play out, but a possible implication of this is greater demand for air freight services. By extension, this could lead to a greater demand for oil, since airplanes use more fuel than ships do per pound of goods transported each mile. In theory then, this could lead to a rise in oil prices due to the higher demand from airplane traffic needs.On the other hand, if the company were to fail, this could potentially lead to a lack of confidence in international shipping firms in the industry. That might cause U.S. retailers to turn more towards products manufactured closer to home – in the U.S. and Mexico. That’s a trend that has already been given a lot of press in recent years, but the Hanjin situation might further exacerbate it. To the extent that international trade with China and Asia slows, that would result in a demand-side related fall in oil use leading to a lower price for oil.

 Four Scenarios for Oil Producers as They Seek to Boost Prices -- A meeting in Algiers at the end of September between OPEC and Russia -- which together pump more than half the world’s oil -- has raised expectations that a deal could be struck to boost prices.  There may be four potential outcomes from the Algiers talks. A freeze in production by OPEC and Russia would be the most effective way of stabilizing the market, Alexander Novak, the Russian energy minister, said in a joint press conference at the G-20 summit in China with his Saudi counterpart on Sept. 5. Novak said his country is ready to cap output at the level of any month in the second half of this year, a period that so far has delivered record volumes from both Russia and OPEC. A freeze at July levels, the most recent month for which data is available, would mean OPEC keeping production at 33.4 million barrels a day, roughly in line with demand for the group’s crude in the fourth quarter, according to data from the International Energy Agency. The Paris-based adviser already expects Russia to hold output steady for the rest of this year and into 2017.  “If they say a freeze at current levels, but making allowances for Iran, Nigeria and Libya, then you’re effectively freezing at a couple of million barrels above where you are today,” Iran is determined to raise production to 4 million barrels a day this year, from about 3.8 million currently, as it recovers market share after years of sanctions.  Nigeria, which produced 1.44 million barrels a day last month according to data compiled by Bloomberg, is seeking to end the militant attacks and get back to the 2 million barrels a day it pumped in January.  Libya is working to reopen its main export terminals, which could boost output to 1.2 million barrels a day by the end of the year, from about 300,000 a day currently.  Iraq and Venezuela are also pumping less crude now than in January, so could seek a higher cap on their output.  OPEC has on occasion overcome internal divisions and agreed to radical measures, most notably to slash production during the 2008 financial crisis.  Previous cuts worked because Saudi Arabia carried most of the burden, said Spencer Welch, director for oil markets and downstream at IHS Markit in London. Now the kingdom “has been quite clear that they are no longer willing to support prices on their own,” he said. The most likely scenario is that the talks don’t yield any curbs on output, said Pugh. When that happened at the April freeze talks in Doha, prices slid right after the collapsed deal, but the impact was offset by an oil workers strike in Kuwait. The market continued to recover in the following months as wild fires shut down output in Canada and attacks in Nigeria cut production.

Crude Soars Above $47 After Biggest Inventory Draw Since 1999 -- Following last night's API-reported 12mm barrel drawdown (the most since 1999) - likely due to Gulf shut-ins due to storms - EIA reports an even bigger 14.5 million barrel draw (likely due to Tropical Storm Hermine). Production fell for the 3rd week and Distillates saw a big inventory build but the headline crude build dominated algos which spiked WTI above $47.  DOE:

  • Crude -14.5mm (exp +905k)
  • Cushing -434k (exp -900k)
  • Gasoline -4.2mm (exp -750k)
  • Distillates +3.38mm

Distillates saw a big build...  API's reported 12mm draw (which made sense in the context of major draws during 2008 and 2013 storm seasons in the Gulf) and DOE confirmed it with the biggest draw since Jan 1999... Unexpectedly large drop in U.S. crude imports, which led to falling inventories and price surge, may be due to Tropical Storm Hermine, and thus could be temporary phenomenon that may reverse, according to Commerzbank and other analysts.  Following Crude production's sudden dramatic rise 3 weeks ago, US production has fallen back for the 3rd week... Following last night's post-API gains, Iran comments combined with Draghi's letdown were weighing on prices before the EIA data hit... which then exploded above $47...  As Bloomberg noted,  “It’s the numbers from last night that are pushing up oil prices,” says Gerrit Zambo, trader at BayernLB in Munich.  “Even if we see a bullish number this afternoon I wouldn’t bet on rising prices for too long”  Charts: Bloomberg

Oil at two-week high after largest weekly crude-supply drop since 1999 - Oil futures on Thursday logged their highest settlement in at least two weeks after U.S. government data revealed the largest drop in crude supplies since 1999.  The 14.5 million-barrel decline reported by the Energy Information Administration was even larger than the surprise 12.1 million-barrel drop reported by the American Petroleum Institute late Wednesday. Ahead of both reports, analysts polled by S&P Global Platts expected a 425,000-barrel climb.  “The large draw in crude oil inventory was driven by a large decline this week in crude oil imports, primarily weather-related, while refinery runs continued to be quite strong,” Robert Merriam, manager of Petroleum Supply Statistics at the EIA, told MarketWatch. He confirmed that the weekly supply drop was the largest since the week ended Jan. 1, 1999.  Oil prices also found support from Chinese data that showed another big increase in the country’s crude imports.  October West Texas Intermediate crude added $2.12, or 4.7%, to settle at $47.62 a barrel on the New York Mercantile Exchange. That was the strongest dollar and percentage gain since April.  November Brent crude on London’s ICE Futures exchange rose $2.01, or 4.2%, to $49.99 a barrel.  The settlement for WTI was the highest since Aug. 26 and highest for Brent since Aug. 19, according to FactSet data. “Crude supply was down dramatically on lower imports,” said James Williams, energy economist at WTRG Economics. “Imports fell because of ships delayed” by last week’s storm. Weekly net crude imports fell by about 1.8 million barrels a day, the EIA said. “We should see a spike in oil prices gradually reversed after the realization of the shipping delay sinks in,” Williams said. “Next week we will see a spike in imports and crude stocks as the delayed ships are unloaded.”

Oil prices surge as US burns through crude supply at record rate - Tropical storms and Hurricane Hermine combined to slow the movement of oil tankers and shut in offshore drilling, forcing the U.S. oil industry to dip into its massive oversupply at the highest rate for this time of year. In the past week, the industry used 14.5 million barrels in storage, largely from the East Coast and Gulf Coast, according to government data. Analysts blamed wind and rough seas resulting from Gaston, Hermine and other storms that have impeded ships with cargoes headed for U.S. refineries. As a result, there was also a sharp decline of 1.8 million barrels a day in U.S. imports — oil that comes from places like Saudi Arabia and Nigeria. Gasoline stocks also fell by 4.2 million barrels. While the storms threatened the Gulf of Mexico, 12 percent of U.S. oil drilling in the Gulf was temporarily shut in.Oil prices jumped on the weekly Energy Information Administration report, adding to gains made late Wednesday on similar data from the American Petroleum Institute. West Texas Intermediate futures for October settled at $47.62 per barrel, a gain of more than 4.6 percent.  "This is an aberrant report of the first order," said John Kilduff of Again Capital. "I think the East Coast shipments were probably affected by Gaston earlier. There was also a barge that got sunk in the Houston Ship Channel. That also affected the ability of ships to move in and out of the channel."  Kilduff said the runup in oil prices is overdone though there could be further impacts in next week's data from Hermine which swirled off the East Coast. A positive for prices was the fact that oil production declined last week, instead of rising as it has lately. The U.S. produced 8.46 million barrels last week, down from 8.49 million.

Oil Markets Brace As U.S. Looks To Sell 100 Million Barrels From SPR - Aging infrastructure could render the U.S. strategic petroleum reserve (SPR) increasingly ineffective, according to a new report from the Department of Energy. The U.S. has stored roughly 700 million barrels of crude oil in salt caverns in Texas and Louisiana for decades. The SPR was established in the aftermath of the Arab oil embargo in 1973, which painfully revealed U.S. oil dependence as high prices drove up inflation, created fuel shortages and lines at gas stations, and rocked the American economy. The SPR was setup to stash 90 days’ worth of supply into storage for safekeeping, meant to be used in the event of a supply outage. Decades of wear and tear mean that the infrastructure is now in desperate need of an upgrade. The DOE says Congress needs to cough up $375.4 million to make repairs, otherwise the SPR may not be all that effective. “Most of the critical infrastructure for moving crude within the SPR has exceeded its serviceable life, increasing maintenance costs and decreasing system reliability,” the report concludes. For the SPR to last decades into the future, DOE argues, investment in the system is needed. But the SPR’s value and purpose is also starting to wane; the U.S. no longer needs the SPR like it once did. High levels of domestic oil production and flat demand mean that the U.S. is not quite as dependent on crude as it once was, at least in terms of the size of the American economy. Five years ago, U.S. oil imports routinely topped 10 million barrels per day. By 2014 that number had shrunk to below 7 million barrels per day. Imports have crept back up a bit as production has declined because of low oil prices, but the U.S. is still far less dependent on imported oil than it used to be.There is another problem with the SPR in 2016 that was less of an issue in the past.The SPR was designed to release oil from the Gulf Coast region, and pump it to the rest of the country. But most of the pipeline infrastructure completed in recent years was designed to flow from north to south, allowing huge volumes of newly produced oil to flow towards the Gulf for refining. The larger north-to-south oil flow means that the SPR would struggle to actually service the country in the event of an outage. Instead of the 4.4 million barrels the SPR is supposed to be able to release each day, it might only be able to move 2 million barrels per day because of pipeline congestion.

People are almost completely ignoring a looming crisis for oil -- In the current climate, the vast majority of worry in the oil markets surrounds the huge imbalance in supply and demand in the industry. This is understandable, given that the enormous glut of oil in the markets has pushed prices down from more than $100 around two years ago, to less than $50 right now.  However, in a major new research note, HSBC argues that soon we won't be worrying about there being too much supply and not enough demand, but rather, things will be the other way round soon enough, and that is going to cause huge problems.  In the report from HSBC staff Kim Fustier, Gordon Gray, Christoffer Gundersen, and Thomas Himboldt argue that given the finite nature of the physical amount of oil in the world, people should really be paying more attention to falling supply in the future, rather than oversupply right now. Here is the extract from Fustier et al (emphasis ours):  "Given the backdrop of the past two years’ severe oversupply in the global oil market, it’s not surprising that few are discussing the possibility of a future supply squeeze. Indeed, most of the current debate on the long-term outlook for oil seems focused on risks to demand from progress on both the policy and technology fronts.  "Meanwhile, we expect the past two years’ severe crude price weakness to result in a return to balance in the global oil market in 2017. At that stage, we expect global effective spare capacity to fall to as little as 1% of demand. Supply disruptions have had only limited impact on price in 2015-16 due to the global oversupply, but the market will be much more susceptible to interruptions post-2017. In addition, given the almost unprecedented fall in industry investment since 2014, we expect the focus to return to the availability of adequate supply."  HSBC's note is more than 50 pages of detailed, thoughtful research on the state of the markets and how the dwindling availability of oil, along with jumping demand over the coming decades will change the world.  But included within the report is a helpful, ten-point summary of the key arguments the bank makes, and what is going on right now. We have summarised the arguments below:

OilPrice Intelligence Report: Oil Set For A Drop After Inventory Data Excitement - Oil prices surged on Thursday following news from the EIA that showed a colossal drawdown in crude oil stocks. Inventories plunged by 14.5 million barrels for the week ending on September 2, the largest drawdown for this time of year on record. However, before the oil bulls get too excited, it is important to note that the huge drawdown could be a one-off, owing to the hurricane that disrupted shipments in the Gulf of Mexico. Imports were down sharply, leading to a larger-than-usual draw on stocks. "This is an aberrant report of the first order," John Kilduff of Again Capital, told CNBC. Others agree: "I suspect over the next few weeks we're going to see inventories recover to a certain extent, as the imports catch up," said Andrew Lipow of Lipow Oil Associates. "There's still plenty of oil out there. What we're seeing is the result of storm impacts on vessel shipping at the same time we still see members of OPEC to increase their oil production." WTI and Brent pared their gains during early trading on Friday as traders took profits.   Oil prices could remain within a range of $35 to $55 per barrel for years, according to Dennis Gartman of The Gartman Letter. Shrugging off any action from OPEC, Gartman says that the global market is very well supplied, and will continue to be for quite some time. He points to the wide contango in the oil futures market, which indicates a short-term glut in supply.  Apache Corporation announced a massive oil discovery in West Texas this week, which could turn out to be one of the largest finds over the past decade. The “Alpine High” discovery in the Delaware Basin could hold as much as 3 billion barrels of oil and 75 trillion cubic feet of natural gas. Alpine High could be worth as much as $8 billion on the lower end of estimates, or ten times as much on the higher end. The exciting thing for Apache is that it says it can turn a 30 percent profit on wells even at today’s prices. The company also says that some of the best natural gas wells could be profitable with natural gas prices at $0.10 per million Btu. Obviously, with natural gas prices much higher than that, the wells could be hugely profitable. As of Friday, Apache’s share price was up more than 15 percent for the week. Bloomberg estimates that Asia’s five largest oil producers – China, India, Malaysia, Indonesia and Vietnam – could see output fall by a combined 255,000 barrels per day because of low oil prices this year. They could also lose an additional 309,000 barrels per day next year.

 Oil Slides As Freeze 'Deal' Hope FaltersOf the four scenarios that we laid out yesterday, it appears "exemptions" or "no deal" are now the only ones left on the table for Algiers - neither of which are good for oil prices. As Bloomberg reports, Iran, Libya, and Nigeria have demanded the right to increase production - a solution that makes a Saudi agreement to 'freeze' less likely and a "no deal" reaction in Algiers more likely. “I think it is normal that Iran has the right to increase production to the pre-sanctions level. It is also the right of Libya, Nigeria to increase,”Algerian Energy Minister Noureddine Bouterfa says in interview in Moscow. “All the solutions are possible” at Algiers talks this mo., Bouterfa says when asked if countries including Iran, Libya, Nigeria may have the opportunity to raise output from current levels within the framework of a freeze deal. “Algeria is ready for any actions to stabilize the market” Paris meeting Friday w/ Bouterfa, OPEC Sec-Gen, Saudi Oil Minister will “evaluate all actions by Iran, Russia, Algeria, Qatar” to prepare for talks in Algiers The reaction in markets is to start giving back the US inventory draw gains...

 US rig count up 11 this week to 508; Louisiana up 8 - The number of rigs exploring for oil and natural gas in the U.S. increased by 11 this week to 508. A year ago, 848 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 414 rigs sought oil and 92 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Louisiana gained eight rigs, Texas was up four, Utah and West Virginia each increased by two and Ohio by one. Oklahoma declined by four and New Mexico was off two. Alaska, Arkansas, California, Colorado, Kansas, North Dakota, Pennsylvania and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

UPDATE 2-U.S. oil drillers add rigs in longest streak in 5 years -Baker Hughes | Reuters: U.S. drillers this week added oil rigs for a tenth week in the past 11, according to a closely followed report on Friday, the longest streak of not cutting rigs since 2011, as the rig count recovered to February levels. After falling 206 rigs in the first half of the year, the rig count has increased or held steady every week so far this quarter. The rig count plunged from a high in October 2014 after crude prices collapsed in the biggest price rout in a generation. Drillers added seven oil rigs in the week to Sept. 9, bringing the total rig count up to 414, the most since February, energy services firm Baker Hughes Inc said. That is well below the 652 oil rigs active during the same week a year ago, but is up from the recent bottom of 316 rigs seen in May. All of the rigs added this week were those units located offshore in Louisiana that returned to service after shutting last week due to Tropical Storm Hermine, analysts said. Drillers removed seven offshore rigs during the week ended Sept. 2 and added eight back during the week ended Sept. 9. U.S. crude futures were on course to rise about 4 percent this week on hopes for a global deal on stabilizing crude output after Saudi Arabia, the leading oil producer inside OPEC, and Russia, the biggest producer outside the group, agreed on Monday to cooperate in oversupplied markets. On Friday, U.S. crude was trading at above $46 a barrel, close to the $50-mark that analysts and drillers say makes drilling more viable. Futures for calendar 2017 were trading over $50.

Permian rig count gains stall after 12 weeks -  The Permian Basin’s run of 12 consecutive weeks of rig count gains ended Friday, but the loss was only slight. The Permian idled two rigs, lowering the basin-wide total to 200, according to data from Baker Hughes. The net loss of rigs happened in New Mexico, where Eddy and Lea counties each shed a rig. District 7B was unchanged at five, District 7C fell one to 21; District 8 gained one to 131 and District 8A held steady at 15. The Texas total for the Permian was 172. Midland County still leads all counties nationwide in rig count. The county, which sits at the core of the Midland Basin, saw one fewer rig this week, lowering the total to 36. Reeves County, which is in the heart of the Delaware Basin, finished the week with 23 rigs, down three. There weren’t any rigs in the Permian that saw renewed activity or ceased all activity. The Permian is almost back to where it started. The count on Jan. 8, the first full week of the year was 209. The Sept. 2 count snapped a 32-week streak of sub-200 rig counts. The nation’s most-active basin recorded 250 rigs a year ago this week.  Texas added four rigs, raising the statewide tally to 245. Aside from the Permian, all of Texas’ major basins were unchanged. The Eagle Ford had 38 rigs, the Haynesville marked 14, the Granite Wash held steady at nine and the Barnett stayed at three. There was one offshore rig in Texas, and there weren’t any rigs in inland waters. All of New Mexico’s rigs were operating in the Permian, which totaled 28. At this time last year, there were 366 rigs in Texas and 48 in New Mexico. The U.S. added both oil and natural gas rigs this week. The number of rigs searching for oil rose seven to 414, while natural gas rigs climbed four to 92. The tally of miscellaneous rigs was unchanged at two. In total the U.S. had 508 rigs, up 11. The count marked the first time since Feb. 26 that the count nationwide was in the 500s. All offshore rigs were in the Gulf of Mexico, which rose eight to 18. Rigs in inland waters held steady at five, while rigs on land rose three to 485. By drilling trajectory, there were 396 horizontal rigs, up one; 64 vertical rigs, up four; and 48 directional rigs, up six. The U.S. had 848 rigs at this time last year.

  Oil continues decline after data show weekly U.S. oil-rig count up by 7 - Oil futures continued to decline Friday after data from Baker Hughes revealed that the number of active U.S. rigs drilling for oil climbed by 7 to 414 rigs this week. The count has risen in 10 of the last 11 weeks. The total active U.S. rig count, which includes oil and natural-gas rigs, rose by 11 to 508, Baker Hughes said. October crude was at $46.10 a barrel on the New York Mercantile Exchange, down $1.52, or 3.2%, from Thursday's settlement. It traded around $46.26 before the rig data.

Iraq And KRG Agree To Split Kirkuk Revenues 50/50 And Fight ISIS In Mosul - Iraq and the semi-autonomous region of Kurdistan have restarted joint exports of crude from the Kirkuk oil field, after the two parties reached a preliminary revenue-sharing deal earlier this week, industry contacts told Reuters on Thursday. The agreement came to fruition during recent meetings in Baghdad between high-level officials from Baghdad and Erbil, including Iraqi Prime Minister Haider al-Abadi and KRG Prime Minister Nechirvan Barzani. One shipping source said that revenues from Kirkuk’s oil trade would be split 50/50 between Iraq’s State Organization for the Marketing of Oil and Kurdistan under the new deal, though the agreement's final details will be sorted out during upcoming discussions between the Iraqi Oil Ministry and the KRG’s Natural Resources Ministry. The officials also discussed the nearing operation for the liberation of Mosul and the future of the city and its citizens once the Islamic State has been removed. “We have an initial agreement with the Kurdistan Region on the participation of all components in the Mosul liberation operation and the future administration of the city when IS is pushed out,” Salim al-Jibouri, the Speaker of the Iraqi Parliament told Kurdistan24. The two sides agreed to coordinate attacks against the terrorist group in Mosul and will work together to return internally displaced persons to their homes, a joint statement by the Iraqi government and the KRG said.

Iraq needs to review upstream contracts in line with oil prices: Oil minister - Oil | Platts News Article & Story: As Iraq continues to pump record crude oil levels, oil minister Jabbar al-Luaibi, stressed Wednesday the need to review its upstream contracts with international oil companies to account for changes in the oil price. Luaibi met a delegation from Italian oil company Eni led by head of exploration, Antonio Villa, in Baghdad, to discuss his plans for the sector in 2016 and 2017, which he said would focus on the small undeveloped fields in the south of the country.Eni leads the development of the 4 billion barrel Zubair oil field in the south of Iraq, along with South Korea's Kogas and Iraqi state-owned Missan Oil Co. under a technical service contract with the oil ministry. It plans to increase total production capacity to 850,000 b/d over the next few years. But planned investments in the field have been delayed as the company has sought to preserve cash to deal with lower oil prices. He emphasized that his office is working to overcome the obstacles and difficulties faced by oil companies operating in Iraq, adding that it "will open a new page in the development of the oil sector" in a statement released Wednesday. Luaibi reiterated that he has no plans to cancel any of the upstream contracts, but called for the deals to be modified to take into account prices.

Saudi Said To Weigh Canceling $20 Billion Of Projects -- Bloomberg -- September 6, 2016 --Link here to Bloomberg: Saudi Arabia is intensifying efforts to shrink the highest budget deficit among the world’s biggest 20 economies, aiming to cancel more than $20 billion of projects and slash ministry budgets by a quarter, people familiar with the matter said. The government is reviewing thousands of projects valued at about 260 billion riyals ($69 billion) and may cancel a third of them, three people said, asking not to be identified as the discussions are private. The measures would impact the budget for several years, according to two of the people. A separate plan includes merging some government ministries and eliminating others, two people said, also speaking on condition of anonymity. The world’s biggest oil exporter is taking unprecedented steps to rein in a budget shortfall that ballooned to 16 percent of gross domestic product last year, curtailing fuel and utility subsidies as well as cutting billions of dollars in spending. The International Monetary Fund expects the shortfall to drop to below 10 percent of GDP in 2017.

Saudi Oil Output Said to Drop as OPEC Debates Production Freeze - Saudi Arabia told OPEC that its oil production dropped by 40,000 barrels a day in August to 10.63 million barrels as the group debates a deal to curb output to shore up prices. The figures were submitted to the Organization of Petroleum Exporting Countries, according a person with knowledge of the data, who asked not to be identified because the information hadn’t yet been made public. The country’s output declined from an all-time high of 10.67 million barrels a day in July, according to OPEC submissions. OPEC and Russia are putting cooperation back on the table, after two years of a Saudi-led strategy by the producer group to pump flat out to protect market share against the surge in U.S. shale oil. Their last attempt to do this -- a proposal to freeze output in April -- collapsed after Saudi Arabia refused to proceed without all OPEC states, including regional rival Iran, participating. “The most important issue is whether Saudi Arabia will cut its production to pre-summer levels,” said Anas al-Hajji, an independent analyst and former chief economist at NGP Energy Capital Management LLC in Houston. The kingdom’s production was 10.22 million barrels a day in March, before the hot summer boosted seasonal local demand. Iran insists it will be ready to decide on capping production once output recovers to what it was before international sanctions on the country were tightened in 2012. That level is “slightly” above 4 million barrels a day, and Iran may reach it by the end of 2016 or early next year, Mohsen Ghamsari, director for international affairs at state-run National Iranian Oil Co., said Thursday in an interview in Singapore.  Iran’s production rose to 3.63 million barrels a day in August from 3.62 million barrels a day in the previous month, according the person with knowledge of the data.  Output in Iraq, OPEC’s second-biggest producer, rose to 4.638 million barrels a day in August from 4.606 million barrels a day the previous month, the person said. Kuwait also increased, to 2.987 million barrels a day from 2.95 million barrels a day, he said. Nigeria’s production rose to 1.456 million barrels a day in August from 1.27 million barrels a day, the person said. The Niger Delta Avengers, a militant organization, declared an end to attacks on Nigerian oil infrastructure, according to a statement last month on a website that said it represents the group.

Saudi Arabia’s oil industry has an overlooked risk -- Last week, a rocket originating from Yemen hit a power-relay facility in southern Saudi Arabia, the state-run Saudi Press Agency reported, as was cited by Bloomberg.  Yemeni rebels said they hit Saudi Aramco facilities, but the kingdom's state-run oil company announced that "all of its oil, gas, and refining plants were operating as normal" in the aftermath, according to Bloomberg.  Still, some analysts argued that the episode shows that the Saudis' campaign in Yemen could pose a risk to its oil sector.  "The recent cross-border rocket attacks originating from Yemen are an ominous reminder of the dangers posed by Saudi Arabia’s 18-month military intervention in Yemen," argued Helima Croft, the head of commodity strategy at RBC Capital Markets, in a note to clients.  "Although no ARAMCO facility in the southern region has yet to be hit, the fact that a rocket did strike a power station in Najran last week demonstrates that critical local infrastructure indeed remains vulnerable."   Notably, the RBC Capital Markets team also argued last year that the Saudi campaign in Yemen could also add additional pressures on its finances as it increases security spending. "The military campaign in Yemen, more assertive efforts to roll back Iranian regional influence, and more muscular counter-terrorism efforts will put further pressure on Saudi government finances as they ratchet up security spending," the team wrote back in June 2015.

Obama Faces Humiliation After House Unanimously Passes Bill Allowing Sept 11 Lawsuits Against Saudi Arabia Two days before the 15 year anniversary of the September 11 attack, moments ago the House unanimously passed - to thunderous applause - legislation allowing the families of 9/11 victims to sue Saudi Arabia in U.S. courts,   The bill, which passed the Senate unanimously in May, now heads to President Obama’s desk. And that's where things get tricky for Obama. The White House has fiercely opposed the bill, arguing it could both strain relations with Saudi Arabia and also lead to retaliatory legislation overseas against U.S. citizens. Obama has lobbied fiercely against the bill, and has hinted strongly it will veto the measure. He is not alone: the Saudi government has likewise led a vocal campaign in Washington to kill the legislation. Those efforts have been fruitless in Congress, however. Meanwhile, the legislation saw broad support from both parties, and Congress could override an Obama veto for the first time if he rejects the legislation. Such an outcome would undoubtedly embarrass Obama and divide Democrats ahead of the 2016 elections and a crucial lame-duck session of Congress.  For now, Obama is adamanat: "The Saudis will see this as a hostile act," said Dennis Ross, Obama’s former Middle East policy coordinator. "You’re bound to see the Obama administration do everything they can to sustain a veto.   How Obama will spin such a pro-Saudi, and anti-US decision, which may be overriden anyway, to the US population is unclear.

The War Economy: CNN's Wolf Blitzer Warns About Job Loss If US Stops Arming Saudi Arabia -- Ladies and gentlemen, it appears the long anticipated moment of peak mainstream media stupidity may have finally arrived.   This is what passes for journalism in America today.The Intercept reports:Sen. Rand Paul’s expression of opposition to a $1.1 billion U.S. arms sale to Saudi Arabia — which has been brutally bombing civilian targets in Yemen using U.S.-made weapons for more than a year now — alarmed CNN’s Wolf Blitzer on Thursday afternoon. Blitzer’s concern: That stopping the sale could result in fewer jobs for arms manufacturers.“So for you this is a moral issue,” he told Paul during the Kentucky Republican’s appearance on CNN. “Because you know, there’s a lot of jobs at stake. Certainly if a lot of these defense contractors stop selling war planes, other sophisticated equipment to Saudi Arabia, there’s gonna be a significant loss of jobs, of revenue here in the United States. That’s secondary from your standpoint?” Paul stayed on message.  “Well not only is it a moral question, its a Constitutional question,” Paul said. “Our founding fathers very directly and specifically did not give the president the power to go to war. They gave it to Congress. So Congress needs to step up and this is what I’m doing.”

Top Saudi cleric says Iran leaders not Muslims as haj row mounts | Reuters: Saudi Arabia's top religious authority said Iran's leaders were not Muslims, drawing a rebuke from Tehran in an unusually harsh exchange between the regional rivals over the running of the annual haj pilgrimage. The war of words on the eve of the mass pilgrimage will deepen a long-running rift between the Sunni kingdom and the Shi'ite revolutionary power. They back opposing sides in Syria's civil war and a list of other conflicts across the Middle East. Tensions between them have been rising since Saudi Arabia cut ties with Iran in January following the storming of its embassy in Tehran, itself a response to the Saudi execution of a dissident Shi'ite cleric. Iranian Supreme Leader Ayatollah Ali Khamenei, in a message published on Monday, criticized Saudi Arabia over how it runs the haj after a crush last year killed hundreds of pilgrims. He said Saudi authorities had "murdered" some of them, describing Saudi rulers as godless and irreligious. Responding to a question by Saudi newspaper Makkah, Saudi Arabia's Grand Mufti Sheikh Abdulaziz Al al-Sheikh said he was not surprised at Khamenei's comments. "We have to understand that they are not Muslims. ... Their main enemies are the followers of Sunnah (Sunnis)," Al al-Sheikh was quoted as saying in remarks republished by the Arab News.He described Iranian leaders as sons of "magus", a reference to Zoroastrianism, the dominant belief in Persia until the Muslim Arab invasion of the region that is now Iran 13 centuries ago.

 Iran says it'll increase output, ignoring Russia-Saudi oil deal:  - Major oil producer Iran has said it will increase its own oil output to pre-sanctions levels in the next few months, shrugging off the deal between Russia and Saudi Arabia to stabilize oil markets. The National Iranian Oil Company's (NIOC) director for international affairs told CNBC on Wednesday that Iran's oil output had reached 3.8 million barrels per day and that it would increase production. "Our current rate of production is slightly over 3.8 million barrels per day and before sanctions we were over 4 million," said NIOC's Seyed Mohsen Ghamsari, who was speaking at a petroleum conference in Singapore hosted by S&P Global Platts."And as everyone knows in the market, we are soon going to introduce new crude oil to the market by the end of the year, (that means increasing output) by at least 300,000 barrels a day so it means that we can match (our pre-sanction) production in two or three months," Dismissing concerns that an oversupply of oil could dampen a price recovery and delicate rebalancing in oil markets, Dow Jones reported on Wednesday that Ghamsari had said that the oil market would be rebalancing by the fourth quarter of this year or the start of 2017. The comments come after other major oil producers Russia and Saudi Arabia (an OPEC member alongside Iran) announced on Monday that they would form a strategic energy partnership designed to help stabilize oil markets. Although no formal agreement was mentioned on freezing production levels, a move that could help to support global oil prices which slumped on an glut in supply, the agreement was seen as "meaningful" by analysts as it marked a further step towards putting a floor under oil prices.

Oil minister: Iran backs OPEC moves geared toward stability (AP) — Iran’s oil minister says his country would support any decision by the oil producing group of nations that seeks to stabilize the oil market, Iranian state TV reported on Tuesday. The remarks by the minister, Bijan Namdar Zangeneh, came after talks with OPEC chief Mohammad Sanusi Barkindo on Tuesday in Tehran. According to Zangeneh, most OPEC members want to see the price of crude oil at 50 to 60 dollars per barrel. “This price makes production of oil by OPEC members profitable, economical and useful, while preventing the rivals from raising their output,” he said, Iran is trying to regain its share of the global petroleum market after the removal of Western sanctions following Iran’s nuclear deal with world powers. It has said it will participate in talks on a possible production freeze after it reaches an output of 4 million barrels per day by April 2017. In late 2000s, Iran was the second producer in OPEC with a total production of 4.2 million barrels per day, with 2.5 million barrels exported. The current production is at 3.6 million barrels of oil a day, of which Tehran exports 2.2 million barrels a day. The world’s two largest oil producers, Russia and Saudi Arabia, on Monday agreed to act together to stabilize global oil output, though it’s unclear what that might entail. Russia, which is not a member of the oil producing nations’ group OPEC, this year supported calls to freeze production, but the efforts fell through after Iran opposed the plan.

US payment of $1.7 billion to Iran made entirely in cash - The Obama administration is acknowledging its transfer of $1.7 billion to Iran earlier this year was made entirely in cash, using non-U.S. currency, as Republican critics of the transaction continued to denounce the payments. Treasury Department spokeswoman Dawn Selak said in a statement late Tuesday that the cash payments were necessary because of the "effectiveness of U.S. and international sanctions," which isolated Iran from the international finance system. The $1.7 billion was the settlement of a decades-old arbitration claim between the U.S. and Iran. An initial $400 million of euros, Swiss francs and other foreign currency was delivered on pallets Jan. 17, the same day Tehran agreed to release four American prisoners. The Obama administration had claimed the events were separate, but recently acknowledged the cash was used as leverage until the Americans were allowed to leave Iran. The remaining $1.3 billion represented estimated interest on the Iranian cash the U.S. had held since the 1970s. The administration had previously declined to say if the interest was delivered to Iran in physical cash, as with the principal, or via a more regular banking mechanism. Earlier Tuesday, officials from the State, Justice and Treasury departments held a closed-door briefing for congressional staff on the payments, according to a Capitol Hill aide familiar with the session. The officials said the $1.3 billion was paid in cash on Jan. 22 and Feb. 5. The aide was not authorized to speak publicly and requested anonymity. The money came from a little-known fund administered by the Treasury Department for settling litigation claims. The so-called Judgment Fund is taxpayer money Congress has permanently approved in the event it's needed, allowing the president to bypass direct congressional approval to make a settlement. The U.S. previously paid out $278 million in Iran-related claims by using the fund in 1991.

Iran: Secret party scene defies strict Muslim authorities with drink, drugs, mini-skirts and music: In spite of Iran's many strict Islamic laws – heterosexual interaction between men and women is forbidden and punishable by lashings and imprisonment, women aren't allowed to dance in the presence of men, rap music isn't strictly illegal but believed to lead to uncontrollable behaviour –Tehrani nights are rife with secret house parties and techno raves.  Behind closed doors Iranian youngsters see themselves as above the law, not part of it. Girls take off hijabs before stepping through the door. The next stop is the master bedroom where they strip their loose manteaus – another indispensable part of the Islamic dress code – and reveal their miniskirts and high heels.In the living room whisky and vodka flow abundantly while under the kitchen's buzzing hood the first joints are being lit. While obviously at ease with engaging in several illegal activities at once, the crowd does show slight signs of panic each time the doorbell rings. It is always among the possibilities that one of the invitees or the neighbours squealed to the police."It is the hardest thing to trust anyone in Iran", several attendees at the party tell me. Most of them already have been arrested and kept in custody for partying on a number of occasions. But the prospect of getting arrested doesn't deter any of them from partying on. "It is certain that one day you will get arrested if you decide to party," says Gazelle, an art student in her early twenties, "mostly you can bribe the officer at the door. It even has a unofficial fixed price: 50,000 toman." That's the equivalent of £10.

War against Isis: Security services bracing for possible return of thousands of jihadists as group loses territory -  Security services are examining plans for how to deal with thousands of Western jihadists who would seek to return to Europe as Isis continues to lose territory in its “caliphate” and suffer severe losses from pounding air strikes by the US-led coalition and Russia. Although the Islamist group has suffered increasingly from desertion, very few of the foreign fighters who have left its ranks have returned to Europe in recent times. The numbers coming to Britain for instance, The Independent has learned, have been in no more than single figures for the last eight months. These extremists, radicalised, armed and trained, will present a severe threat in the near future, “a ticking time bomb” as they try to break out of the region, say security officials, who stress that a coordinated policy is needed to confront the impending crisis. Turkish military opens up new front against ISIL in Syria. The problem has been compounded by a dramatic increase in the use of children, including those of Western parentage, by Isis to carry out executions of prisoners and other acts of extreme violence. A photo appeared last week of a young boy, said to be British, in the act of shooting Kurdish fighters captured by Isis. The 11-year-old, it has been claimed, was the son of Sally Jones, a British woman who had converted to Islam and joined Isis in Syria

US-Trained Special Ops Fighter Is The Islamic State's New Top Commander In Iraq -- Just days after the news hit that ISIS' main propaganda officer, Mohammad al-Adnani, one of the Islamic State's most prominent leaders, the second in command of Abu Bakr al-Baghdadi, as well as the unofficial spokesman of the terrorist organization, was killed (with a scandal promptly erupting between the US and Russia over who had taken him out), the power vacuum that formed at the top of the Islamic State has been promptly filled, after former Tajik Special Forces colonel Gulmurod Khalimov became the top ISIS battlefield commander in Iraq, after defecting last year and swearing jihad against the West.  Khalimov is set to take the position vacated by Abu Omar al-Shishani, also known as Omar the Chechen, who was killed in the Iraqi city of Shirqat, south of Mosul. in early July and whom the Pentagon described as Islamic State's "minister of war." What makes the ascent of Khalimov particularly embarrassing for the US is that The former paramilitary unit commander of the Tajikistan armed forces received his battlefield training from American advisors and even came to the United States on several occasions to receive special counterterrorism training through the US State Department’s Diplomatic Security/Anti-Terrorism Assistance program.  Then last year, Khalimov defected to ISIS where the Daesh forces in Iraq welcomed the new addition to their ranks with open arms especially since he was acquainted with US military and intelligence tactics. Subsequently, the American trained former Special Forces colonel Gulmurod Khalimov received a promotion within the terrorist organization, and has become the group's Iraqi battlefield commander just weeks after ISIS refused to officially announce that Khalimov had been promoted to the top ranks of the terrorist organization out of concern that he would become a high-priority target of US led strikes in Iraq, but Iraq’s Al Sumaria news agency exposed the promotion through a source in Nineveh province

Isis' oil empire is employing thousands of children - Satellites reveal boom in cottage industry in which tens of thousands of civilian workers are engaged in dangerous, toxic work that props up extremist regime. Satellite images have revealed a huge expansion of makeshift oil refineries and a further human catastrophe for those struggling to survive amid Syria’s civil war. Tens of thousands of black smudges have appeared across the country since the beginning of the war in 2011. A report prepared by the Dutch NGO Pax analysed images of the ground north of the Isis-controlled city of Deir ez-Zor and found 5,791 backyard-style refineries had sprung up since 2012. The refinement of the crude has shifted from large, easily targeted facilities to small household-run furnaces that are toxic, volatile and often manned by children. A shortfall in production means that oil remains one of the few industries in which Syrians can still earn a living. Separate investigations by Unicef, Save the Children and the UN, as well as numerous journalists, have previously raised concerns over the high proportion of children working in the refineries around Deir ez-Zor.Report author Wim Zwijnenburg said the scale revealed by the satellites indicated that tens of thousands of civilians, including thousands of children, are now involved in the cottage oil industry. Many adult men in Syria have gone away to fight. At one site a local doctor claimed 2000 children were working amid 300 refineries. “Considering that in our analysis we found 5800 refineries at 5 locations, and there at 36 known locations, we felt that’s it safe to say that thousands of children are likely working at these sites spread over all of northern and eastern Syria,” said Zwijnenburg.

 How the ISIS Recruits And Coerces Children: A few weeks ago the world once again witnessed ISIS’s use of at least one child bomber, perhaps two. A child between the ages of 12 and 14 was reportedly the culprit behind a suicide attack – blowing up the wedding of Besna and Nurettin Akdogan in Gaziantep, Turkey and killing 54 people on August 20. Although now the Turkish government is not certain whether it was a child or an adult, it’s certainly not the only time children have been used by terrorist networks to perpetrate attacks. The following day, a child was caught before he could detonate a suicide bomb at a Shia school in Kirkuk, Iraq. During the course of research for our book, Small Arms: Children and Terror, John Horgan and I have learned how ISIS socialises children into their terrorist network. We have also had the opportunity to meet with children who have been rescued from terrorist groups in Pakistan. There are important differences in how groups engage children in militant activities. Differences between children in terrorist groups and child soldiers include how children are recruited and what role the parents and community play in recruitment. Understanding these differences helps us know how best to approach treating the children’s trauma and figure out which children can be rehabilitated and which ones might be vulnerable for recidivism as adults.

Nearly half of all refugees are children, says Unicef -- Children now make up more than half of the world’s refugees, according to a Unicef report, despite the fact they account for less than a third of the global population.  Just two countries – Syria and Afghanistan – comprise half of all child refugees under protection by the United Nations High Commissioner for Refugees (UNHCR), while roughly three-quarters of the world’s child refugees come from just 10 countries.New and on-going global conflicts over the last five years have forced the number of child refugees to jump by 75% to 8 million, the report warns, putting these children at high risk of human smuggling, trafficking and other forms of abuse.  The Unicef report (pdf) – which pulls together the latest global data regarding migration and analyses the effect it has on children – shows that globally some 50 million children have either migrated to another country or been forcibly displaced internally; of these, 28 million have been forced to flee by conflict. It also calls on the international community for urgent action to protect child migrants; end detention for children seeking refugee status or migrating; keep families together; and provide much-needed education and health services for children migrants.

Obama and Putin unable to reach cease-fire agreement for Syria  - President Obama and Russian President Vladi­mir Putin failed to reach a deal Monday on a cease-fire for Syria, but the two sides have agreed to continue negotiating even as Syrian government forces close in on the beseiged city of Aleppo. Meeting with Putin on the sidelines of the Group of 20 economic meeting here, Obama emphasized the humanitarian importance of and urgent need for a cease-fire, but he was adamant about not striking an agreement that wouldn’t meet his long-term objectives in Syria, said a White House official who spoke on the condition of anonymity under ground rules. The 90-minute unscheduled meeting was described by both sides as longer than usual for the sidelines of a G-20 summit. But an ultimate agreement remained elusive. At a news conference, Obama said the breakdown of a previous cessation of hostilities agreement had prompted Syrian President Bashar al-Assad to resume bombing opposition forces “with impunity.” That has led opposition forces, including those with ties to terrorism, to ramp up recruitment of new fighters, the president said. “That is a very dangerous dynamic,” Obama said. Of his meeting with Putin, he added: “We have had some productive conversations about what a real cessation of hostilities would look like to allow us to both focus our energies on common enemies. . . . But given the gaps of trust that exist, that’s a tough negotiation. We haven’t yet closed the gap.”

A reminder of the permanent wars: Dozens of U.S. airstrikes in six countries -- While Americans savored the last moments of summer this Labor Day weekend, the U.S. military was busy overseas as warplanes conducted strikes in six countries in a flurry of attacks. The bombing runs across Asia, Africa and the Middle East spotlighted the diffuse terrorist threats that have persisted into the final days of the Obama presidency — conflicts that the next president is now certain to inherit. In Iraq and Syria, between Saturday and Monday, the United States conducted about 45 strikes against Islamic State targets. On the other side of the Mediterranean, in the Libyan city of Sirte, U.S. forces also hit fighters with the militant group. On Sunday in Yemen, a U.S. drone strike killed six suspected members of ­al-Qaeda in the Arabian Peninsula. The following day, just across the Gulf of Aden in Somalia, the Pentagon targeted al-Shabab, another group aligned with ­al-Qaeda. The military also conducted several counterterrorism strikes over the weekend in Afghanistan, where the Taliban and the Islamic State are on the offensive. Militants in each of those countries have been attacked before, but the convergence of so many strikes on so many fronts in such a short period served as a reminder of the endurance and geographic spread of al-Qaeda and its mutations. “Now, we’ve got U.S. combat operations on multiple fronts and we’re dropping bombs in six countries. That’s just the unfortunate reality of the terrorism threat today.” In meeting those threats, Obama has sought to limit the large-scale deployments of the past, instead relying on air power, including drones; isolated Special Operations raids; and support for foreign forces.

China Releases Secret Data On Crude Oil Inventories -- China is bothering energy analysts and investors. It’s bothering them because it has been on a buying spree for crude in the last two years but nobody knows for sure how much of it the world’s second-largest consumer of oil has stashed away in strategic and commercial tanks.  At least, that was true up until this morning, when China graciously reported their oil strategic inventory reserves as of the first of the year—31.97 million tons, or between 33 and 36 days’ worth of China imports. The figure, which is higher than analysts had expected, may not mean a whole lot, because we still don’t know anything about how much they have amassed since then, and it doesn’t include any information about what may be stashed away in commercial storage facilities. Knowing how much oil China has put away could be vital for predicting the future moves of the oil market, from analysts’ perspective. Unfortunately, Beijing doesn’t feel that it has to share this vital information with the world. What the world-outside-China knows is that this year, crude oil imports there have reached historic highs, as the country takes advantage of the price rout and teapot refineries gain in prominence – and clients abroad. The world also knows that local production is falling, as E&Ps have to deal with maturing fields and low profitability.  This falling local production is increasing China’s dependence on external sources of crude, which hardly sits well with Beijing and could provide an easy explanation for the inventory boost: buy it cheap while it lasts, have a nice big cushion when prices start climbing back up.Yet, it’s certainly uncomfortable for observers and analysts to not know even approximately how much crude oil there is in China. That’s why some of them have found a way around the fragments of information that the country’s bureau of statistics releases sporadically. Bloomberg writes that analysts at JPMorgan use a simple calculation method to figure out those notorious inventories. They simply subtract what the country consumes from what it produces and imports. The difference over the first half of the year came in at 1.2 million bpd, with total inventories reaching about 400 million barrels by end-June. This falls short of a stated target of 511 million barrels, but the target may have been reached by the end of August and JPMorgan analysts are suggesting Chinese imports this month could fall.

Global Oil Demand Set To Tumble As China Cracks Down On Teapot Refiners -- One week ago we reported (for the second time) that one of the biggest mysteries for the global oil market, and certainly the biggest wildcard for future oil prices, is the current state of China's Strategic Petroleum Reserve. As JPM reported , China's SPR demand was equivalent to approximately 1mm bpd. More importantly, stopping shipments for the reserve would wipe out about 15 percent of the country’s imports. More to the point, according to JPM, and contrary to official data, China's strategic oil reserve was approaching capacity, which going back to JPM's June calculation, meant that "our base case assumes China continuing high volumes of (1mbd) SPR builds through August, while factoring in 7% domestic crude production decline and 2% refinery throughput increase. This means 15% mom decline in China’s crude imports in September, or 1.2mbd loss from the China inventory demand. China’s net oil imports ytd has expanded 16% yoy, versus a flat consumption growth." . According to Oilchem, a Shandong-based industry researcher, China's major refineries cut runs to 70.3% of capacity as of September 1, down -1.43% from Aug. 18. To be sure, a big part of the utilization rates decline emerged as the Sinopec Qilu refinery with 8m ton/yr capacity, started maintenance. Oilchem expects the tuns to rebound in mid-Sept. as some plants will resume after works. That, however, may prove optimistic, because while we don't doubt that China's major refiners do come back on line in short notice, the biggest variable for China's recent oil demand, the blistering pace of refining by China's smaller, "teapot" refiners, may be about to see a steep decline. The reason is that, as Bloomberg wrote over the weekend, suddenly "everyone wants a share of the world’s hottest oil market, including China’s taxman." Which brings us to the teapots: as Bloomberg adds, "purchases by the country’s independent refiners, granted permission last year to buy foreign crude, have soaked up some of the global oil glut and helped revive prices after the biggest collapse in a generation.Sellers from Saudi Arabia to BP Plc have been supplying the plants known as teapots, which account for a third of the nation’s processing capacity."

Chinese Billionaire Linked to Giant Aluminum Stockpile in Mexican Desert - WSJ: Two years ago, a California aluminum executive commissioned a pilot to fly over the Mexican town of San José Iturbide, at the foot of the Sierra Gorda mountains, and snap aerial photos of a remote desert factory. He made a startling discovery. Nearly one million metric tons of aluminum sat neatly stacked behind a fortress of barbed-wire fences. The stockpile, worth some $2 billion and representing roughly 6% of the world’s total inventory—enough to churn out 2.2 million Ford F-150s or 77 billion beer cans—quickly became an obsession for the U.S. aluminum industry. Now it is a new source of tension in U.S.-Chinese trade relations. U.S. executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system. Aluminum-industry representative Jeff Henderson says he is convinced that China Zhongwang Holdings Ltd. CHZHY 0.00 % , a Chinese aluminum giant controlled by billionaire Liu Zhongtian, tried to evade U.S. tariffs by routing aluminum through Mexico to disguise its origins, a tactic known as transshipping. Mr. Liu, a member of China’s ruling Communist Party, denies any connection to the Mexican aluminum or transshipping. “These things have nothing to do with me,” he said in a June interview at his company’s Liaoning, China, plant, where he lives in an apartment inside the factory. He said he wouldn’t know how to establish a business in Mexico, joking that “in that sort of place, there are a lot of killers with guns.”Company records, trade documents and legal filings reviewed by The Wall Street Journal, along with interviews of people who have done business with Mr. Liu, raise doubts about his account. They show that hundreds of thousands of tons of aluminum were shipped to Mexico from China through a series of companies, including one owned by Mr. Liu’s son and one by someone who describes himself as a longtime business associate of the Chinese billionaire. The U.S. Commerce Department says it is investigating the Mexican aluminum’s origin as part of a slew of trade complaints by the U.S. metals industry against China, many of which include allegations of transshipping.

Chinese banks' shadow loans grow despite regulatory glower | Reuters: Shadow lending by listed Chinese banks surged in the first half, underlining the challenges faced by the country's banking regulator as it tries to rein in the use of opaque lending structures that are seen as a threat to financial stability. China's lenders, led by the mid-tier banks, have been increasing their use of shadow lending products for years, as they can offer higher returns and tie up less of a bank's capital than traditional lending. But they also disguise the quality of a bank's balance sheet, and sector-wide make it harder for regulators to assess systemic risk and the volume of lending in the economy. A Reuters analysis of bank filings shows Shanghai Pudong Development Bank, a leading joint-stock lender, increased its receivables for trust schemes and asset management plans, or so-called shadow loans, by 14 percent in the first six months of the year to 1.27 trillion yuan ($190 billion), giving it China's biggest portfolio of such products. The shadow loan book at China's largest joint-stock lender, Industrial Bank Co, rose 4.4 percent to 1.23 trillion yuan, equivalent to 63 percent of its normal loan book, according to Reuters calculations. China Minsheng Banking Corp, China Zheshang Bank Co, Shengjing Bank Co, Bank of Jinzhou Co and Bank of Chongqing Co also substantially increased their portfolios by 9 percent or more. Minsheng and Zheshang both reported an 86 percent rise, the fastest among their listed peers, according to Reuters calculations.

G20 a success for China, but hard issues kicked down the road | Reuters: China is lauding its successful hosting of the G20 summit in scenic Hangzhou, with open confrontation largely avoided and broad consensus reached over the fragile state of the global economy and the need for a wide range of policies to fix it. There was even a joint announcement by China and United States that they would ratify the Paris climate change agreement, a significant step for the world's two biggest emitters of greenhouse gases. But scratch beneath the surface, and the gathering of the world's most powerful leaders was not all plain sailing - from the distraction of a North Korean missile test to the failure of the United States and Russia to reach agreement over Syria, and diplomatic faux pas to double speak over protectionism. Chinese state media, while largely basking in the glory of a summit that happened without being too overshadowed by disputes such as the South China Sea, also let slip Beijing's frustrations at what it sees as Western efforts to stymie its economic ambitions. "For the world's major developed economies, they should curb rising protectionism and dismantle anti-trade measures as economic isolationism is not a solution to sluggish growth," China's official Xinhua news agency said late on Monday. "In order to build an inclusive, rule-based and open world economy, protectionism must be prevented from eroding the foundation for a faster and healthier economic recovery." In the run-up to G20, China has been particularly upset by what it sees as unwarranted suspicion of its overseas investment agenda smacking of protectionism and paranoia. A few weeks before the summit, Australia blocked the A$10 billion ($7.63 billion) sale of the country's biggest energy grid to Chinese bidders, while Britain delayed a $24 billion Chinese-invested nuclear project.

China's Insufficient Investment in Education - Tim Taylor - Can China maintain its rapid pace of economic growth in the decades ahead? Jacob Funk Kirkegaard suggests that one substantial hindrance may be China's education system is not keeping up. He lays out the case in "China’s Surprisingly Poor Educational Track Record," which appears as Chapter 3 in  China’s New Economic Frontier: Overcoming Obstacles to Continued Growth, published by the Peterson Institute for International Economics.  As a starting point, compare countries by per capita GDP and what share of the adult population has at least an upper secondary education. As shown in the figure, the education level of China's adult population ranks well below other countries with a roughly similar level of per capita GDP. China has made dramatic gains in its education level in the last few decades.  Clearly, China has made substantial gains. But just as clearly, the gains in China's education attainment are below those for France, Spain, Brazil, Korea, and others. Moreover, China was starting at a much lower level of educational attainment (the hollow box showing educational attainment for the 55-64 age group is lower for China than for the comparison countries shown here) and so middling gains for China in educational attainment aren't helping it to catch up.   Kirkegaard sums up the situation this way: "In some ways, China may have been a victim of its own success. The pull effects of its sustained economic boom and rapidly rising wage levels appear to have led too many young people to leave education too early to acquire the skills needed to sustain them (and Chinese economic growth rates) throughout their lifetimes. As Chinese economic expansion shifts toward more skill-intensive growth, those without a secondary education will be less able to find jobs. ...  The Chinese government and society appear to have failed to keep enough of the country’s young people in school during the recent decades of economic growth. This is likely to have long-term scarring effects, as public underinvestment in human capital and individual acquisition of needed skills are difficult to undo.

Confrontations Flare as Obama’s Traveling Party Reaches China — Air Force One had a bumpy landing in Hangzhou on Saturday, but it was nothing compared with what happened after the plane rolled to a stop. As the reporters who traveled to the Group of 20 summit meeting with President Obama from Hawaii piled out and walked under the wing to record his arrival, we were abruptly met by a line of bright blue tape, held taut by security guards. In six years of covering the White House, I had never seen a foreign host prevent the news media from watching Mr. Obama disembark. When a White House staff member protested to a Chinese security official that this was not normal protocol, the official shouted, “This is our country.” In another departure from protocol, there was no rolling staircase for Mr. Obama to descend in view of the television cameras. Instead, he emerged from a door in the belly of the plane that he usually uses only on high-security trips, like those to Afghanistan. Witnessing the scene, Susan E. Rice, the national security adviser, looked baffled and annoyed. Joined by her deputy, Benjamin J. Rhodes, she ducked under the rope to make her way closer to the president. The two were immediately stopped by the same Chinese official, who angrily challenged them. Asked later what happened, a diplomatic Ms. Rice replied, “They did things that weren’t anticipated.” There were further surprises. At the West Lake State House, where Mr. Obama met President Xi Jinping, White House aides, protocol officers and Secret Service agents got into a series of shouting matches over how many Americans should be allowed into the building before Mr. Obama’s arrival. There were fears the confrontation would become physical.

China’s Export Machine Is Grabbing More of the Global Market - China is eating up a larger chunk of the world’s shrinking trade pie. Brushing off rising wages, a shrinking workforce and intensifying competition from lower cost nations from Vietnam to Mexico, China’s global export share climbed to 14.6 percent last year from 12.9 percent a year earlier. That’s the highest proportion of world exports ever in International Monetary Fund data going back to 1980. Yet even as its export share climbs globally, manufacturing’s slice of China’s economy is waning as services and consumption emerge as the new growth drivers. For the global economy, a slide in China’s exports this year isn’t proving any respite as an even sharper slump in its imports erodes a pillar of demand. Those trends are likely to be replicated in August data due Thursday. Exports are estimated to fall 4 percent from a year earlier and imports are seen dropping 5.4 percent, leaving a trade surplus of $58.85 billion, according to a survey of economists by Bloomberg News as of late Tuesday. While China’s advantage in low-end manufacturing has been seized upon by Donald Trump’s populist campaign for the U.S. presidency, the shift into higher value-added products from robots to computers is also pitting China against developed-market competitors from South Korea to Germany. A weaker yuan risks exacerbating global trade tensions, which became a hot button issue at the G-20 meeting in Hangzhou over cheap steel shipments. "All the talk we have heard over the last few years about China losing its global competitive advantage is nonsense,"

 Imbalances Are Back, In Asia and Globally - The Economist, inspired in part by a recent paper by Caballero, Farhi and Gourinchas, highlighted two key points in its free exchange column criticizing Germany’s surplus: a) Global imbalances have reemerged over the last few years (though this is more obvious from summing the surpluses of surplus countries than from summing the deficits of deficit countries): “… a sustained era of balanced growth failed to emerge [after the global crisis]. Instead, surpluses in China and Japan rebounded. In recent years Europe has followed, thanks to a big switch from borrowing to saving.”  b) Those imbalances are a big reason why interest rates globally are low: “Once a few economies become stuck in the zero-rate trap, their current-account surpluses exert a pull which threatens to drag in everyone else.” I have only one small quibble. The rise in Asia’s surplus didn’t just come immediately after the crisis. There was also a significant rise in Asia’s surplus from 2013 to 2015. Indeed, in 2015, East Asia’s combined surplus actually significantly exceeded that of Europe, adding to the world’s difficulty generating enough demand growth even with ultra-low rates.*  Yes, some of this is oil. But the oil exporters in aggregate aren’t running large external deficits financed by their high saving customers (Russia is in surplus; the Saudis are more an exception than the rule). The IMF puts the aggregate deficit of the main oil exporting regions of the world economy (the Middle East, North Africa, Russia and Central Asia) at $50-100 billion, substantially less than the combined surplus of Europe and Asia. So it isn’t all oil either. China’s unloved, credit-based stimulus, together with the large reported increase in tourism spending (whether real or fake), looks set to pull China’s surplus down a bit in 2016. But China will retain a surplus of over $200 billion in 2016, and ongoing surpluses in Korea, Taiwan, Singapore and Japan will keep Asia’s aggregate surplus high. I would bet East Asia’s aggregate 2016 surplus will still exceed that of Europe.

South Korea’s Hanjin Shipping Files for U.S. Bankruptcy Protection - WSJ: South Korea’s Hanjin Shipping Co. 117930 -13.71 % , one of the world’s largest container shipping companies, has filed for bankruptcy protection in the U.S. to protect its vessels from being seized by creditors. (Hanjin filed Friday for protection under chapter 15, the section of the U.S. bankruptcy code that deals with international insolvency matters, in U.S. Bankruptcy Court in Newark. N.J., days after the company sought protection in South Korea on Wednesday. The company’s filing for rehabilitation. akin to chapter 11 in the U.S., in Seoul has roiled ports in the U.S. and beyond, as creditors seized ships and terminal operators refused to handle cargo, stranding Hanjin’s container ships loaded with appliances, electronics and other consumer goods. Hanjin is currently the largest shipping company in Korea, operating approximately 60 regular lines world-wide, with 140 container or bulk vessels, court papers said. It is ranked as the world’s ninth largest container shipping company, transporting over 100 million tons of cargo a year. Its failure would be the largest container-shipping failure in history, dwarfing all previous carrier bankruptcies. Since Hanjin called in the bankruptcy lawyer, the refusal of ports to handle its cargo has stranded 45 ships at sea, according to the company, and more than half a million containers. The U.S. bankruptcy filing was made by Tai-Soo Suk, Hanjin’s inside director and foreign representative under the South Korean bankruptcy. If recognized by the U.S. court, the chapter 15 filing will block creditors in the U.S. from seizing the company’s assets or launching other legal actions while its foreign bankruptcy proceedings are under way.

Hanjin Shipping’s Troubles Leave $14 Billion in Cargo Stranded at Sea - WSJ -  The financial woes of one of the world’s biggest shipping lines have left as much as $14 billion worth of cargo stranded at sea, sending its owners scurrying to try to recover their goods and get them to customers, according to industry executives, brokers and cargo owners. Since Hanjin Shipping Co. 117930 -4.41 % of South Korea filed for bankruptcy protection there last week, dozens of ships carrying more than half a million cargo containers have been denied access to ports around the world because of uncertainty about who would pay docking fees, container-storage and unloading bills. Some of those ships have been seized by the company’s creditors. Samsung Electronics Co. SSNHZ 0.00 % , which makes the Galaxy smartphone and other devices, said it has cargo valued at about $38 million stranded on Hanjin ships in international waters. “We’re passengers on a bus, and we’re being told we can’t get off,” Evan Jones, a lawyer for the company, said Tuesday. Samsung said it is considering chartering 16 cargo planes to fulfill its shipment contracts, mostly to the U.S. About 95% of the world’s manufactured goods—from dresses to televisions—are transported in shipping containers. Though Hanjin accounts for only about 3.2% of global container capacity, the disruption, which comes as retailers prepare to stock their shelves for the holiday season, is expected to be costly, as companies scramble to book their goods on other carriers. Analysts don’t expect the snarl to leave U.S. retailers with inventory shortfalls for the holidays, but the longer the logjam drags on, the greater the risk. “This is not impacting store shelves now,” said Nate Herman, a senior vice president for the American Apparel & Footwear Association. “It will impact store shelves if the situation isn’t resolved.”

Hanjin shipping bankruptcy: 'Efficient' just-in-time delivery not so efficient after all -- We are about to learn once again that lack of resilience is the flip side of efficiency. The world's seventh largest shipping firm, Korean-based Hanjin Shipping Co. Ltd., failed to rally the support of its creditors last week and was forced to file for bankruptcy. Retailers and manufacturers worldwide are in a bit of a panic as the fate of goods on Hanjin ships shifts into the hands of courts and lawyers for creditors intent on seizing Hanjin assets in order to ensure payment of outstanding bills. Much of Hanjin's fleet is chartered, that is, owned by others, and those owners want to make sure they get paid their charter fees or get their ships back pronto. The result has been that half of Hanjin's container vessels are currently blocked from the world's ports for fear that the ports will not be paid for their loading and unloading services. Other shippers which include trucking companies which carry containers to their final destination are reluctant to take on Hanjin freight for fear of not getting paid. U.S. retailers are so panicked that they have asked the U.S. Department of Commerce to step in to help resolve the breakdown which is likely to hurt those retailers during the upcoming Christmas shopping season. Let's take a step back to understand how this all happened. Clever business owners have learned to run so-called "lean" operations to compete with their equally lean competitors. One way to be lean is to reduce idle inventories which just sit in expensive warehouses by arranging to have what the business needs delivered practically every day. The approach is often referred to as a warehouse on wheels and also as just-in-time delivery. With little or no inventory of essential goods and raw materials retailers and manufacturers are subject to disruptions all along their supply chains which reach around the globe. A breakdown at any step can quickly bring activity to a halt on the factory floor or on the sales floor. Just-in-time is very efficient financially (until, of course, it isn't). Little money is tied up in inventories or the space to warehouse them. But just-in-time is not very resilient. It used to be that businesses stockpiled goods and critical resources to ensure against disruptions. But the advent of computerized tracking combined with more efficient shipping practices worked to end the stockpiling of inventories.  Along these lines, does a three-day supply of food now available in most metropolises seem like wise planning?

"It's Bordering Chaos": $14 Billion In Cargo Stranded At Sea, Crews "Go Crazy" On Hanjin Ghost Ships -- The fallout from last week's historic bankruptcy of one of the world's biggest shipping lines, Hanjin Shipping, continued with little resolution with as much as $14 billion worth of cargo stranded at sea according to the WSJ, sending cargo owners scurrying to try to recover their goods and get them to customers. Since Hanjin's bankruptcy protection filing, dozens of ships carrying more than half a million cargo containers have been denied access to ports around the world because of uncertainty about who would pay docking fees, container-storage and unloading bills. Some of those ships have been seized by the company’s creditors. As Bloomberg adds, 85 Hanjin ships that have been effectively marooned offshore as ports in the U.S., Asia and Europe have turned the company’s ships away. The worry is that Hanjin ships won’t be able to pay port fees or their contents might be seized by creditors, which would disrupt port operations. The global shipping disruption comes just as companies are shipping merchandise to fill shelves and warehouses for the end-of-year holiday season.  Earlier this week, South Korean authorities rushed to piece together a capital injection. Hanjin Group will provide 100 billion won ($90 million), including 40 billion won from Chairman Cho Yang Ho, to help contain disruptions in the supply chain. At the same time, South Korea’s ruling Saenuri Party asked the government to offer about 100 billion won in low-interest loans to the shipping line if Hanjin Group provides collateral, in what is effectively a government funded DIP loan.  Some have calculated that the funding package won't be enough: South Korea’s Ministry of Oceans and Fisheries estimates Hanjin Shipping needs more than 600 billion won to cover unpaid costs like fuel, including about 100 billion won immediately for payments such as to port operators to unload cargo from stranded ships.

Global Shippers Eye Spoils of Hanjin Collapse The world's top two shipping companies are setting up new routes to and from Busan with an eye to mopping up the business of bankrupt Hanjin Shipping. Danish shipper Maersk said Thursday it will launch a new route linking Shanghai, Busan and Los Angeles next week, deploying six 4,000 TEU vessels. One TEU is equivalent to one 6 m container. A Maersk staffer said, "We've been getting calls from cargo clients seeking solutions to their shipping needs after the demise of Hanjin and decided to create the new route to meet demand on the Asia-U.S. route." MSC of Switzerland, the world's No. 2 shipping company, will also launch a new route linking China, Busan and Canada next week. China's top shipper COSCO and Taiwan's Yang Ming also put more ships on their routes in Asia and the U.S. Ryu Dong-geun at Korea Maritime and Ocean University said, "If major global shipping firms take all of the cargo, they could threaten Korean companies like Hyundai Merchant Marine." Korean shipping firms pale compared to Maersk and MSC, which run eight to 10 times as many ships. They also have very large containers measuring 18,000 TEU, which no Korean shipping company has. The bigger the ship, the greater the price competitiveness. In the short term the big operators will simply pick up the slack from the Hanjin collapse, but in the longer term they could snatch business away from other Korean firms.

The Most Interesting FX Story in Asia is Now Korea, Not China -  China released its end-August reserves, and there isn’t all that much to see. Valuation changes from currency moves do not seem to have been a big factor in August, the headline fall of around $15 billion is a reasonable estimate of the real fall. The best intervention measures — fx settlement, the PBOC balance sheet data — aren’t out for August. Those indicators suggest modest sales in July, and the change in headline reserves points to similar sales in August. That should be expected. China’s currency depreciated a bit against the dollar late in August. In my view, the market for the renminbi is still fundamentally a bet on where China’s policy makers want the renminbi to go, so any depreciation (still) tends to generate outflows and the need to intervene to keep the pace of depreciation measured.* Foreign exchange sales are thus correlated with depreciation.  But the scale of the reserve fall right now doesn’t suggest any pressure that China cannot manage. Indeed the picture in the rest of Asia could not be more different than last August, or in January. The won for example sold off last August and last January. More than (even) Korea wanted. During the periods of most intense stress on China, the Koreans sold reserves to keep the won from weakening further. Not this summer. The slow measured slide in China’s currency against its basket hasn’t translated into selling pressure elsewhere. And Korea is now quite clearly intervening to keep the won from strengthening. In July, the rise in headline reserves, the rise in the Bank of Korea’s forward book, and the balance of payments data all point to over $3 billion in purchases (the forward book, one of the best measures of what might be called Korea’s shadow reserves, matters; it rose by over a billion in July). There is only data for headline reserves for August at this stage, and this points to a further $4 billion in intervention. Scaled to Korea’s GDP, Korea bought about two times as much as China appears to have sold. And I would bet Korea’s forward book also increased, so the full count for August could be higher still. And with the won flirting with 1090, the level that triggered reports of heavy intervention in mid-August, the market quite reasonably is on intervention watch again. I am a long-standing fan of Reuters’ coverage of Asian fx markets. Reuters reported on Wednesday:“The won rose as much as 1.2 percent to 1,092.4 per dollar, compared with a near 15-month high of 1,091.8 hit on Aug 10 … The South Korean currency pared some of its earlier gains as finance ministry officials said the authorities are ready to take action in case of excessive currency movements. The warning boosted caution over possible intervention to stem further strength …”

South Korea’s household debt inflates in August amid low interest rates - EconoTimes: Household debt in South Korea rose during the month of August despite the prevalence of low-interest rates and continued efforts by the government to tackle the potential risk that is threatening Asia’s fourth-largest economy. The balance of household loans extended by local banks amounted to 682.4 trillion won (US$623 billion) as of the end of August, up 8.7 trillion won from a month earlier, data released by the Bank of Korea (BoK) showed Thursday. Of the aggregate debts, mortgage loans extended by banks rose by 6.2 trillion won to 512.7 trillion won. The country's total household credit jumped 11.1 percent on-year to an all-time high of 1,257.3 trillion won as of end-June amid prolonged low-interest rates and strong demand for new apartments. Further, the government last month noted that it shall reduce supply of new apartments to control fresh mortgage demand loans. The country’s household debt level is one of the highest in the world, posing potential threats in the near future. Meanwhile, the BoK slashed its benchmark interest rate to a record low of 1.25 percent in June to help bolster the ailing economy. However, market participants expect the central bank to hold the key rate steady at a record low 1.25 percent for September.

Abe "Strongly Protests" After North Korean Ballistic Missile Launch Into Japan's Air Defense Zone - Just a month after Japan ordered its military to a "state of alert," and as world leaders gather in China for the G-20 summit, AP reports that North Korea fired three ballistic missiles off its east coast Monday, Japanese Prime Minister Abe "strongly condemned" the actions, as the missiles fell into Japan's air defense zone, declaring the launch a clear violation of UN Security Council resolutions. As AP reports, South Korea's Joint Chiefs of Staff said in a statement that the three missiles, launched from the western North Korean town of Hwangju, flew across the country before splashing in the waters off its east coast, but officials did not describe the range of the missiles. Before the firing, on Monday on the sidelines of the G-20 summit, South Korean President Park Geun-hye criticized the North for what she called provocations that are hurting Seoul-Beijing ties. The launch comes four days before the 68th anniversary of the founding of North Korea's government, and days after South Korean and U.S. troops ended annual joint summertime military drills, which North Korea regularly describes as a dress rehearsal for invasion. Last month, worries about the North's weapons programs deepened after a missile from a North Korean submarine flew about 500 kilometers (310 miles), the longest distance achieved by the North for such a weapon. The U.N. Security Council in late August strongly condemned four North Korean ballistic missile launches in July and August. It called them "grave violations" of a ban on all ballistic missile activity. Japan's HNK reports... The 3 missiles North Korea launched at 12:13pm likely fell in Japan’s Exclusive Economic Zone.

Bank of Japan Risk: Running Out of Bonds to Buy - WSJ: Japan’s central bank is facing a new problem: It could be running out of government bonds to buy. The Bank of Japan 8301 1.25 % is snapping up the equivalent of more than $750 billion worth of government debt a year in an effort to spur inflation and growth. At that rate, analysts say, banks could run out of government debt to sell within the next 18 months. The looming scarcity is a powerful sign of the limits central banks face as they turn to ever-more aggressive means of stimulating their economies. The problem is mirrored in Europe, where self-imposed rules limit how many eurozone government bonds the European Central Bank can buy from individual governments. Facing a diminishing supply of sovereign bonds, the ECB started buying corporate debt in June. Some economists have even called for the ECB to start buying stocks. The central bank left its bond-buying program and interest-rate policy unchanged at its meeting Thursday. The Japanese central bank has fewer options if the country’s banks, which have to hold a certain amount of safe debt to use as collateral in everyday transactions, ever become unwilling to sell more of their holdings. Its most obvious alternatives—pushing rates deeper into negative territory or buying other types of assets—have practical limitations. Meanwhile, the BOJ’s economic goals remain out of reach: Inflation is stubbornly low, and the yen has strengthened about 18% this year. “Given the lack of assets to buy, that’s constraining the BOJ’s policy options,” “If they want to increase easing, let alone maintain the current pace of easing, they have to think of other things to buy or other things to do.”

BOJ deputy chief does not rule out going deeper on negative rates Bank of Japan Deputy Gov. Hiroshi Nakaso said Thursday that expanding the central bank’s negative interest rate policy is still a key tool that could be used to pave the way to its 2 percent inflation target, but emphasized the undesirable impact of the controversial measure. The negative interest rate policy has created several positive effects, including growth in corporate lending, but “the flip side of such positive developments is the growing pressure on financial institutions’ profits,” Nakaso said in a speech in Tokyo. Nakaso, who has worked at the BOJ for more than 30 years and is well-versed in its inner workings, said a drastic downturn in lending rates has weighed on the earnings of private financial institutions. “This can be seen from the larger fall in lending rates relative to a marginal decline in rates on deposits,” he said. “For Japan, the impact of the negative interest rate policy on the profits of financial institutions tends to be relatively large,” he said.

Japan Isn’t Playing Neoliberalism’s Word Games - It’s no surprise that we in western democracies succumb to self-censorship if we’re told that there’s something base, unsophisticated or downright rude about making a populist appeal. And yet free-market clichés abound. How many times have you heard people talk about or read in print arguments as “the nation’s credit card”, “business being strangled by red tape” or “free trade” all of which come straight out of neoliberalism’s stash of banalities? One seemingly insurmountable problem is that, because neoliberalism is a construction made entirely out of western capitalism, we almost instinctively find it difficult to critique it overtly. To do so would be somewhat akin to self-flagellation. So we need to cushion the blow a little by turning it into an abstract, theoretical concept and then we can feel safer picking over the minutia of that rather than staring directly at the ugliness of the culture which created it in the first place. The Japanese, freed from such cultural loyalties, have no such reservations. We can learn a lot from them. We might even find – rediscover might be a better word – a grammar and a vocabulary for how to make clear, concise and direct assaults on neoliberalism’s most obvious failings without thinking we have to over-intellectualize about them. As the Trans-Pacific Partnership agreement (TPP) continues to drag itself around like a political zombie, those amongst the Japanese population who are opposed to it are demonstrating how to – having already laid out their intellectual arguments over the past few years – engage with the wider population and encourage them to, if they are so inclined, tell the political class in Japan that they don’t want the Diet (Japan’s parliament) to enact the TPP. Numerous blogs, movements, pressure groups, activist collectives and one-man-bands have sprung up to remind people briefly (and the emphasis here is on brevity) what’s wrong with the TPP but then to direct responders to the most appropriate way of turning disquiet into specific action.  What they are most definitely not doing is getting bogged down in discussing the merits, or otherwise, of the theories of capitalism, trade, economics or finance.  The contrast between how the Japanese are opposing the TPP and how, typically, free trade agreements are opposed in the west is stark.

Thunder From the East -  THE OFFICE OF THE CHIEF economic adviser to the government of India's wall is decorated with a wooden board recording the names of all the previous holders of his office. In the spring of 2015, the two most recent names were Raghuram Rajan and Arvind Subramanian. Both men were distinguished Indian economists who had spent most of their careers in the US and were at least as comfortable in Washington as in Delhi. Despite their years working at leading American institutions such as the University of Chicago (Rajan) and the Institute of International Economics in Washington (Subramanian), both men had also maintained a certain intellectual distance from the optimistic, consensus view in the US about America’s enduring global power. In 2005, Rajan had delivered a prescient warning of instabilities building up in the US financial system—which was treated sceptically at the time, but gained him a reputation as a seer after the financial crisis of 2008. Subramanian is even more of a sceptic. In 2011, he published a book arguing that China would displace the US as the world’s leading economic power. Eclipse: Living in the Shadow of China’s Economic Dominance begins with a provocative vision of a US president in 2021 applying for an emergency loan from a Chinese director of the IMF. Subramanian argued that ‘The economic dominance of China relative to the United States is more imminent... will be more broad-based, and could be as large in magnitude, in the next 20 years, as that of the United Kingdom in the halcyon days of empire.’Eclipse had received a hostile reception in much of the United States, where its frank ‘declinism’ was distinctly unfashionable. By 2015, with the US economy recovering and China slowing markedly, some argued that predictions of America’s eclipse by China were now off the mark. But when I met Subramanian in his office in Delhi in May of that year, I found him unrepentant: ‘The broad premise and prediction of the book have been borne out in spades,’ he argued. For many Indians, the problem with the argument of Eclipse was not what it said about the US or China, but how little it said about India. For the election of the government of Narendra Modi had led to a resurgence of bullish optimism about the future of Asia’s second would-be superpower. Modi himself had spoken of the twenty-first century as ‘India’s century’. And many in the country’s elite dared to hope that India might ‘own’ the next thirty years of international economic development— just as China had dominated the three decades that had followed its opening to the outside world in 1979.

180 million workers have gone on strike in India - India’s labour unions wielded their clout on Friday (Sept. 02) with 180 million workers going on strike demanding higher pay and in protest of the Narendra Modi government’s economic policies. These workers belong to 10 of the country’s biggest trade unions, and include employees of banks, government telecom companies, and coal mining firms. But Indian railway workers, central government employees, and members of the Bharatiya Mazdoor Sangh (BMS)—a sister body of the ruling Bharatiya Janata Party—are not participating in the one-day strike. “Besides ports and civil aviation, essential services like transport, telecom, and banking will be paralysed,” SP Tiwari, secretary of the Trade Union Coordination Committee, a labour union, said on Sept. 01. “The workers will go on strike in hospitals and power plants but the protest will not affect their normal functioning.” Last year, a similar strike cost the economy more than Rs25,000 crore ($4 billion). The workers have presented a charter of 12 demands, which includes a monthly minimum wage of Rs18,000 and a pension of Rs3,000. They also want the government to stop disinvesting at various public sector units, change the foreign direct investment policy, and ensure universal social security for all workers. The government has, meanwhile, promised to look into the protesters’ demands. “In the last one-and-a-half years, the inter-ministerial committee had met with central trade unions,” India’s finance minister Arun Jaitley said. “The government has taken some decisions with regard to those (demands) on the basis of their recommendations.”

Indians Staged One of the Largest Strikes in History, But No One on Cable News Covered It -- Ten Indian trade unions staged one of the largest strikes in human history on Friday, with tens of millions of public sector workers participating in a shutdown of parts of the Indian economy to protest Prime Minister Narendra Modi’s economic plans. But if you’re an American relying on cable news, it would be hard to know it ever happened. Not a single American cable news network ran a segment focused on India’s massive strike, even on Labor Day, the U.S.’s annual holiday dedicated to workers. The strike came after Modi began a push for increased foreign investment and privatization of some state-run industries. Unions fear these policies will undermine both wages and employment. The size of the strike alone forced the government to offer concessions prior to Friday in an attempt to avert it, offering a boost in the minimum wage for some non-skilled workers and the unfreezing of some public employee bonuses. The unions were not persuaded by this offer. “Prime Minister Narendra Modi said his fight is with poverty, but it seems his fight is with the poor in this country,” Indian National Trade Union Congress Vice President Ashok Singh said prior to the strike.The unions petitioned the government with a list of demands, including a call to increase the minimum wage to 18,000 rupees a month (around $271 USD). India-based The Hindu published a short video report on the strike with English subtitles. Watch it here:

In Kashmir, Doctors Bear Witness: The corridors of the Jhelum Valley Medical College (JVC) in Srinagar were tense with dread. The medical superintendent had received word on WhatsApp from some district hospitals and volunteers about pellets and bullets being fired in Baramulla and Shopian. “This means there will be a surge in patients, so we have the whole staff on standby,” said Dr. Shafa D.W. Deva, medical superintendent at JVC. “On some days, 40 or 50 arrive in just this small hospital.” Two months ago, the all-too-familiar cycle of violence began again in Kashmir when popular Hizbul Mujahideen militant Burhan Wani was killed by armed forces. The state-imposed curfew and the separatist-recommended strikes have been ongoing for 58 days across the Valley. Frustrated residents are part of stone-pelting protests but also peaceful rallies and funeral processions; the Central Reserve Police Force (CRPF) and Jammu & Kashmir police have cracked down on these with pellet guns, batons and tear gas shells. Over 10,000 have been injured and 73 killed, with more than 700 people, including teenagers, being hit in the eyes. At least 60 of them have been entirely blinded – nearly one every day since the uprising began. Thousands have been riddled with the red pock marks of tiny blood clots all over their body, each a lead pellet that they will have to live with for the rest of their lives.The ongoing unrest in Kashmir has competing narratives, especially on the indiscriminate firing of pellets and bullets. There are the ‘chicken and egg’ arguments about provocation by stone pelters and security forces. The CRPF and the government might continue to justify the crackdown, blaming separatists and Pakistan for instigating young men, but as in any violent conflict, some undeniable, unvarnished truths can be found where all politics must take pause: in hospitals. Doctors have been working round the clock and bearing witness. They say unequivocally that going by the nature of deaths and injuries, security forces have not only violated protocol, but also targeted people. Speaking to patients and their families during diagnosis and post-operative care, the doctors find that the collective experience of loss and gross injustice has fuelled more rallies and clashes.

Q&A: 'Element of fear is gone' for Kashmir's youth - News from Al Jazeera: Indian-administered Kashmir has been in turmoil since July 8 when rebel commander Burhan Wani was killed by Indian security forces.More than 70 people have been killed and thousands wounded in the ensuing unrest, including hundreds with serious eye injuries from pellets guns fired by Indian security personnel, who have faced criticism for using excessive forces against the protesters.The disputed region has mostly remained under a curfew since the unrest began.An all-party delegation from New Delhi concluded a recent visit to the Himalayan region but no breakthrough could be reached on how to end nearly two months of deadly violence.Al Jazeera spoke to Parvez Imroz, a leading human rights activists in the Kashmir valley, about the situation in the region.Imroz is the founding president of the Jammu Kashmir Coalition of Civil Society (JKCCS), which runs advocacy campaigns, documents rights violations and provides legal assistance to victims.

So Long to the Asian Sweatshop  - For 30 years, the word "sweatshop" has conjured up a very specific image: low-wage Asian workers making branded clothes in crowded, unsafe factories for consumers overseas. The power of that image has launched human rights campaigns, altered how major companies source their products and informed (often incorrectly) how politicians in rich countries shape their trade policies. Now that image is fading into history. In Asia, at least, the factors that made sweatshops an indelible part of industrialization are starting to give way to technology. A recent report from the International Labor Organization found that more than two-thirds of Southeast Asia's 9.2 million textile and footwear jobs are threatened by automation -- including 88 percent of those in Cambodia, 86 percent in Vietnam and 64 percent in Indonesia. Whether that will be good for workers in general is debatable. But one thing is certain: The heyday of the Asian sweatshop is coming to an end. Nowhere is that shift clearer than in Cambodia. Since the mid-1990s, global manufacturers have off-shored production there to take advantage of the country's low wages, loose regulation and large population of rural residents eager for wage-paying jobs in the city. The result was a boom: By 2015, textile and footwear exports had become a $6.3 billion industry. They now account for about 80 percent of Cambodia's export revenue. Under the best conditions, textile and footwear jobs are monotonous and uncomfortable (as they've been since the Victorian era). Under the worst, they can be degrading and life-threatening. Nonetheless, Cambodia's 630,000 textile and footwear workers have prospered. From 2014 to 2015, their average wage rose from $145 a month to $175, in a country where per-capita income is about $1,000 a year. That trend has repeated itself across Asia, especially in the great garment-making centers of China and Vietnam. And thats where things get sticky. Increasing competition from low-wage economies has pushed down garment prices worldwide. The average cost of clothing exported from Cambodia to the U.S. fell by 24 percent between 2006 and 2015. For a manufacturer, that'd be hard to swallow if wages were static; when wages are rising, it threatens to become a crisis. In response, some factories have simply closed up shop. Some Chinese producers have moved to Southeast Asia, where they hoped the low-wage good times would persist. But they haven't. And that leaves two options: Negotiate better prices from Nike, H&M and other companies that outsource to Asia (unlikely), or increase productivity.

What’s a few missing billions among friends: Why Malaysia 1MDB scandal might not dent US ties - A sweeping U.S. investigation into assets allegedly looted from a state fund in Malaysia has raised the heat on Prime Minister Najib Razik, but it wasn't entirely clear that would dent the two countries' ties. Malaysia's status as a moderate Muslim-majority nation in Southeast Asia has helped the country develop a solid relationship with the U.S., offering a bulwark against extremism. Indeed, last year, during a visit to Malaysia, U.S. President Barak Obama called the country's voice "critical" on counter-terrorism efforts. But the long-running scandal over billions of dollars missing from the Malaysia state fund 1MDB came to roost in the U.S. In July, the U.S. Department of Justice moved to seize more than $1 billion of assets tied to an international conspiracy to launder funds funnelled away from 1MDB, including funds related to the film "The Wolf of Wall Street." That complaint said officials at 1MDB, their relatives and other associates diverted more than $3.5 billion from the state fund and laundered it through complex transactions and shell companies with bank accounts in Singapore, Switzerland, Luxembourg and the U.S. The producer of "The Wolf of Wall Street," Red Granite Pictures, was co-founded by Riza Aziz, the stepson of Malaysia's Prime Minister Najib Razak. Riza was named as a "relevant individual" in the complaint, but Najib wasn't named. However, media have reported, citing unnamed sources, that the complaint's 32 references to "Malaysian Official 1," who allegedly received hundreds of millions from 1MDB, were to Najib. On Thursday, Abdul Rahman Dahlan, a senior government minister in Najib's cabinet, said that Malaysian official 1 was Najib, confirming statements he made in a BBC interview published earlier Thursday. Rahman's statement noted that Malaysian official 1 was only referred to in the civil suit, not named as a subject.

New Multilateralism for Maritime Southeast Asia: More Value Per Carat - The last dozen years have been tumultuous for maritime Southeast Asia. Twelve years ago, a tsunami killed a quarter-million people in Indonesia and Thailand. Since then, cyclones, typhoons, tsunamis, and coastal floods have killed hundreds of thousands and impacted millions more. The same period witnessed three airliners crash into the ocean and a fourth simply disappear. Pirates attacked more than one thousand ships and hundreds of people have been killed in ferry disasters, 116 of them aboard a ship that dramatically sank in Manila Bay after a terrorist bombing. Recognizing that forces of nature, lost aircraft, drifting ships, terrorists, and criminals do not respect political boundaries, the maritime security forces of the region have amped up multinational cooperation both with each other and with extra-regional partners such as the United States. The U.S. Navy has readily taken part in multilateral cooperation in the region, using its expanding fleet capabilities to execute operations while simultaneously modernizing its exercises to advance regional maritime security capacity.  In contrast to the growth in multilateral operations, the bulk of U.S. maritime security training in Southeast Asia have remained bilateral. Experiences from recent multinational operations have demonstrated that the challenges associated with bringing together a wide range of capabilities, skill levels, and communications protocols are among the most formidable barriers to operational success. To better align operations and training, the U.S. Seventh Fleet and its regional partners are now seeking to introduce new multilateral elements into previously bilateral exercises.

"Who Is He To Confront Me?" - Philippines President Unloads On "Son Of A Bitch" Barack Obama -- What was an embarrassing weekend for president Barack Obama, whose arrival at the G-20 summit in China was a case study in diplomatic humiliation, just turned even worse when on Monday, Philippine president Rodrigo Duterte warned Obama not to question him about extrajudicial killings, or "son of a bitch I will swear at you" when the two presidents meet in Laos during an upcoming summit. The topic of Duterte's killing spree, supposedly involving mostly criminals and drug-traffickers, without due process has raised eyebrows most recently by the United Nations, which urged the Philippines to stop executing and killing people linked to drug business and threatened that “state actors” could be punished. As a result, two weeks ago Duterte lashed out at the UN and threatened that the country could leave the UN. "Maybe we'll just have to decide to separate from the United Nations. If you're that rude, son of a bitch, we'll just leave you," Duterte told reporters in Davao, quoted by Bloomberg. “I don't give a shit about them,” he added. “They are the ones interfering. You do not just go out and give a shitting statement against a country.” In his typical foul-mouthed style, Duterte was quoted by AP as responding: "I am a president of a sovereign state and we have long ceased to be a colony. I do not have any master except the Filipino people, nobody but nobody. You must be respectful. Do not just throw questions. Son of a bitch I will swear at you in that forum," he said. Duterte has earlier cursed the pope and U.N. Secretary-General Ban Ki-moon. Aware of the firestorm his question would provoke from his less than diplomatic peer, it wasn't clear whether Obama plans to raise the issue of extrajudicial killings with Duterte during a meeting on the sidelines of the summit of the Association of Southeast Asian Nations. "Who is he to confront me?" Duterte said, adding that the Philippines had not received an apology for misdeeds committed during the U.S. colonization of the Philippines. He pointed to the killing of Muslim Moros more than a century ago during a U.S. pacification campaign in the southern Philippines, blaming the wounds of the past as "the reason why (the south) continues to boil" with separatist insurgencies. Duterte then once again pointed to human rights problems in the United States.

Obama Tucks Tail, May Cancel Meeting With President Who Called Him "Son Of A Bitch" -- After calling President Obama a "son of a bitch," both Philippine President Rodrigo Duterte and Obama have called into question whether a meeting between the two will go ahead as planned for tomorrow.  Obama expressed doubts the two could have"constructive, productive conversations" while Duterte responded to questions on whether the meeting would go ahead as planned by simply saying "Maybe, if I feel good."  Last week the White House announced that Obama would meet with Duterte on Tuesday to discuss tensions in the South China Sea, among other issues. The meeting would be the first between the world leaders since Duterte took office in June.  That said, Obama apparently now has questioned whether sitting down with someone who recently called him a "son of a bitch" would be "productive."  In comments from the G-20 summit in China, Obama said that before having a meeting he likes to make sure "it's actually productive and we're getting something done." Per Reuters:"Obviously the Filipino people are some of our closest friends and allies and the Philippines is a treaty ally of ours. But I always want to make sure that if I'm having a meeting that it's actually productive and we're getting something done.""I'm going to make an assessment ... What is certainly true is that the issues of how we approach fighting crime and drug trafficking is a serious one for all of us, and we've got to do it the right way."

Duterte regrets Obama insult after bilateral meeting cancelled - FT - Philippine president Rodrigo Duterte has expressed regret after Barack Obama cancelled what would have been the first meeting between the two men in response to the Filipino leader’s threat to swear at the US president.   Mr Obama was expected to confront Mr Duterte about the Philippines’ use of extrajudicial killings in the country’s war on drugs in a meeting on the sidelines of the Association of Southeast Asian Nations summit in Laos.   But hours before Mr Obama landed in Vientiane, Laos’s capital city, Mr Duterte told reporters in Tagalog that if Mr Obama challenged him on the killings, “Son of a whore, I will swear at you in that forum.”  “Who is he? I am a president of a sovereign state and we have long ceased to be a colony. I do not have any master except the Filipino people, nobody but nobody,” Mr Duterte said. After the bilateral meeting was cancelled, Mr Duterte, who is known for his colourful language, said in a statement on Tuesday: “While the immediate cause was my strong comment to certain press questions that elicited concern and distress, we also regret it came across as a personal attack on the US president.”  The diplomatic spat highlights some of the tensions over the US’s “pivot to Asia” amid China’s territorial ambitions. The Philippines and the US have been treaty allies since the early 1950s. Mr Duterte has cultivated a tough-guy image — earning him the nicknames “The Punisher” and “Dirty Harry” — that helped drive him to the presidency earlier this year.  However, his signature “war on drugs” campaign, which has left about alleged 2,000 drug users and pushers dead, has drawn the ire of the UN and a number of international human rights organisations for steamrolling the rule of law.

Philippines' Duterte says 'not a fan' of US, plots own course - Philippine President Rodrigo Duterte, saying he was "not a fan" of the United States, vowed Saturday (Sep 10) to steer an independent course for the key Asian ally and refrain from confronting territorial rival China.The incendiary leader made the comments after a controversial first foreign trip and spectacular falling out with US President Barack Obama, who he called a "son of a whore"."I am not a fan of the Americans... Filipinos should be first before everybody else," Duterte told reporters upon arrival in his hometown of Davao city Saturday."In our relations to the world, the Philippines will pursue an independent foreign policy. I repeat: The Philippines will pursue an independent foreign policy."The president's trip to a summit in Laos was overshadowed by his verbal tirade, which saw Obama cancel a planned meeting. The pair met briefly later after Duterte expressed regret.The US, Manila's main military ally and the Philippines' colonial ruler until 1946, has criticised Duterte's brutal crackdown on crime, which has claimed 3,000 lives since he took office in July and drawn condemnation from the United Nations.Obama has urged the Filipino leader to conduct his crime war "the right way" and protect human rights, but Duterte has dismissed it as being none of America's business.

Global activity now led by the emerging economies - -- In last month’s report on the Fulcrum nowcasts for global economic activity, we documented a marked pick-up in growth rates in many big economies, ending a prolonged period in the doldrums. At that time, global growth was running slightly above its trend rate, and the widespread nature of this improvement led us to ask whether the world economy might be approaching escape velocity for the first time since 2010. According to the latest nowcasts, global activity growth has dropped fractionally in August to reach 3.4 per cent, which is very close to the trend rate. Although this growth rate is not exactly exciting, it is better than anything seen since the oil shocks hit the world economy in mid-2014. The main bright spot in the past month has been a bounce in the estimated growth rate in the UK, where the nowcast models have revised their view of the severity of the post-Brexit downturn. Another encouraging factor has been generally firmer growth in the main emerging economies, including emerging Asia and emerging Europe. Finally, the recessions in Brazil and Russia may at last be over. Bleaker news has, however, been recorded in the US, where the economy once again seems to have failed to achieve a clear break above the recent 2 per cent growth “ceiling”. Meanwhile, Japan and the eurozone have been growing steadily this month, with little signs of a big change in either direction. The recent recovery has been especially pronounced in the emerging economies, where growth is now exactly at its 5.5 per cent trend rate. Fears of a hard landing in China have declined markedly, and the nowcast suggests that growth has been maintained at the firm rate of 7.8 per cent during August. The policy easing in China has clearly stabilised the economy for now, though the monetary stimulus is likely to abate in the rest of 2016. Meanwhile, the big global drag from very deep recessions in Brazil and Russia (that together subtracted 0.6 per cent from the global growth rate early in 2016) has now almost disappeared.

Emerging markets on track to set sovereign debt record - Developing economies are on course to raise a record sum on global debt markets this year, as ultra-low rates in the developed world cheapen borrowing costs for countries from Asia to South America. After a slow start, governments in countries including Mexico, Qatar and Argentina have issued bonds worth $90bn in 2016. By the end of the year, credit strategists at JPMorgan expect sales of debt by emerging markets in “hard” currencies such as dollars and euros to reach more than $125bn — boosted by Saudi Arabia’s first appearance on global bond markets.A punishingly low yield environment for money managers has sparked a jump in demand for emerging market fixed debt in the past few months, as lack of inflation keeps interest rates in big economies on hold and prompts additional monetary easing from the European Central Bank, the Bank of Japan and the Bank of England. In the US, weak jobs data published on Friday have also pushed back expectations of the Federal Reserve raising interest rates this month, potentially removing a threat to the buoyancy of emerging market assets. Record inflows of funds have in turn pushed up emerging market bond prices, reducing borrowing costs down and spurring an increase in debt sales. Inflows into EM fixed income have surpassed other risky assets in the past two months, with investors pouring over $16bn into emerging market bond funds since the UK voted for Brexit. While inflows have headed primarily to dollar-denominated bonds, local currency bonds — which expose investors to both credit risk and currency moves — have also seen an uplift in demand.

Are We Really Going to Sell Out the US Alliance for Property Prices? Australia’s China Choices --Finally the nation has been shunted into a decent debate about China and its role in Australia’s future. We know it’s a debate of substance because the Chinese Communist mouthpiece, The Global Times, was sufficiently exercised to mock it: A Briefing Book, given to all senators and members by Australia’s Parliamentary Library recently, warned them of China’s “Belt and Road” initiative and expressed concerns toward it. The book called on senators to adopt a prudent mind toward China affairs and to keep alert toward China’s motives behind its investments. The book is an epitome of some Australians’ attitude toward China. The news that Labor Senator Sam Dastyari from New South Wales accepted political donations from a Chinese man has caused quite a stir. The Chinese donor was found to have paid his legal bills, and Dastyari reportedly supported China’s stance in the South China Sea issue. Conservative forces within Australia launched an assault on Dastyari and urged him to resign. “I think the Australians need to make a choice,” said Colonel Tom Hanson, assistant chief of staff, US Army Pacific. “It’s very difficult to walk this fine line between balancing the alliance with the United States and the economic engagement with China.” Some Australians seem to be deliberately hyping up the alarm toward China, which baffles Chinese society. China and Australia are geographically detached. Like Canada, Australia is an English-speaking country and apt for doing business, study, travel and migration. Canada used to have disputes with China over human rights. It is not difficult to understand as Canada belongs to the Western camp. But what bewilders us is why Australia keeps confronting China over security issues. Southeast Asia is situated between China and Australia. But Australia seems to have more security concerns toward China than Southeast Asian countries like Indonesia and Malaysia. It is even difficult to maintain a normal relationship with Australia now.

Globalization Hits a Wall - For the first time since early 2014, the dollar value of goods imported and exported by the G-20 countries actually grew a little in the second quarter of this year, the Organization for Economic Cooperation and Development reported last week. This is probably just because oil prices bounced back a bit after hitting a 12-year low in the first quarter. The world trade volumeindex maintained by the Netherlands Bureau for Economic Policy Analysis fell 0.7 percent in the second quarter. (The bureau, which also goes by its Dutch initials, CPB, doesn't actually go out and measure how big the things are that we're trading with each other; it just adjusts for price and currency fluctuations to give a clearer picture of trade flows.)  By this metric, global trade has been sputtering since early 2015, and the sputtering has been getting worse lately, not better.  For those who have been following the shipping business, this surely isn't a big surprise. As Bloomberg Gadfly's David Fickling and Rani Molla put it Tuesday: "Of the top 15 container lines that were in operation nine months ago, four have gone out of business or are in the process of doing so." Much of the world seems to be in denial about this, though. Fickling and Molla again: "The global container fleet is still getting bigger."  The denial is understandable because in the decades since the fall of the Berlin Wall in 1989, the main thing global trade has done is grow. There have been declines during recessions, but if the global economy was growing, trade was usually growing even faster. Since the initial bounceback from the last recession, this has no longer been true. Trade's share of global gross domestic product has been declining since 2012.  One thing this last chart makes clear is how remarkable the period from about 1987 to 2008 was. There was a big leap in trade's share of global GDP in the 1970s when oil prices rose, but otherwise long periods of relative stability. Then, from 1987 onward, came the era of seemingly unstoppable globalization. And now it seems to be over.

G-20 Leaders Challenged to Find Effective Plan to Reignite World Growth - WSJ: Pointed words over China’s steel overproduction crystallized a challenge for world leaders gathered here to come up with an effective plan to reignite world growth. A few hours before Chinese President Xi Jinping opened the meeting by the Group of 20 major economies on Sunday, a top European official called excessive steel output a “global problem with a specific Chinese dimension.” Determination to fix economic trends on growth, trade and investment—and sliding confidence about the benefits of globalization—permeates a draft of a communiqué expected to be adopted Monday by G-20 leaders. But according to a copy seen by The Wall Street Journal, the G-20 list of remedies rivals the world economy in its complexity, running on for 7,000 words with ideas about migration, terrorism, energy and the spread of the Zika virus.The final document, said a European diplomat involved in the negotiations, risks looking “like a Christmas tree.” On the sidelines of the meeting, Britain’s Prime Minister Theresa May sought to reassure other leaders that Britain’s decision to leave the European Union won’t further disrupt global trade. U.S. President Barack Obama spent one of his final summits with other world leaders trying to resolve the crisis in Syria. China’s president has staked considerable global capital on an often unwieldy G-20 as he tries to peddle Beijing’s vision for the global economy. Many of the measures in the draft had Mr. Xi’s fingerprints, including more than 25 references to making growth “innovative,” a term much in use by China’s leadership these days. But many other government leaders came to Hangzhou hoping to see pledges of straightforward action: drastic cuts in China’s steel production. The sector has emerged as a barometer of how serious Beijing is about a restructuring of its growth model and reducing risks that the No. 2 economy would face a destabilizing crisis.

Is Fiscal Policy for Prosperity Back in Place of Austerity? - Fiscal policy has not been taken seriously by policymakers since the Great Financial Crisis (GFC) of 2007-2008, with some exceptions over the period 2009-2010, notably after the G20 meeting in London (April 2009). The GFC prompted significant government and central bank interventions, both to restore confidence in the financial system and to contain the impact of the crisis on the real economy. Monetary and fiscal policy responses became very accommodative in many countries. Central banks responded by flooding the financial markets with liquidity, while fiscal authorities attempted to deal with the decline in the solvency of the banking sector. Those policies before 2010 had helped to avoid a complete collapse of the financial system and the real economy after the emergence of the GFC. Subsequently “unorthodox” monetary policies have been implemented, which have not been successful in terms of producing and maintaining healthy growth in the economy. Fiscal policy has increasingly been concerned with “balancing the budget” and “expansionary austerity” rather than being genuinely expansionary.  There are several reasons for such a change in terms of fiscal austerity going out of fashion. An important one being the failure of the austerity policies to bring about significant recovery despite the claims made for “expansionary fiscal consolidation.”

Capital Controls, Not Global Accords, Touted As the New Fix for Currency Volatility - Currency volatility is one of the many symptoms of—and threats to—the global economy’s long malaise. But unlike former days when exchange-rate pressures risked tearing up economies, currency accords are becoming anachronistic in some key policy circles. Capital controls, long anathema in the West, are now touted as the policies du jour.Cross-border restrictions on capital, such as limits on foreign buying or selling of short-term bonds or currencies, could avert potential damage without the need to intervene in exchange rates, proponents argue. The dollar’s surge has accompanied plummeting exchange rates for a host of emerging-market and advanced economies. Several bouts of volatility in foreign-exchange markets—fueled by central banks vying against one another for growth—prompted calls for the Group of 20 largest economies to draft a new, global deal to manage currency values. Many analysts and economists called for a modern-day Plaza Accord to tame damaging currency swings and prevent a dangerous cascade of tit-for-tat currency interventions. Back then, the 1985 deal between the U.S., France, Germany, Japan and the U.K. orchestrated a depreciation of the dollar to ward off a dangerous swell of support for protectionist trade policies in the U.S. Now, while protectionist policies are once again on the rise, policy makers are struggling to see eye-to-eye on the appropriate policies needed to fix the world’s economic ails. The closest G-20 economies have come to a currency deal is agreeing not to surprise one another with major policy changes. “Our relevant authorities will consult closely on exchange markets,” G-20 leaders vowed this week.

 Nigeria Spends N1 Trillion On Four Food Imports Annually - FG - Massive importation of food, especially, rice, wheat, sugar and fish, has continued to bleed the nation's economy, with the four items accounting for a whopping N1 trillion loss to the nation annually. Executive Secretary, Agricultural Research Council of Nigeria, ARCN, Prof. Baba Abubakar, disclosed this at a sensitization seminar on Genetically Modified Organisms, GMOs, and Agricultural Biotechnology, organised for staff of Federal Ministry of Agriculture and Rural Development by Biotechnology Development Agency, in collaboration with other OFAB and National Bio-safety Management Agency, in Abuja, yesterday. Abubakar, who was represented by the Acting Director, Partnership and Linkages Programme, Yarama Ndirpaya, noted with dismay that Nigeria had remained a large food importer, in-spite of massive uncultivated agricultural land across the country. He said: "Nigeria spends over N1 trillion on the top four food imports annually. And farmers have limited capacity and use techniques that adversely affect soil fertility, water and biodiversity. Human-induced climate change compounds the issue." According to him, Nigeria is the largest importer of US hard red and white wheat worth N635 billion annually; world's number 2 importer of rice at N356 billion; N217 billion on sugar and N97 billion on fish. Abubakar, who described the development as unacceptable, further noted that Nigerian farmers had limited capacity and used techniques that adversely affected soil fertility, water and biodiversity and warned that unless farmers were empowered with biotechnology, the problem might linger into the future.

Mass protests in Brazil against Temer 'coup' - (AFP) - Tens of thousands took to Brazilian streets to support sacked leader Dilma Rousseff and protest the new government of Michel Temer, who has taken power and downplayed the protests. Demonstration organizers -- who have rejected Temer's ascendancy as a "coup" -- said some 100,000 protestors filled the major artery Paulista Avenue, many holding banners that read "Out with Temer!" and "Direct elections now!" The Senate voted Wednesday to convict Rousseff on charges of having illegally manipulated government accounts, stripping her of her office and replacing her with Temer, her bitter enemy and former vice president. The protest ended with clashes between demonstrators and police, who fired gas bombs, according to the news website G1. Temer, who after being sworn in promptly traveled to China for the G20 summit, said the protests were done by "small groups and predators."

Mexico Faces Austere 2017 Budget on Lower Oil Revenue - -- Mexican President Enrique Peña Nieto on Thursday submitted to Congress a budget proposal for 2017 that calls for spending cuts and a primary surplus as his government seeks to contain a growing public debt amid slow economic growth and declines in oil revenue. The primary surplus, which excludes debt payments, is projected to be equal to 0.4% of gross domestic product, Finance Minister José Antonio Meade said in delivering the proposal to legislators. Years of budget deficits coupled with low economic growth, a slump in world oil prices and the sharp depreciation of the Mexican peso, have pushed up Mexico's public sector debt, which is projected to exceed 50% of GDP by the end of this year. Moody's Investors Service and Standard & Poor's have changed their ratings outlook for Mexico to negative from stable. The 2017 budget proposal is consistent with the fiscal consolidation path set out in 2013, Mr. Meade said.

Exclusive Interview With Vladimir Putin - Bloomberg

  The Kremlin Really Believes That Hillary Wants to Start a War With Russia - If Hillary Clinton is elected president, the world will remember Aug. 25 as the day she began the Second Cold War.  In a speech last month nominally about Donald Trump, Clinton called Russian President Vladimir Putin the godfather of right-wing, extreme nationalism. To Kremlin-watchers, those were not random epithets. Two years earlier, in the most famous address of his career, Putin accused the West of backing an armed seizure of power in Ukraine by “extremists, nationalists, and right-wingers.” Clinton had not merely insulted Russia’s president: She had done so in his own words. Worse, they were words originally directed at neo-Nazis. In Moscow, this was seen as a reprise of Clinton’s comments comparing Putin to Hitler. It injected an element of personal animus into an already strained relationship — but, more importantly, it set up Putin as the representative of an ideology that is fundamentally opposed to the United States. Even as relations between Russia and the West have sunk to new lows in the wake of 2014’s revolution in Ukraine, the Kremlin has long contended that a Cold War II is impossible. That’s because, while there may be differences over, say, the fate of Donetsk, there is no longer a fundamental ideological struggle dividing East and West. To Russian ears, Clinton seemed determined in her speech to provide this missing ingredient for bipolar enmity, painting Moscow as the vanguard for racism, intolerance, and misogyny around the globe. The nation Clinton described was unrecognizable to its citizens. Anti-woman? Putin’s government provides working mothers with three years of subsidized family leave. Intolerant? The president personally attended the opening of Moscow’s great mosque. Racist? Putin often touts Russia’s ethnic diversity. To Russians, it appeared that Clinton was straining to fabricate a rationale for hostilities.

The transatlantic trade pact that risks more harm than good - Wolfgang Münchau - The British electorate rebelled against membership of the EU. The Italians may rebel against constitutional reforms in a referendum in November. The Germans, French, Austrians and Belgians, among others, are rebelling against the Transatlantic Trade and Investment Partnership, otherwise known as TTIP.  President François Hollande of France said last week that he no longer sees an agreement on TTIP in time for ratification before President Barack Obama leaves the White House in January. Since neither of the candidates to succeed him — Hillary Clinton or Donald Trump — supports TTIP, there is a strong probability that it will fail.  One obvious reason for this is the electoral timetable. France and Germany hold elections next year. In quieter times this would not matter. But like no other trade agreement before, TTIP has managed to become one of the top campaign issues in both countries.  In Germany Angela Merkel, chancellor, is still defending the deal — in principle. But her deputy Sigmar Gabriel, leader of the Social Democrats, has turned against TTIP and is exploiting its unpopularity as one of his party’s main policies. Since the two opposition parties, the Greens and the Left party, are also against TTIP, Ms Merkel has no parliamentary majority on this issue. Given these political difficulties, I cannot see how EU negotiators can accept even a modest compromise on the outstanding controversial issues around TTIP. These include access to Europe’s agriculture markets and the proposed investor tribunals — dispute settlement procedures that take place outside existing legal systems and that are accountable to no one. The truth is that the Europeans are politically not ready for a deal. It is not clear that the US is either. The US would have to open procurement markets to EU bidders and liberalise their visa regime. TTIP is not a classic free trade agreement. It is largely about investment and the reduction of regulatory barriers. As such it is similar to the single European market though not nearly as comprehensive. It also constitutes an intrusion into national sovereignty over economic policy. While UK voters rebelled against the single European market, continental voters reject the single transatlantic market. This is no coincidence.

Et Tu Austria - 3rd European Nation Abandons TTIP Trade Deal - In our coverage on the slow death of TTIP we focused on Germany and France.  We are now hearing that the Austrian SPÖ, the majority partner in the governing grand coalition, is also opposed - and not only to TTIP but also to the CETA deal with Canada.  Der Standard quotes Chancellor Christian Kern as questioning CETA just after vice-chancellor Reinhold Mitterlehner from the ÖVP, the centre right coalition partner, questioned TTIP. Kern is planning to consult his party base before taking a formal decision but this procedure is certain to lead to the rejection of the project. He said TTIP constitutes a massive shift in power towards multinational companies and against democratic rule - and this is a fundamental design flaw of both TTIP and CETA. Mitterlehner was more nuanced than Kern, saying that it was a shame that the otherwise decent CETA deal was discredited by TTIP. He said if Austria rejected CETA it would most likely be outvoted in the council, where decisions on these matters are taken with a qualified majority vote. Eric Frey has a comment in Der Standard in which he notes that the failure of TTIP is due to the cowardice of politicians. Not one, except perhaps Angela Merkel, has openly campaigned for it. Even Austria's ÖVP has not. The truth is that small export-driven economies would benefit enormously from this agreement, but the debate is entirely dominated by NGOs and critics of globalisation. The strongest argument against TTIP is the hostile public opinion. But this is the fault of politics.  We disagree with Frey fundamentally. We are living at a time when people are considering voting for extreme policies like Brexit, and extremist politicians like Trump, Le Pen, or various Austrian characters on the right. This is a response to the failures of the globalised economy since 2008. An intelligent response cannot consist of doubling down on what was done before then: more free trade, lower taxes for multinational companies, and more loss of democratic control. 

Italy's Target 2 liabilities hit new record at 327 bln euros | Reuters: The Bank of Italy's liabilities towards other euro zone central banks rose to a new record high of 326.95 billion euros ($367.5 billion) in August, above levels seen four years ago at the height of the euro zone's debt crisis. Positions within the Target 2 system, which settles cross-border payments in the euro zone, are monitored because they can signal financial stress, for example when banks in a country lose foreign funding. However, seasonal factors such as the end of a quarter can also affect it. The Bank of Italy said in July the recent increase in its Target 2 position was driven by foreigners selling Italian assets, especially bonds, and Italians buying foreign assets, movements which were only partially offset by Italian banks raising more funds on international markets

German 10-Year Auction Yield at Fresh Record Low: In the latest EUR5.0bn auction of German 10-year bonds due in 2026, the Bundesbank only sold EUR3.501bn with an average yield of -0.11% from -0.09% at the previous auction in August. This was a fresh record low yield for the 10-year auction and the last three auctions have all seen record lows. The bid/cover ratio declined to 1.1 from 1.4 previously and the bid/offer ratio declined to 0.79 from 1.13 previously. There was a higher retention rate of 30% from 19.9% previously. The auction reverted to the pattern of uncovered auctions seen in June and July. Overall demand for German 10-year paper has remained generally strong given the negative interest rate structure across the curve with around 85% of German bonds now having yields below zero. Secondary demand for bunds is still being supported by Bundesbank buying as part of the ECB’s EUR80bn per month bond buying programme. The weak bid/cover ratio does suggest underlying demand has declined and the latest ECB rate decision will be watched very closely on Thursday. There will be the potential for a sharp decline in bund prices if the central bank is not as dovish as expected, especially if it appears to rule out an extension of the bond-buying programme. Any extension beyond March 2017 or a strong commitment to further action, if required, would trigger fresh support for bunds.

 Companies Get Paid to Borrow as Global Bond Binge Resumes - Europe’s Sanofi and Henkel AG became the first companies outside of the banking industry to raise debt with yields less than zero. Issuance on both sides of the Atlantic kicked into a higher gear after Monday’s Labor Day holiday in the U.S., with companies including Siemens AG and Home Depot Inc. announcing plans to sell more than $18 billion of bonds. “This is what happens when you get back from Labor Day,” said Tom Murphy, a money manager at Columbia Threadneedle Investments. “September is supposed to be a pretty big month. It’s coming off August, which was a record month for issuance as well. At this point, the market is set up to absorb it well.” Investors seeking refuge from negative yields brought on by easy-money monetary policies outside the U.S. are embracing investment-grade dollar debt, which has gained 9.2 percent this year after losing 0.7 percent in 2015, according to the Bloomberg Barclays U.S. Corporate Bond Index Sanofi, the French drugmaker, sold 1 billion euros ($1.12 billion) of three-year notes at a yield of minus 0.05 percentage point. German household products maker Henkel issued 500 million euros of two-year notes also at a yield of minus 0.05 percentage point. Officials at Paris-based Sanofi and Dusseldorf, Germany-based Henkel weren’t immediately available to comment on the sales.

For The First Time, Two European Non-Financial Companies Will Be Paid To Issue Debt -- Today was another historic day in the monetary twilight zone that is Europe, when two large European, non-financial companies were the first in history to be paid by investors to borrow, courtesy of the ECB's corporate debt monetization program, which has unleashed an unprecedented scramble for frontrunning the central bank's purchases of corporate debt and a historic collapse in bond spreads. As the WSJ reported earlier, German multinational Henkel AG and French drugmaker Sanofi SA are set to pay, pardon collect, a yield of minus 0.05% on new issues of short-dated bonds on Tuesday. The German household products is set to sell €500 million of two-year bonds that yield negative 0.05 percent, while Sanofi will be paid to issue three-year debt.  As the WSJ conveniently adds, in case someone was still unaware, "the fund raising is another sign of how unprecedented monetary policy has turned conventional investment theory on its head." Roughly €717 billion of eurozone investment-grade bonds traded at a negative yield as of the end of August, or over 30% of the entire market. The ECB had bought over €20 billion of corporate bonds as of Sep. 2, after launching its program in early June, with most of its purchases coming in secondary markets. The result is shown in the charts below:

ECB is set to extend QE well into next year as it struggles to kickstart inflation: The European Central Bank is expected to extend its trillion-euro bond-buying program beyond March 2017 and announce to expand the universe of eligibile bonds as part of its seemingly never-ending struggle to kickstart the euro zone's economy. The central bank and its President Mario Draghi has been trying to push inflation back to its goal of below but close to 2 percent with a plethora of measures and instruments ranging from negative deposit rates to spur lending, a quantitative easing (QE) program that has been buying 80 billion euro ($89 billion) in bonds every month and interest rates close to zero - but without a breakthrough success. Analysts believe the ECB's governing council has its work cut out when it meets to decide on monetary policy Thursday. The headline rate of inflation remained unchanged at 0.2 percent in August. Core, or underlying inflation, which excludes energy, goods, alcohol and tobacco, fell from 0.9% in July to 0.8%, according to Eurostat.

 QE: quantitatively shrinking collateral reuse - Izabella Kaminska - Adding to the QE scarcity concerns already highlighted by David earlier on Monday, here’s a couple of charts from Citi’s Hans Lorenzen reflecting the fundamental “too much of a good thing” problem with QE.  Glaring, right?  As has been frequently mentioned to us by the IMF’s resident collateral expert Manmohan Singh, when the central bank becomes the market for quality collateral in the context of regulatory policy which restricts collateral re-use for macro-prudential reasons, this technically amounts to the very same thing as narrow money policy. In Singh’s opinion, the only thing which can consequently return the collateral and repo markets to a normal state of functionality is a strategic decision to allow collateral held on central bank balance sheets to be actively reused in the market. As Singh has explained to us, in economic terms the “reuse” or rehypothecation of a security is identical to the money creation that takes place in commercial banking through the process of accepting deposits and making loans. That’s why restricting collateral reuse even in the context of ample QE still has the end result of tightening monetary policy all round (especially in a world where bank reserves, which are only accessible to licensed banks, might be deemed an inferior final settlement security than T-bills).  As Singh notes, if we understand that the term “pledged for reuse” constitutes the equivalent of collateral which can be reused by the taker in his own name, we can see how and why the practice comes to underpin the economies of scale provided to the market by the financial system. We’d even argue this is precisely what banking is supposed to be about: the efficient and productive reuse of other people’s idle capital for the purpose of extending the longevity and duration of underlying savings. At the same time, however, it’s undeniable the practice creates multiple current claims over the same securities, posing macro-prudential risks which lead to intermittent financial panics if and when the reuse merry-go-round ever comes to an abrupt halt. And so it is, understandably, that regulators and central bankers come to see the reuse of collateral as the source of risk in the financial system and strive to limit its intensity. The problem is, if finance really is all about the risky re-use of scarce capital for the sake of economic scaling, then shuttering the industry’s capacity to reuse collateral defies itsraison d’etre and inevitably impacts its return potential.

Negative rates will stay for another five years, JPMorgan warns: Equity valuations between Japanese and European banks will converge with quantitative easing (QE) programs and negative interest rate policies set to continue for the long term, according to a team at JPMorgan. "QE reduces lending rates to negative and we are going to expect negative lending rates until 2021," Kian Abouhossein, head of European banks equity research at JPMorgan told CNBC Tuesday. "So as long as that is the case, margins will not improve. Sixty percent of revenues is net interest income and as long as that's the case earnings will not improve. So return on equity is very low." European banks are more akin to their Japanese counterparts and less like Wall Street, warns JPMorgan, who has detailed how a negative interest rate policy has led to ongoing pressure on revenues and profit margins. Europe has seen a balance sheet recession since the economic crisis of 2008, it said, highlighting that a 10.9 percent increase in reserves at these banks has failed to increase lending to the wider economy. "QE has worked initially and helped to stabilize asset prices, and to lower funding cost for banks …. However, the secondary long-term effects of QE are manifesting themselves in the form of pressure on revenues for European Banks with customer margins in euro area declining from 2.5 percent in 2011 to 1.8 percent in 2015," the report said. The European Central Bank (ECB), the Danish National Bank (DNB), the Swedish Riksbank, and the Swiss National Bank (SNB) have all pushed key short-term policy rates into negative territory. A negative interest rate policy, or NIRP, essentially charges banks to hold cash at a central bank in the hope that they will instead lend to the real economy. Many expect banks to pass on this disincentive to save to its customers by trimming rates or by ramping up borrowing costs. The policy is increasingly being seen as a viable option for central bankers after Japan's move below zero earlier this year.

Thousands rally in Paris to protest crime targeting Chinese -  Reuters) - At least 13,000 people attended a rally in Paris on Sunday to protest against what they say is a crime wave targeting the Chinese community in France, police said, after a Chinese textile designer died after being mugged last month. Demonstrators waving French flags and sporting T-shirts printed with the slogans "Stop violence, muggings, insecurity" or "Equality for all, security for all" marched from the Place de Republique square to the Bastille in eastern Paris, asking for more police protection. Chaoling Zhang, a 49-year-old textile designer, died last month after five days in a coma after being attacked in the northern Paris suburb of Aubervilliers by three men who stole his bag. Members of Aubervilliers' large Chinese community, home to many Chinese immigrants, said that the death of Chaolin Zhang was the latest in a string of targeted assaults. "At first it was just stealing bags, then it was stealing bags with violence, and now it's stealing bags and killing. It could happen to anyone," 31-year-old Wang Yunzhou told Reuters TV.

Blockades, attacks, and tear gas: what’s going on in Calais?: Walking into the Calais camp – now known by inhabitants and the rest of the world as “The Jungle” – for the first time last Thursday, I couldn’t quite believe the scene unfolding before me. Traffic had stalled on the motorway towering over the camp and, seizing on a rare opportunity so close to the tunnel, hundreds of refugees charged at the white barbed wire fence in broad daylight, breaking through and storming the lorries bound for the UK. The riot police – stationed there, forever on standby – tear-gassed the crowd into submission, eventually restoring order, with refugees and volunteers alike left shielding their burning eyes. Life in the camp at that moment couldn’t seem more desperate. Until you speak to the residents and realise how many put themselves through this hell every night. Winter is fast approaching and they’re well aware of the political backdrop. The French Interior Minister Bernard Cazeneuve’s promise to dismantle the camp is met with a mix of cynicism and fear. Tension is in the air, even more so than usual I’m told, and there’s a palpable sense that time is running out.

Merkel Mum As Five German Women Assaulted By Migrants, Danes Post Arabic Ads Saying "Don't Come Here" --With nearly two-thirds of Germans currently opposed to a fourth term for Chancellor Merkel (see "Thousands Of Germans Demand Merkel's Resignation; Protest "Open Door" Immigration Policy") and a humiliating loss in German state elections on Sunday, coming in third place to the anti-immigration, eurosceptic AfD party in her own home state, many have speculated whether Merkel's days as a public servant may be numbered.  Support for the Chancellor has waned as Germans blame the tide of rising migrant violence on her open border immigration policies while Merkel insists that "Islamist terror in Germany wasn't imported with refugees...terror existed in Germany before the refugee influx." Certainly events like this weekend's attack of five women in the German city of Hildesheim only serve to bolster the rising tide of nationalism in Germany and throughout Europe.  Apparently the latest sexual assaults were committed by three teenage migrants of Afghan and Iranian descent who accosted and assaulted five different women over the weekend.  Police reports indicate the men were "trying to kiss them, grope them and have sex with them."  According to Breitbart London, when the women rejected their advances the migrants grew violent and threatened to hit the non-compliant women in the head with glass bottles. Police say that the victims of the attack, all between 18 and 21-years-old were walking down the streets of the city at around 2:40 am when they were approached by the trio of migrants. The migrants spoke to the women in English and attempted to corner them and kiss them. The victims say that the gang made various physical gestures that made it clear they were after sex. When the women resisted the migrants by telling them to go away and using body language to ensure the migrants understood they weren’t interested, the migrants became irate. The men followed the women and then set upon them, striking the women in the face and grabbing their buttocks. One migrant kicked one of the women in the stomach. After the beating the migrants once again tried to engage the women and this time threatened to smash several glass bottles of beer and champagne over the heads of the women if they didn’t comply with the demands of the migrants.

Europe’s Left After Brexit - Yanis Varoufakis -- In just eleven months, the Greek “Oxi” and Brexit shook up both the European Union and Europe’s left. Exasperated by the EU’s mixture of authoritarianism and economic failure, a segment of Europe’s left is now calling for a “break with the EU,” which would mobilize left-wing support for exit referenda across the continent. Their analysis has come to be known simply as “Lexit.” DiEM25, the transnational Democracy in Europe Movement, rejects the Lexit logic in favor of an alternative agenda for Europe’s progressives. Undoubtedly, the Left must confront — with all its energy and imagination — the European Union’s practice of depoliticizing decision-making. In fact, this task also falls on other European democrats, Greens, and liberals. These formations may not consider themselves Left, but share our duty to resist Brussels’s authoritarian incompetence. The question is not whether progressive forces must clash with the EU establishment and current practices. The question is in what context, and within what overarching political narrative, this confrontation should take place. Three options present themselves.

There may be tech trouble ahead - The European Commission is expected to unveil the most controversial parts of its digital single market strategy in the coming months, encroaching on national sovereignty and threatening business models across industries. Lobbying on all sides is at full force as the Commission tries to update laws on copyright, telecoms, value-added taxes and data. The proposals could have sweeping consequences for consumers, including the ability to watch Britain’s Sky outside of the U.K., a faster rollout of 5G telecoms services and more banking and health apps. The final four months of the year will lay bare the entrenched corporate interests and national protectionism around tech, tax and data. “I hope the Commission has an idea for where the compromise lies,” said Fredrik Erixon, director of the European Centre for International Political Economy, “but I have not seen one so far.” “The vision has already been bruised and the ambitions we heard at the start of this Commission have clearly been scaled down,” he added. The digital single market strategy was introduced in May 2015, designed to create a kind of e-Schengen in which shopping, media and entertainment and 5G telecommunications have no borders, and government administration is electronic and international. The Commission has since made about a dozen targeted proposals, including new rules for on-demand video services and cross-border internet shopping. In an effort to get an easy win, the Commission tackled popular changes to copyright laws like allowing consumers to watch Netflix while on vacation abroad. However, the cut-throat debate over other changes to copyright law — like how films get financed and sold — is still raging.

 The EU Case Against Apple’s Irish Tax Deal -- The European Commission made a decision that Apple should pay €13 billion of corporate income taxes (plus interest) to Ireland as reimbursement of illegal state aid. What’s this all about?

  • 1) What is state aid? The Treaty on the Functioning of the European Union prohibits government subsidies to private industry and state-owned companies like airlines and steel manufacturers. The treaty has been interpreted to prohibit financial assistance by means of tax breaks to specific taxpayers or selected classes of taxpayers like multinationals. Prohibited state aid involves a subsidy (“advantage”) directed to a particular class (“selectivity”). A discretionary tax break for a specific multinational is state aid. That is black-letter law in the EU.
  • 2) This is not about Ireland’s low-tax regime. The European Commission said the decision was not about Ireland’s rate, which it lacks the legal authority to challenge. It is about Apple’s special deal with Ireland under which it paid far less than Ireland’s statutory rate on EU sales income which had not borne much income tax in the EU countries where products were sold. The commission is not challenging the income-stripping payments of royalties from EU countries to Ireland—the big enchilada. The premise of the EU treaty is that a tax paid anywhere in the EU is good enough.
  • 3) It’s about the sweetheart deal Ireland gave Apple.  Apple sells Chinese-made products all over Europe. Apple’s US parent owns the intellectual property that is the primary value driver in these products. Apple’s Irish affiliates have rest-of-world rights to that IP. So Apple’s EU affiliates pay royalties to its Irish affiliates that reduce their taxable income in countries where sales were made. The upshot is that the only country left to tax EU sales income is Ireland, which is a tax haven. Ireland made a special deal with Apple—a transfer pricing ruling called an advance pricing agreement—under which Apple’s Irish affiliates paid far less than the 12.5% rack rate. For the years 2003 to 2014, Apple’s Irish affiliates paid less than one percent tax on this income. How did they do that? The ruling allocated much of their income to imaginary remote head office expenses—as if executives in Cupertino were remotely managing Irish operations. So most of the EU sales income was taxed nowhere.

 Legal loophole on tax evasion to be debated at Westminster The Herald - A LEGAL loophole that allows Scotland to act as a possible haven for tax evasion and money-laundering will be debated at Westminster, following a series of exposes in The Herald.  Roger Mullin, SNP Treasury spokesman, will formally call for a full UK Government review into Scottish Limited Partnerships (SLPs) – off-the-shelf firms marketed widely in eastern Europe as “zero-tax Scottish offshore companies”.  The call for a review will come as an amendment to the Government’s finance bill on Monday and follows a series of Herald investigations that revealed how the Scottish-based firms were being used to launder profits from gun-running deals, vodka industry corruption in Ukraine and international diet pill scams. Mr Mullin MP, who represents Kirkcaldy, has already secured the backing of international aid charity Oxfam for his amendment amid widespread political concern that century-old legislation behind SLPs is being ritually abused.

Brexit: Japanese Companies Could Pull UK Investment: This comes after Britain was confronted with memo warning that Japanese companies could relocate their headquarters to EuropeJapanese businesses might pull investment out of the U.K if their “requests are not met” during ‘Brexit‘ negotiations, warned the country’s ambassador in Britain during an interview with the BBC on Monday. Ambassador Koji Tsuruoka warning comes after a strongly-worded memo was issued by Japan’s foreign on Sunday. The 15-page document spelled out Japan’s worries for its companies operating in Britain and called for British Prime Minister Theresa May and the E.U. to negotiate a deal that safeguarded almost all of the U.K.’s rights in the single market. The memorandum, which was issued as May was attending the G20 summit in China, also said that Japanese companies could relocate their headquarters from Britain to European countries “if E.U. laws cease to be applicable in the U.K. after its withdrawal.” Tsuruoka says Japan hopes Brexit will be “a success” and businesses he spoke to think Britain is the “best place to do business in Europe.” He told the BBC: “Their [Japanese businesses] duty is to produce profits – if the way Brexit ends up does not provide companies with a prospect of making sufficient profits to continue operating in the U.K. of course there’s no option they cannot choose – all options are open.” He also said that it was hard to “imagine” that Japanese companies would leave the U.K. in totality, but added: “There is a negotiation that will have to be conducted. If there are variations, if those requests are not met, it will be up to the industry to decide what to do.”

Japan Throws Spanner into Brexit Negotiations - Yves Smith - I’m surfacing from my holiday to highlight a development in the Brexit negotiations which further undermines the fantasies hope of Leave proponents, in the form of a letter from the Japanese government outlining its expectations to 10 Downing Street.  One of the beliefs of the pro-Brexit camp was that the UK was such an important export market to the EU that Britain would have negotiating advantage. We’ve thought this belief was misguided, in that the UK’s own export sectors were far more vulnerable. The critically important transport industry is almost entirely in foreign hands, and its owners could migrate production to the EU over time if the UK lost access to the single market or for other reasons became a less attractive location than now. Similarly, there is no reason to believe that the dominant players in the EU, Germany and France, each of which has large, influential banks, would let UK banks get passporting rights without making very large concessions on other fronts. As vlade pointed out, another shoe has dropped in the form of the 15 page letter of Brexit demands from the Japanese government. The UK is being exposed as having fewer degrees of freedom in these talks than its leaders assumed by virtue of its deep economic integration with other economies. As the Guardian points out: Above all, the Japanese memo underlines that the UK is not only negotiating bilaterally with the EU commission and council of ministers, but with many other foreign firms that have invested in the UK, each of which is quite capable of upping sticks in the next phase of their investment cycle. And it focused on the issue we’ve stressed, that the only reason foreign manufacturers were in the UK was to get access to the single market with more favorable labor regulations. Upend that equation and those firms have no reason to stay: The Japanese missive also called for the free movement of EU citizens, which is antithetical to pro-Brexit demands for curbs on immigration.  Moreover, the Japanese letter is likely to encourage other countries whose companies have a significant presence in the UK to convey their own set of Brexit requirements.

BoE's Cunliffe sees another rate cut if economy evolves as forecast | Reuters: Bank of England Deputy Governor Jon Cunliffe said on Wednesday he expects to vote for another interest rate cut this year if the economy evolves as the central bank expects. "If the economy evolves as set out in the August forecast, I would expect to vote for another cut in Bank Rate this year as highlighted in the Minutes of the MPC's August meeting," Cunliffe said in a statement to lawmakers. "If demand slows more significantly than expected, and the output gap is correspondingly larger, I would be willing to vote for further monetary stimulus." The Bank of England said it expects the British economy to slow markedly in the second half of 2016 following the vote to leave the European Union, while avoiding recession.

 Violent crimes against women in England and Wales reach record high -- The number of prosecutions relating to violence against women and girls in England and Wales reached a record level last year, the director of public prosecutions said, as she warned of the increasing use of social media to threaten and control. Alison Saunders said the ease with which such crimes could be committed online was contributing to the increase in prosecutions. The number of offences against women, including domestic abuse, rape and sexual assaults, rose by almost 10% to 117,568 in 2015-6. Speaking to the Guardian as the Crown Prosecution Service published its annual report on violence against women and girls, Saunders said: “The use of the internet, social media and other forms of technology to humiliate, control and threaten individuals is rising and it is something that we will possibly see increase further. It is undoubtedly easier to commit a lot of these crimes online, people do it without thinking, it is more immediate and it is about the reach and ability to communicate to so many more people.” New offences such as the recently passed revenge porn laws were also adding to the caseload. Since the new law of disclosing private sexual images without consent was introduced in April 2015, there have been 206 cases of revenge pornography taken to court – with many individuals pleading guilty, according to the DPP.

Hundreds of child refugees have vanished since arriving in the UK - Hundreds of child refugees are missing in the UK, The Independent can reveal, amid fears they have fallen victim to human traffickers or other forms of exploitation such as sexual abuse or modern slavery. Authorities have no idea of the whereabouts of 360 of the vulnerable children, or even if they are safe. More than 200 have been missing for over two years, prompting serious concerns for their safety. Campaigners and MPs say the figures, released to The Independent by the Home Office under freedom of information rules, show the children have been “failed” by Theresa May’s government and are “being let down by a system which is meant to keep them safe”. Over the past five years, 9,287 children have sought safety in the UK as “unaccompanied minor” asylum seekers travelling alone, without a parent or guardian. Many of the children are fleeing war, poverty and persecution in their home countries. During this period, 360 have gone missing and are still unaccounted for. Of these, 81 of the children have been missing for five years, a further 77 children have been missing for four years and another 87 children have been missing for three

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