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

Saturday, September 3, 2016

week ending Sep 3

Fed's Evans, citing slow growth, says low U.S. rates are here to stay | Reuters: Chicago Federal Reserve Bank President Charles Evans on Wednesday said he is increasingly convinced that U.S. economic growth has slowed permanently, a situation that will keep U.S. interest rates low for a long time ahead. Embracing Harvard Professor Larry Summers' so-called secular stagnation theory, Evans argued that an aging U.S. population and slowing productivity growth mean there is little reason for interest rates to rise either fast or far. Expectations of low growth have become so embedded in corporate and investing behavior, he said, that even if inflation rises unexpectedly and the Fed has to raise rates faster than it now anticipates, a detrimental spike in long-term interest rates is unlikely. "Long-run expectations for policy rates provide an anchor to long-run interest rates," Evans said, according to a detailed outline provided ahead of his remarks to the Shanghai Advanced Institute of Finance in Beijing. "So lower policy rate expectations act as a restraint on how much long-term rates could rise following a surprise over the near-term policy path." Fed Chair Janet Yellen said last week that with the U.S. economy near full employment and inflation showing signs of rising toward the Fed's 2 percent goal, the case for a U.S. interest-rate hike has strengthened in recent months. Traders responded to those and other somewhat hawkish comments from Yellen's colleagues by adding slightly to their bets that the Fed will raise rates before the end of the year. Evans, who does not have a vote on Fed policy this year, is known as one of the U.S. central bank's most outspoken doves, generally in favor of delaying rate rises as long as possible so as to encourage hiring and investment. Although he did not express any view in his prepared remarks on when the Fed should next raise rates, his argument suggests support for patience.

 Fed’s Fischer Says Negative Rates Seem to Work in Today’s World - Federal Reserve Vice Chairman Stanley Fischer said negative interest rates seem to be working in other countries, while reinforcing that they aren’t on the table in the U.S. While the Fed isn’t “planning to do anything in that direction,” the central banks using them “basically think they’re quite successful,” Fischer said Tuesday on Bloomberg Television with Tom Keene in Washington. He reiterated that Fed rate increases will be data dependent without giving a specific timeline.Fischer’s comments on negative rates come days after Chair Janet Yellen left the subject out of a speech on the future U.S. monetary policy toolkit, suggesting that they’re not an option that’s up for discussion at the Fed. Fischer is a former Bank of Israel governor and a prominent figure in international economics, so his remarks constitute an important acceptance that the unconventional and often controversial policy might be working in other jurisdictions. “We’re in a world where they seem to work,” Fischer said, noting that while negative rates are “difficult to deal with” for savers, they typically “go along with quite decent equity prices.” Fischer’s assessment compares with the views of Mark Carney, the governor of the Bank of England, who earlier this month rejected the idea of negative rates as an effective option. “What we’ve seen in other countries is, to be honest, they’ve got this a bit wrong,” Carney said in a radio interview in early August. Swiss National Bank President Thomas Jordan has said that negative rates are “absolutely necessary” in his country.

Bill Gross says negative interest rates are nothing but liabilities - Call bond-market veteran Bill Gross a “broken watch.” He doesn’t care. His gripe about negative interest rates and a flood of debt, which he considers a risk, not a fix, for a global economy that’s still limping out of the financial crisis, is challenged daily by resilient demand for the bonds he’s bearish on. But even if being “right” eventually is a hard sell right now, he’s not backing down, Gross said in his latest monthly commentary. “The problem with Cassandras, such as Gross and Jim Grant and Stanley Druckenmiller, among a host of others, is that we/they can be compared to a broken watch that is right twice a day but wrong for the other 1,438 minutes,” Gross wrote.. “But believe me: This watch is ticking because of high global debt and out-of-date monetary/fiscal policies that hurt rather than heal real economies.” Germany, Switzerland, France, Spain and Japan are among countries that have negative yields on government-issued debt. Their hope is that cheap, even free, borrowing raises inflation and revives asset prices that can filter through economies; they argue extreme policies have been needed. Gross and others have argued that rates, including those at the Federal Reserve, at near zero or below won’t create sustainable economic growth and actually undermine capitalism.

 Should the Fed keep its balance sheet large? – Bernanke - In this post I’ll report on one important debate: the question of the optimal long-run size of the Fed’s balance sheet. It seemed to me that the strongest arguments made at the Jackson Hole conference supported a strategy of keeping the balance sheet large (though comparable to other major central banks), rather than shrinking it to its pre-crisis level as the FOMC currently plans to do. The Fed’s balance sheet has roughly quintupled since the financial crisis, from about $900 billion in 2007 to about $4.5 trillion today. (See here for a useful overview of the main elements of the Fed’s pre-crisis and current balance sheets.) The increase mostly reflects the Fed’s large-scale asset purchases (quantitative easing), which the FOMC employed to reduce longer-term interest rates to help the economy recover from the Great Recession. Although the Fed stopped adding to its stock of financial assets in October 2014, it still holds about $2.5 trillion of U.S. Treasury securities and $1.7 trillion of government-guaranteed mortgage-backed securities. Because the size of the Fed’s balance sheet is closely tied to its methods for influencing short-term interest rates, the debate at Jackson Hole was about which “package” makes more sense: (1) the pre-2008 system that includes a relatively small balance sheet and the management of the funds rate through operations that vary the supply of bank reserves; or (2) the current system that includes a large balance sheet and the setting of the IOER and the interest rate on RRPs to establish the fed funds rate. The FOMC’s publicly announced strategy, reiterated by Janet Yellen in her opening speech, is to return over time to the pre-2008 system. The plan is to do this, at the appropriate time, by ending the reinvestment of maturing securities, thereby allowing the balance sheet to shrink “naturally,” and by phasing out the RRP program, so that non-banks will not be able to make deposits at the Fed. Overall, I think the FOMC’s plan to return to a pre-2008 balance sheet and the associated operating framework needs more thought. The appropriate size and composition of the Fed’s balance sheet inevitably depends on a range of complex decisions about the management of monetary policy and the role of the central bank in preventing and responding to financial crises. We’ve learned a lot about both areas since the crisis, and some important arguments have emerged for keeping the balance sheet larger than in the past. Maybe this is one of those cases where you can’t go home again.

Why The Fed Will Never Reduce Its $4.5 Trillion Balance Sheet Again - Back in early April, one of the foremost experts on the practical applications of QE (there are many more "experts" on the discredited theoretical framework of QE, most of whom are career economists), Credit Suisse's Zoltan Pozsar wrote a note titled "What Excess Reserves", in which the former NY Fed analyst made a very clear case for why the Fed's balance sheet will never shrink again (particularly in the context of the broken Fed Funds market).  Back in April, he also laid out the role of the Fed's massively expanded balance sheet in the context of the prime money fund shrinkage as a result of the October 14 money market reform deadline:[W]e are witnessing a structural shift in the amount of reserves held by foreign banks as well. Gone are the days when foreign banks settled their Eurodollar transactions with deposits held at correspondent money center banks in New York.Under the new rules, interbank deposits do not count as HQLA, and foreign banks are increasingly settling Eurodollar transactions with reserve balances at the Fed. Foreign banks’ demand for reserves as HQLA to back Eurodollar deposits and as ultimate means of settlement for Eurodollar transactions will underwrite the need for a large Fed balance sheet as  well. Prime money fund reform is a very important yet grossly under-appreciated aspect of this, one with geo-strategic relevance for the United States.Prime money funds have been providing the overwhelming portion of funding for foreign banks’ reserve balances. If the prime money fund complex shrinks dramatically after the October 14th reform deadline, funding these reserve balances will become structurally more expensive. This in turn means that for foreign banks across the globe running Eurodollar businesses – lending Eurodollars and taking Eurodollar deposits – will become structurally more expensive. Why? Because if the LCR requires banks to hold more reserves as the preferred medium for settling Eurodollar transactions and the funding ofthese balances become more expensive, funding the liquidity portfolio corresponding to Eurodollar books may become a negative trade. Will that somewhat diminish the dollar’s pre-eminence as the global reserve currency and play into China’s hand? You bet

 Mission Creep - How The Fed Will Justify Maintaining Its Excessive Balance Sheet -- FOMC have changed their normalizing strategy several times and we now see the contours of yet another shift. The Federal Reserve was supposed to reduce its elevated balance sheet before moving interest higher as it would be impossible to increase the fed funds rate in the old fashioned way when the market was saturated with trillions of dollars in excess reserves. When it finally dawned on the FOMC that selling large quantities of TSY and MBS into the market was probably not a very bright idea, they created the O/N RRP to be able to raise rates without draining the financial system of reserves beforehand. Still, the thought of selling, or more accurately not rolling over, trillions worth of government debt, when SWF’s and foreign FX managers are desperate to raise USD is still not something the FOMC even want to contemplate. So a case needs to be built for the FOMC to justify maintaining its bloated balance sheet indefinitely; conveniently enough ex-FOMC member Jeremy Stein with his Harvard colleagues Robin Greenwood and Samuel Hanson did just that in a paper called “The Federal Reserve’s Balance Sheet as a Financial-Stability Tool” presented at the Jackson Hole Symposium. Their argument is simple. When the FOMC starts to raise rates, demand for positive yielding cash-like instruments will increase, thus re-enabling financial institutions to use the commercial paper market to fund themselves cheaply and enjoy a positive carry on their maturity transformation. As our chart below shows, commercial paper outstanding, with extremely short duration, grew exponentially prior to the GFC as financial institutions used the wholesale market to fund illiquid and longer dated positions.

Years of Fed Missteps Fueled Disillusion With the Economy and Washington - WSJ -- In the past decade Federal Reserve officials have been flummoxed by a housing bubble that cratered the financial system, a long stretch of slow growth they failed to foresee and inflation persistently undershooting their goal. In response they engineered unpopular financial rescues, launched start-and-stop bond buying and delayed planned interest-rate boosts. “There are a lot of things that we thought we knew that haven’t turned out quite as we expected,” said Eric Rosengren, president of the Federal Reserve Bank of Boston. “The economy and financial markets are not as stable as we previously assumed.” In the 1990s, a period known in economics as the “Great Moderation,” it seemed the Fed could do no wrong. Policy makers and voters saw it as a machine, with buttons officials could push to heat or cool the economy as needed. Now, after more than a decade of economic disappointment, the central bank confronts hardened public skepticism and growing self-doubt about its own understanding of how the U.S. economy works. For anyone seeking to explain one of the most unpredictable political seasons in modern history, with the rise of Donald Trump and Bernie Sanders, a prime suspect is public dismay in institutions guiding the economy and government. The Fed in particular is a case study in how the conventional wisdom of the late 1990s on a wide range of economic issues, including trade, technology and central banking, has since slowly unraveled. Once admired globally for their command of the economic system, central bankers now are blamed by the left and right for bailouts during the financial crisis and for failing to foresee and manage forces suffocating the global economy in its aftermath. Populist protest movements called “Fed Up,” “End the Fed” and “Occupy Wall Street” lashed out at the bank’s policies, and in the case of End the Fed, its very existence. Lawmakers of both parties want to subject it to more scrutiny or curb its powers.

Four Ways to Reform the Fed - Narayana Kocherlakota - The expanding responsibilities of the U.S. Federal Reserve have prompted numerous calls for reform, ranging from intrusive auditsto outright abolishment.  I disagree with most of the proposals, but I do believe that the central bank would benefit from some changes -- four, to be exact. The inspiration came from an excellent new book, "The Power and Independence of the Federal Reserve," in which the legal scholar Peter Conti-Brown describes the historical forces that have shaped the idiosyncratic and multi-faceted institution, with its ostensible independence and responsibilities ranging from helping banks move money to managing the economy and overseeing the financial system. My analysis leads me to four recommendations for possible reforms.

  • 1) Congress should more clearly define the Fed's goals for monetary policy, bank supervision and financial stability.
  • 2) The public should have a lot more visibility into how the Board of Governors oversees regional Federal Reserve banks, particularly with respect to appointing the banks' presidents.
  • 3) The president of the New York Fed should not vote on monetary policy.
  • 4) There should be a public conversation about changing the structure of the Fed to better reflect its functions and objectives. Should it become a unified public entity, and if so what would the policy-making Open Market Committee look like?

Think You Know the Natural Rate of Interest? Think Again --  The new debate in central banking is over whether long-run interest rates are lower than in the past, thanks to permanently lower growth. Investors seem to share the view of many policy makers that they are: Long-dated bond yields have plummeted around the world. But how much do we really know? The president of the Federal Reserve Bank of San Francisco, John Williams, set the tone for the gathering of central bankers at Jackson Hole, Wyo., last month when he published a widely read letter suggesting the long-run “natural” rate of interest has come down drastically in the past 25 years. This is the rate that would keep inflation steady if the economy were operating at full capacity, and provides the basis for where rates ought eventually to stabilize. His letter was backed by an updated version of a model he first published more than a decade ago, with two Fed colleagues,  Kathryn Holston and Thomas Laubach. The model shows the long-run interest rate has come down not only in the U.S. but also in the eurozone, Canada and the U.K. Secular stagnation has taken hold of the developed world, as one of their charts shows. Economists—and investors—tend to ignore the level of confidence in a calculation.  (If you doubt that, look at the attention paid to small beats or misses of expectations for the nonfarm payrolls report, which has a margin of error of plus or minus 100,000 jobs, with 95% confidence.) Holston, Laubach and Williams helpfully published the margin of error around their estimates, and it is big enough to drive a truckload of economists through. The error margins they produced allow a 95% confidence interval to be calculated, and for some regions it is just silly: They are 95% sure that the natural rate of interest in the eurozone is currently somewhere between plus 12% and minus 12%. Frankly, I’m 100% sure the natural rate sits in a much narrower band than that, without even picking up a calculator.

 Central Bankers Hear Plea: Turn Focus to Government Spending - The New York Times: — Central bankers who gathered here to discuss better ways of jump-starting slow economic growth received a surprising message from their lunchtime speaker on Friday: Stop. You’re making things worse.  Christopher A. Sims, a Nobel laureate in economic science, told the annual conference that increased government spending was required to lift the world’s major economies from stagnation. The pursuit of innovations in monetary policy, he said, is diverting needed attention from the inaction of fiscal policy makers.“So long as the legislature thinks it has no role in this problem, nothing is going to get done,” said Mr. Sims, a professor at Princeton. The best hope, he said, “is that people at central banks are willing to say publicly that this is what is necessary.”Developed nations have leaned heavily on their central banks since the 2008 financial crisis. The United States, Europe and Japan have all relied on low interest rates to encourage increased spending by businesses and consumers even as government spending has remained relatively austere. Mr. Sims is among a growing number of experts who warn that this experiment has reached its limits.The central banks have pushed rates to historically low levels. The European Central Bank and the Bank of Japan have even imposed negative interest rates, effectively taxing savings to encourage spending. Yet job growth and inflation remain stubbornly weak. Benoît Coeuré, a European Central Bank official, drew laughter from the audience when he noted the “good news” that eurozone inflation had doubled last month — from an annual rate of 0.1 percent up to 0.2 percent.In the United States, the Federal Reserve responded to the crisis more forcefully than other central banks, and the federal government initially spent more freely. Yet here, too, growth remains slow, inflation remains weak and millions of middle-age people are no longer working.

Harvard Professor Launches The War On Paper Money --Six months since Larry Summers first suggested "it;'s time to kill the $100 bill," and three months after The ECB actually killed the €500 Note, another Harvard 'scholar' is reinvigorating the war on cash. Amid claims that paper money fuels corruption, terrorism, tax evasion, and illegal immigration, Ken Rogoff (ironically of "It's Different This Time" infamy) says the US should get rid of the $100 bill (and $50s and $20s) proposing, in his words,"a 'less-cash' society, not a cashless one, at least for the foreseeable future." According to the esteemed ivory tower academic, paper currency lies at the heart of some of today’s most intractable public-finance and monetary problems. As Rogoff explains in The Wall Street Journal, getting rid of most of it - that is, moving to a society where cash is used less frequently and mainly for small transactions - could be a big help. Rogoff's begins by stating factoids as facts...  There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism.There are substitutes for cash—cryptocurrencies, uncut diamonds, gold coins, prepaid cards—but for many kinds of criminal transactions, cash is still king. It delivers absolute anonymity, portability, liquidity and near-universal acceptance. It is no accident that whenever there is a big-time drug bust, the authorities typically find wads of cash. Cash is also deeply implicated in tax evasion, which costs the federal government some $500 billion a year in revenue. According to the Internal Revenue Service, a lot of the action is concentrated in small cash-intensive businesses, where it is difficult to verify sales and the self-reporting of income. By contrast, businesses that take payments mostly by check, bank card or electronic transfer know that it is much easier for tax authorities to catch them dissembling. Cash also lies at the core of the illegal immigration problem in the U.S. If American employers couldn’t so easily pay illegal workers off the books in cash, the lure of jobs would abate, and the flow of illegal immigrants would shrink drastically. Needless to say, phasing out most cash would be a far more humane and sensible way of discouraging illegal immigration than constructing a giant wall.

Updated Q2 2016 look at corporate profits as a long leading indicator: Corporate profits are one of the long leading indicators, typically peaking more than a year before the start of a recession. Since these were reported for Q2 last Friday, let's take a look. The graph below shows corporate profits with and without inventory adjustment: Typically these move in tandem. Last quarter was one of the few times the two diverged, as shown in this longer term view: In either event, it looks like Q4 of 2015 was the bottom of the profits recession. Since the nearly 20% surge in the US$ from mid 2014 to summer 2015 was a big reason for the hit to profits, some further evidence in support of that assertion is found when we compare profits with the US$ YoY (inverted to better show the correlation): Finally, one insight generated by making use of overall leading economic indicators is that, if corporate profits are a long leading indicator, and stock prices a short one, then it stands to reason that corporate profits actually lead, rather than follow, stocks, at least when measured as a quarterly average. If it wasn't clear before, then this graph from Scott Grannis a/k/a the Calafia Beach Pundit (, dispels all doubt: Here's how corporate profits and the S&P 500 (averaged quarterly) compare through the second Quarter, normed to 100 as of the 4th quarter of 2007: Stocks remain as richly valued compared with corporate profits as they were back in 2007.

Recession Odds Spike To 37%, JPM Calculates, Highest Yet For This Cycle --While not as dire as the recent analysis by Deutsche Bank which calculated that a recession over the next 12 months is more than likely, with odds rising to 60%, overnight JPM released its latest recession probability analysis, and - somewhat unexpectedly following the last two stellar job reports and a full court political press that the recovery has rarely been stronger going into the election - now sees a 37% chance of a recession in the next 12 months. This is the highest recession probability calculated by Jamie Dimon's bank during the current economic cycle, and matches the odds first laid out in early July. While the rising odds of a US recession are not surprising on their own, what is notable is that even JPM highlights the disconnect between the economy and the financial markets, observing that "as risk markets have rallied somewhat since our last update, the probability from the model based on macroeconomic data is now considerably above our models based on financial markets", confirming once again how distorted the relationship between the markets, supported by central banks, and the underlying economy has become. Here is how JPM's Jesse Edgerton came with this number: US recession risk tracker back up on weak business sentiment and profits After dropping to 30% on July 8, our preferred macroeconomic indicator of the probability that a recession begins within 12 months has risen back to 37%, equaling its high for the expansion. (Table 1, bottom row and Figure 2, blue line).As risk markets have rallied somewhat since our last update, the probability from the model based on macroeconomic data is now considerably above our models based on financial markets (Table 2).Since our last update, consumer sentiment and auto sales have both improved, but most other near-term indicators have softened. The four-week average of initial claims for unemployment insurance edged up over the last month, the Senior Loan Officer Opinion Survey showed business credit conditions tightening more rapidly, and single-family building permits fell in July. But the most notable development in the near-term data has been the deterioration in the business sector sentiment surveys, particularly for nonmanufacturing. The nonmanufacturing surveys from Markit and the New York, Philly, and Richmond Feds all moved down in their August readings, and our composite sentiment index moved down noticeably (Figure 3).

The Economic Trend Is Our Friend - J. Bradford DeLong - These are days of grave disillusionment with the state of the world. Sinister forces of fanatical, faith-based killing – something that we in the West, at least, thought had largely ended by 1750 – are back. And they have been joined by and are reinforcing forces of nationalism, bigotry, and racism that we thought had been largely left in the ruins of Berlin in 1945.  In addition, economic growth since 2008 has been profoundly disappointing. There is no reasoned case for optimistically expecting a turn for the better in the next five years or so. And the failure of global institutions to deliver ever-increasing prosperity has undermined the trust and confidence which in better times would serve to suppress the murderous demons of our age.  Pessimism understandably comes easy these days – perhaps too easy. In fact, enthusiastic and positive contrarianism is in order: if we look at global economic growth not just five years out, but over the next 30-60 years, the picture looks much brighter.  The reason is simple: the large-scale trends that have fueled global growth since World War II have not stopped. More people are gaining access to new, productivity enhancing technologies, more people are engaging in mutually beneficial trade, and fewer people are being born, thus allaying any continued fears of a so-called population bomb.   Moreover, innovation, especially in the global north, has not ceased, even if it has possibly slowed since the 1880s. And while war and terror continue to horrify us, we are not witnessing anything on the scale of the genocides that were a hallmark of the twentieth century.

Obama Will Leave $20 Trillion Debt Crisis For Clinton Or Trump - President Obama is set to leave a massive near $20 trillion debt crisis for his successor - be that Hillary Clinton or Donald Trump. The U.S. national debt reached $19.5 trillion last week and has been increasing by roughly $1 trillion a year during his Presidency and during the so called "recovery" as the U.S. government continues to spend money like a drunken sailor.  During Obama’s presidency, the total national debt has risen from $10.6 trillion to nearly $20 trillion - see Debt Clock here. There is also the not insignificant matter of the between $100 trillion and $150 trillion in unfunded liabilities - for medicare, medicaid and social security. The U.S., like the EU and most western nations, is "kicking the can down the road." Consequently, a U.S. and global debt crisis looks likely during the term of the next President if not sooner. The Washington Times reported last week:With federal budget deficits on the rise again, the White House Wednesday officially kicked the problem down the road to the next president. Asked about Congressional Budget Office projections that the federal deficit will spike 33 percent this year, White House press secretary Josh Earnest cited reasons including an aging population and Republican-sponsored tax cuts. Then he added, “There’s certainly a lot of money that can be saved, and this will be a challenge that the next president and the next Congress will have to do.”

Our Quick Take on CBO's August Projections -- The Congressional Budget Office (CBO) just released updated baseline projections showing deficits and debt rising in the coming years. CRFB will release a full analysis later this week, but the report shows as previous CBO projections have shown this year that the debt is on an unsustainable path. CBO now projects deficits more than tripling, from $438 billion in 2015 to $1.24 trillion by 2026, with trillion dollar deficits returning by 2024. CBO now projects the deficit for 2016 to be $152 billion higher than 2015 at $590 billion. Debt held by the public, meanwhile, will grow by $10 trillion from $13.1 trillion at the end of 2015 to $23.1 trillion by 2026. As a share of Gross Domestic Product (GDP), debt will grow from 74 percent of GDP in 2015 – already twice its pre-recession levels – to 85.5 percent of GDP in 2026. March projections showed debt that was slightly lower in the short term but on track to reach a similar level as a percent of GDP (85.6 percent) by 2026. Changes in deficits come entirely from economic and technical changes. Notably, the 2016 deficit, which had been projected to grow to $534 billion, is now expected to grow to $590 billion because of lower than expected revenue.  Over ten years, deficits are $712 billion lower than projected in March between 2017 and 2026, though since GDP is also projected to be lower, debt as a percent of GDP in 2026 is about the same at 85.5 percent. CBO's latest report shows the same picture as it has throughout the year: deficits and debt will continue to increase over the next ten years, bringing debt to a very high level. The complacency that lawmakers have shown about debt over the past few years must end so they can address the troublesome trajectory of deficits and debt.

The Looming Air Superiority Train Wreck - America is on track to lose air supremacy in contingencies involving near-peer air combat. Even as soon as next year, achieving air superiority in a war with China within a politically and operationally effective time frame might be doubtful. In a 2025 war, American aircraft losses are expected to be severe. In a 2030 war, the U.S. Air Force, after assessing currently funded improvement programs, now expects to no longer be able to win the air superiority battle. This downward progression in U.S. airpower has been matched in terminology. After the Cold War, the buzzword was “air dominance.” In the last decade, “air supremacy” became more common and covered situations when the opposing air force was rendered ineffective. Today, the objective is “air superiority,” when the air threat is manageable at certain times and places. In the words the Air Force uses, we can see the service’s way of thinking about projecting airpower has changed from a period when own aircraft losses were unimaginable to one in which losses would hopefully be limited to an acceptable level. And 15 years hence, meeting even this low bar will be doubtful. This downward spiral matters. U.S. Air Force Lt. Gen. Mike Holmes observes: “Air superiority is the most important thing the Air Force provides for the joint force in the tactical environment.” If an air force can’t get you air superiority where and when it is needed, there may not a compelling argument for even having an air force. Gaining air superiority is an air force’s raison d’etre, and providing air superiority enables many other air, maritime, and land warfighting missions.

The U.S. Department of Clinton - WSJ -- This is the week that we finally learned why Mrs. Clinton used a private communications setup, and what it hid. This is the week, in short, that we found out that the infamous server was designed to hide that Mrs. Clinton for three years served as the U.S. Secretary of the Clinton Foundation. The Democratic nominee obviously didn’t set up her server with the express purpose of exposing national secrets—that was incidental. She set up the server to keep secret the details of the Clintons’ private life—a life built around an elaborate and sweeping money-raising and self-promoting entity known as the Clinton Foundation. Mrs. Clinton’s problem—as we now know from this week’s release of emails from Huma Abedin’s private Clinton-server account—was that there was no divide between public and private. Mrs. Clinton’s State Department and her family foundation were one seamless entity—employing the same people, comparing schedules, mixing foundation donors with State supplicants. This is why she maintained a secret server, and why she deleted 15,000 emails that should have been turned over to the government. Mostly, we learned this week that Mrs. Clinton’s foundation issue goes far beyond the “appearance” of a conflict of interest. This is straight-up pay to play. When Mr. Band sends an email demanding a Hillary meeting with the crown prince of Bahrain and notes that he’s a “good friend of ours,” what Mr. Band means is that the crown prince had contributed millions to a Clinton Global Initiative scholarship program, and therefore has bought face time. It doesn’t get more clear-cut, folks. What we discovered this week is that one of the nation’s top officials created a private server that housed proof that she continued a secret, ongoing entwinement with her family foundation—despite ethics agreements—and that she destroyed public records. If that alone doesn’t disqualify her for the presidency, it’s hard to know what would.

Clinton's Pay-to-Play Is The Natural Consequence Of Big Government --Hillary Clinton has been taking heat for her relationship with the Clinton Foundation. Did individuals and firms making large donations to the Foundation, or paying large speaking or consulting fees to Bill Clinton, get preferred access to Ms. Clinton as Secretary of State? Is there a revolving door between the Clinton campaign and the Foundation’s fundraising staff? Are these relationships the subject of the emails she deleted from her private server?  These questions point to a more basic issue about the role of money in politics. What, exactly, do large corporations get in exchange for their payments to candidates and current and former government officials? Ms. Clinton gave 92 speeches between 2013 and 2015 that netted her $21.6 million, including $1.8 million for just 8 speeches to large banks. (CNN provides eye-opening details about her speaking requirements — the $225,000 fee is just the tip of the iceberg.) Ms. Clinton is hardly known for her business acumen; her infamous cattle-futures trades are widely recognized as a political payoff, and her views on corporate governance have been ridiculed by experts. Her opinions on world politics are already in the public domain, so I doubt Goldman Sachs was getting $200K worth of unique insight into global affairs. Bill Clinton, with zero experience in higher-education administration, bagged $17 million to be honorary chancellor of an obscure for-profit university. Why are these companies throwing their money away? […] A more intriguing finding, however, is that most large companies not only give generously, but about equally to both major parties, even when the parties’ candidates and representatives differ on particular issues. This suggests that payments to politicians are best understood as a form of insurance. Money in politics provides protection against what Fred McChesney has called “rent-extraction” by government. For example, before the mid-1990s, the tech industry had a very low profile in Washington — few contributions, no DC headquarters for the big tech companies, and so on. After the Microsoft antitrust trial, this situation was completely reversed, and now tech companies are among the biggest lobbyists in the US. The message was clear: you want to play ball, you pay up — or we shut you down. It’s not that companies are necessarily paying for specific outcomes; rather, they are paying for the right to do business at all.

The Bribery Standard - The real question was: Why did she have a private server in the first place? She obviously lied about the purpose. It wasn’t convenience. It was concealment. What exactly was she hiding? Was this merely the prudent paranoia of someone who habitually walks the line of legality? After all, if she controls the server, she controls the evidence, and can destroy it — as she did 30,000 emails — at will. But destroy what? Remember: She set up the system before even taking office. It’s clear what she wanted to protect from scrutiny: Clinton Foundation business. The foundation is a massive family enterprise disguised as a charity, an opaque and elaborate mechanism for sucking money from the rich and the tyrannous to be channeled to Clinton Inc. Its purpose is to maintain the Clintons’ lifestyle (offices, travel, accommodations, etc.), secure profitable connections, produce favorable publicity and reliably employ a vast entourage of retainers, ready to serve today and at the coming Clinton Restoration.

Records Show Clinton Funnelled Taxpayer Funds To Foundation For Staff, IT Equipment -- In 1958, Congress passed the "Former Presidents Act" (FPA) which entitled former presidents to certain taxpayer-funded benefits after leaving office.  The benefits include a pension for the former president, lifetime secret service protection, transition expenses to a new office after leaving the White House and funding for the president's staff.  All expenses are explicitly intended to be used specifically for the benefit of the former President.  But like many things with the Clintons, discoveries from a Politico FOIA request imply that rules under the Former Presidents Act were seemingly viewed by Bill as more of a "suggestion" rather than explicit guidance on how taxpayer dollars could be appropriated.   According to a report published by Kenneth Vogel of Politico, Bill Clinton seemed to ignore the rules of his FPA funding and instead used it to at least partially fund the salaries of Clinton Foundation staff and to purchase IT equipment for the Foundation.  Per a FOIA request, Politico found that Bill Clinton requested allocations totaling $16 million under the FPA since leaving office in 2001, more than any other living president over that same time period.  While that number is staggering, what's more disturbing is the level of overlap between Clinton's official staff (i.e. those eligible for FPA salaries) and the Clinton Foundation staff.  Per Politico:An analysis of the records provided by GSA, combined with Clinton Foundation tax returns, found that at least 13 of the 22 staffers who have been paid by GSA to work for Clinton’s personal office also worked for the Clinton Foundation.

Hillary and the Clinton Foundation: Exemplars of America’s Political Rot - The latest in a string of embarrassing scandals is centered on the powerful Clinton Foundation, and the obvious impropriety of its acceptance of large donations from foreign governments (and wealthy individuals connected to them), especially those governments universally recognized as oppressive dictatorships whose foreign policy orientation places them squarely in the US orbit.Of particular note are the Gulf monarchies such as Saudi Arabia and Qatar whose massive donations belie the fact that their oppression of women runs contradictory to Clinton’s self-styled ‘feminism’ and belief “that the rights of women and girls is the unfinished business of the 21st Century.” Is collaborating with feudal monarchies whose subjugation of women is the stuff of infamy really Clinton’s idea of feminism? Or, is it rather that Clinton merely uses issues such as women’s rights as a dog whistle for loyal liberals while groveling before the high councilors of the imperial priesthood?What the Clinton Foundation hullabaloo really demonstrates is that Clinton’s will to power is single-minded, entirely simpatico with the corruption of the military-industrial-financial-surveillance complex; that she is a handmaiden for, and member of, the ruling establishment; that Clinton represents the marriage of all the worst aspects of the political class. In short, Clinton is more than just corrupt, she is corruption personified.

  Romanian Hacker Who Exposed Hillary's Private Email Server Sentenced To 52 Months -- The infamous Romanian hacker Marcel Lazar, better known by his nickname "Guccifer" and best known for helping expose the existence of the private email domain Hillary Clinton used when she was U.S. secretary of state was sentenced on Thursday to 52 months in prison by a federal court in Alexandria, Virginia. Lazar had pleaded guilty in May to charges including unauthorized access to a protected computer and aggravated identity theft after being extradited from Romania. In an NBC interview in May, Guccifer claimed that he also gained access to the former Secretary of State's "completely unsecured" server. "It was like an open orchid on the Internet," Lazar told NBC News. "There were hundreds of folders." What is curious is that according to Reuters, law enforcement and national security officials said that claim is meritless. Of course, the question arises: just how diligently did national security officials probe Guccifer's claim: the reason to be skeptical is that if this allegation was confirmed, then the FBI's entire case against Clinton would collapse, as it would be proven that her server was indeed hacked, something the FBI said there was no evidence ever happened, and lead to renewed questioning about the impartiality of the FBI's probe. In any case, Lazar is believed to have hacked into email accounts of about 100 victims between 2012 and 2014. They include prominent political figures such as former Secretary of State Colin Powell, a relative of former President George W. Bush and Sidney Blumenthal, a former Clinton White House aide and an unofficial adviser to Clinton. Clinton is now the Democratic nominee for president.

Homeland eyes special declaration to take charge of elections - Even before the FBI identified new cyberattacks on two separate state election boards, the Department of Homeland Security began considering declaring the election a "critical infrastructure," giving it the same control over security it has over Wall Street and the electric power grid. The latest admissions of attacks could speed up that effort possibly including the upcoming presidential election, according to officials. "We should carefully consider whether our election system, our election process, is critical infrastructure like the financial sector, like the power grid," Homeland Security Secretary Jeh Johnson said. "There's a vital national interest in our election process, so I do think we need to consider whether it should be considered by my department and others critical infrastructure," he said.DHS has a vital security role in 16 areas of critical infrastructure and they provide a model for what the department and Johnson could have in mind for the election. DHS describes it this way on their website: "There are 16 critical infrastructure sectors whose assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof." A White House policy directive adds, "The federal government also has a responsibility to strengthen the security and resilience of its own critical infrastructure, for the continuity of national essential functions, and to organize itself to partner effectively with and add value to the security and resilience efforts of critical infrastructure owners and operators."

Why Is The DHS Preparing To Take Control Of The US Election -- What do you do when you're the dictatorial leader of an oppressive government regime looking to maintain power while simultaneously preserving the facade of free and open elections?  Well, if you're the Obama administration then you look for avenues to nationalize state-run election infrastructure. But you can't just seize control of infrastructure that has been successfully run at the state level for a couple hundred years...that kind of stuff only happens in Venezuela and we're better than that. No, you need a catalyst for this kind of blatant power grab.  "Coincidentally", a catalyst just like the FBI's warning a couple of days ago about "foreign hackers [read Putin] penetrating state election systems."  Then, once you've defined the super villain, all you need is a couple of political cronies to go on a fear mongering tour to whip the electorate into a frenzy.  And wouldn't you know it...Harry Reid recently did just that by sending a letter to the FBI voicing his "concerns" that the "Russian government" may be looking to tamper with the upcoming presidential election.  Per the New York Times, Harry Reid's letter to the FBI included the following: "I have recently become concerned that the threat of the Russian government tampering in our presidential election is more extensive than widely known and may include the intent to falsify official election results."  The combination of all these things might be just enough to scare the American electorate into forfeiting another chunk of their individual sovereignty to the elite political class in Washington DC while plunging us one step closer to the inevitable end game of "fundamentally transforming" our constitutional democracy into a police state. Per the Washington Examiner, this sort of scenario is precisely what Department of Homeland Security Secretary, Jeh Johnson, discussed at an event hosted by The Christian Science Monitor earlier this month.   "There's a vital national interest in our election process, so I do think we need to consider whether it should be considered by my department and others critical infrastructure."

President Obama just extended the “state of emergency” that’s existed for 15 years - Vox: Until the announcement that Barack Obama was extending the state of emergency that has legally existed in the United States since September 14, 2001, hit my inbox this afternoon, I will confess that I was somewhat unaware we were in an emergency situation. But, apparently we are: Given that the emergency is defined vaguely as constituting something like “terrorists might attack the country,” it seems like we should consider dropping the charade of annual renewals and just admit that “emergency” 9/11 powers are now a permanent part of the landscape.

DHS Prepares For Nuke Attack With Massive Order For Radiation Detectors -- Earlier this year we reported that Texas game wardens on the southern border have been issued radiation detectors due to concerns that a nuclear or radiological device could be smuggled into the United States through the porous Mexican border. It appears that the Department of Homeland Security is also taking the potential for a nuclear-based weapon of mass destruction seriously. According to a new report from NextGov the government has ordered some $20 million worth of wearable intelligent nuclear detection (WIND) units in an effort to boost domestic security: Last year, DHS made a broad agency announcement soliciting proposals for so-called Wearable Intelligent Nuclear Detection, or WIND, technology. Employees would wear the products to ensure nuclear devices weren’t secretly being transported in areas like marine vessels, metro systems, or other public areas, according to DHS. DHS was specifically searching for “advanced technology demonstrations,” which are for “mature prototype capable of providing reliable performance measurements in a challenging and realistic, albeit simulated, operational environment,” the BAA said.

The Big Problem With The Trans-Pacific Partnership’s Super Court That We’re Not Talking About - David Dayen - TPP would hugely expand the number of companies that could sue the U.S. government.   Investor-state dispute settlement — an integral part of the Trans-Pacific Partnership trade deal — allows companies to sue entire countries for costing them money when laws or regulations change. Cases are decided by extrajudicial tribunals composed of three corporate lawyers. Buzzfeed, in a multi-part investigation launched Sunday, called it “the court that rules the world.”  Although the ISDS process has existed for years, TPP would drastically expand it. The most common criticisms of the system are that it’s secret, that it’s dominated by unaccountable big-firm lawyers, and that global corporations use it to change sovereign laws and undermine regulations. That’s all true. But here’s what most of the coverage and the critics are missing.  The ISDS system ― which is now written into over 3,000 international trade treaties, including NAFTA ― was designed to solve a specific problem.  But instead of helping companies resolve legitimate disputes over seized assets, ISDS has increasingly become a way for rich investors to make money by speculating on lawsuits, winning huge awards and forcing taxpayers to foot the bill.  Wealthy financiers with idle cash have purchased companies that are well placed to bring an ISDS claim, seemingly for the sole purpose of using that claim to make a buck. Sometimes, they set up shell corporations to create the plaintiffs to bring ISDS cases. And some hedge funds and private equity firms bankroll ISDS cases as third parties — just like billionaire Peter Thiel bankrolled Hulk Hogan in his lawsuit against Gawker Media. It’s the same playbook that hedge funds were following when they bought up Argentine, Puerto Rican and other U.S. housing debt for pennies on the dollar. As The Huffington Post reported in May, the financiers were betting they could use lawsuits and lobbying to influence the political system in favor of the creditors like them and reap huge rewards. Indeed, the damage of ISDS goes far beyond the money that investors manage to extract from public coffers and extends to the corruption of a political system by investors who buy off scholars, economists and politicians in pursuit of whatever policy outcome leads to a payoff. And there’s nothing stopping plutocrats with agendas that go beyond profit-making from getting involved ― again the way Thiel did with Gawker. That alone changes the power dynamic: If you’re the government of Thailand, the billionaire you’re negotiating with has one extra threat at his disposal.

How ISDS Is a Playground for the Ultra-Wealthy, Corrupt, and Criminal -- New reporting this week further exposes how Investor State Dispute Settlement, or ISDS—a legal system enshrined in thousands of global treaties and pacts, including the pending Trans Pacific Partnership (TPP)—empowers corporations and rich investors at the expense of citizens and democracy. Under the ISDS framework, as Common Dreams has reported, multinationals are granted a parallel legal system through which they can sue governments, and therefore taxpayers, for loss of "expected future profit," with the power to overrule national laws and judicial systems. "Workers, environmentalists, and human rights advocates don't get the right to use ISDS; only big corporations do," Sen. Elizabeth Warren (D-Mass.) has said. "That's a rigged system." At the Huffington Post on Monday, journalist David Dayen outlined how "ISDS has increasingly become a way for rich investors to make money by speculating on lawsuits, winning huge awards, and forcing taxpayers to foot the bill." "Here's how it works," he explained: Wealthy financiers with idle cash have purchased companies that are well placed to bring an ISDS claim, seemingly for the sole purpose of using that claim to make a buck. Sometimes, they set up shell corporations to create the plaintiffs to bring ISDS cases. And some hedge funds and private equity firms bankroll ISDS cases as third parties—just like billionaire Peter Thiel bankrolled Hulk Hogan in his lawsuit against Gawker Media. A "huge number of opportunities to sue," plus the prospect of uncapped awards, "have the ISDS claim-financing industry booming," according to Dayen. "Hedge funds, private equity firms and institutional investors are flocking to fund lawsuits as they would any other speculative asset," he said, citing experts in the field. "And the lack of transparency means that lawyers acting as arbitrators or advocates in one case could be unnamed investors in other cases, and nobody would ever know." Indeed, he wrote: "Once a venue of last resort for corporations wronged in a foreign jurisdiction, ISDS is now a playground where investors with no connection to the initial investment can get rich."

The Court That Rules The World -- Imagine a private, global super court that empowers corporations to bend countries to their will. Say a nation tries to prosecute a corrupt CEO or ban dangerous pollution. Imagine that a company could turn to this super court and sue the whole country for daring to interfere with its profits, demanding hundreds of millions or even billions of dollars as retribution. Imagine that this court is so powerful that nations often must heed its rulings as if they came from their own supreme courts, with no meaningful way to appeal. That it operates unconstrained by precedent or any significant public oversight, often keeping its proceedings and sometimes even its decisions secret. That the people who decide its cases are largely elite Western corporate attorneys who have a vested interest in expanding the court’s authority because they profit from it directly, arguing cases one day and then sitting in judgment another. That some of them half-jokingly refer to themselves as “The Club” or “The Mafia.” And imagine that the penalties this court has imposed have been so crushing — and its decisions so unpredictable — that some nations dare not risk a trial, responding to the mere threat of a lawsuit by offering vast concessions, such as rolling back their own laws or even wiping away the punishments of convicted criminals. This system is already in place, operating behind closed doors in office buildings and conference rooms in cities around the world. Known as investor-state dispute settlement, or ISDS, it is written into a vast network of treaties that govern international trade and investment, including NAFTA and the Trans-Pacific Partnership, which Congress must soon decide whether to ratify.

Why the TPP and TTIP Trade Deals May Now Be Dead in the Water -- The Trans-Atlantic Trade and Investment Partnership (TTIP) is dead, at least according to Angela Merkel's second-in-command. And the Trans-Pacific Partnership (TPP) may not be far behind. German Vice Chancellor Sigmar Gabriel said Sunday that "negotiations with the United States have de facto failed, even though nobody is really admitting it." According to Gabriel, who also serves as his country's economy minister, negotiators from the European Union and United States have failed -- despite 14 rounds of talks -- to align on any item out of 27 chapters being discussed. Gabriel and his ministry are not directly involved in the negotiations.  EU officials were quick to downplay Sigmar's statement, saying they hoped to "close this deal by the end of the year." But Gabriel isn't the first to cry foul on the TTIP, which, if enacted, would establish the world's largest free trade zone between the United States and the EU's 28 member states. In May, French negotiators threatened to block the agreement. U.S. negotiators have also reportedly been angry over the passage of a similar agreement between Canada and the EU, which included protections U.S. negotiators don't want included in the TTIP. Sunday's TTIP news comes on the heels of Senate Majority Leader Mitch McConnell (R-Ky.) saying that the Senate would not vote on the TPP in the upcoming lame-duck session of Congress. (The Obama administration countered, saying it still hopes to pass the deal before the next president takes office.) Both trade announcements follow years of protests on each side of the Atlantic to fight the TTIP and the TPP, especially from unions and environmental groups. "The fact that TTIP has failed is testament to the hundreds of thousands of people who took to the streets to protest against it, the three million people who signed a petition calling for it to be scrapped, and the huge coalition of civil society groups, trade unions, progressive politicians and activists who came together to stop it," writes Kevin Smith of Global Justice Now, an organization that has worked to fight TTIP in the United Kingdom.

Free Trade Wins: The TTIP Is Dead - You have probably heard of the controversial TPP, the Trans-Pacific Partnership, the deal that Hillary Clinton can’t make up her mind on. However, you probably have not heard of the Transatlantic Trade and Investment Partnership (TTIP). It is referred to as a free trade pact between the United States and the European Union. I only recently read about it in European media sources. Negotiations have been going on for years and it only recently surfaced because top European officials have declared it a de facto dead deal. Such trade deals are inherently suspicious by nature. They invariably benefit large corporations to the detriment of the average citizen. As political scientist Kerry Chase has concluded “When groups that rely on scale economies and production sharing networks” i.e., big multinational corporations, “have political clout trading blocs are likely to form.” In the case of TTIP the contents of the negotiations are actually “classified” from the general public. However, several leaks from the negotiations indicate that the proposals would clearly benefit special interests and do harm to labor, the environment, and national sovereignty. Germany's Vice-Chancellor Sigmar Gabriel has said “In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it.” Even earlier French President Hollande said he would never accept the deal because of the rules it enforces, particularly in relation to farming and culture, are too beneficial to US business interests. The death of TTIP should be celebrated. Trading blocs do not necessarily increase overall international trade, they only increase trade within the bloc. Trading blocs do not necessarily increase economic efficiency, either. Trading blocs are not a movement toward the free market; they are actually a movement in the direction of global conflict. So-called free trade pacts are a bad thing.  Real Free Trade is a unilateral policy. A nation that adopts a free trade policy simply lowers its tariffs, eliminates quotas, and reduces all of its barriers to trade. There are no requirements for trade partners to adopt as free trade provides its own benefits for the nation that adopts it. Real free trade provides widespread benefits and does not create political conflicts.

Death of TTIP: True? And What Should Follow? – naked capitalism - Jerri-Lynn here. I’d like to believe that this week’s reports of the TTIP’s demise are accurate, but I think it’s premature to celebrate. I’ve been watching the progress of international trade negotiations closely since the early 1980s, and it has not been uncommon for a trade deal to be declared dead only later to see it miraculously revived. There’s too much money at stake and I think the Obama administration will do its utmost to push TTIP and especially TPP before it leaves office. This is especially true if free trade supporters– both political and corporate– believe the political climate is shifting so that it will only become more difficult to push similar deals in future. While Global Justice Now’s Nick Dearden may be more convinced than I am that the TTIP is well and truly dead, we agree on the importance of the political organizing that must continue on trade and economic issues, in Europe and the United States, whether TTIP is indeed shelved and especially, if it is not.

Could reducing tax cheating close the deficit? -  Catherine Rampell - In response to the column predicting more tax cheating, a reader named Lonnie Palmer argues that collecting more of the taxes that are already legally owed could help both parties achieve some of their most important objectives, by bringing in more revenue (a win for Democrats) and potentially allowing a reduction in the statutory tax rates (a win for Republicans). Wise observation, Lonnie!  So how big of a difference would eliminating tax cheating make? Here’s one back-of-the-envelope calculation.  The most recent estimates for the size of the “tax gap” (basically, how much tax revenue should be collected but isn’t) are for tax years 2008-2010. Thanks to the financial crisis, both the economy and the deficit looked especially bad then —  incomes were depressed and a very expensive stimulus package had just passed — so it’s not a perfect analogy to today’s world. Rather than looking at the raw number of tax dollars that went unpaid those years, then, I’m going to rely on the percent of tax dollars that went unpaid, and apply that figure to today’s fiscal situation. In each of those years, an average of 81.7 percent of taxes were paid “voluntarily and timely.” Another 2 percent were ultimately collected late and after enforcement actions, which brings the “net compliance rate” to 83.7 percent. These estimates of compliance rates have been relatively stable over the last three decades.  The Congressional Budget Office’s detailed revenue estimates show that about $3.083 trillion in tax revenues will be collected in fiscal year 2016 (counting only individual income, corporate income, payroll, excise, estate and gift taxes). If we assume that figure represents only 83.7 percent of what’s legally owed, that means the real total tax liability is closer to $3.684 trillion. It also suggests we’re leaving about $600 billion on the table in uncollected tax revenue ($3.684T -$3.083T = $600B). The budget deficit for 2016, according to the C.B.O., is $590 billion.That’s right: The estimated amount of dollars lost to tax cheating is almost exactly equal to the size of the annual deficit.

  Top Marginal Tax Rates and Real Economic Growth, Part 2 -- by Mike Kimel -- A few weeks I wrote a post looking at the correlation between the top marginal tax rate in a given year and the growth in real GDP per capita over subsequent years. This post is the first of several follow-ups. It will provide a simple way to estimate the optimal top marginal tax rate – that is, the tax rate at which economic growth is maximized. It will also deal with a weakness that vexes many economic studies, namely how do you estimate the effect of taxation on growth using historical data without ignoring the fact that the economy has changed a great deal over the time period for which we have data?  Let’s start with the second issue first. An honest critique of my previous post, and of similar studies, is that saying “the economy grew faster in year X when the tax rates were higher/lower than in year Y” can be problematic if years X and Y are separated by decades. This is particularly true if there is a clear trend in the data. (For the statistically minded, this is the unit root problem.) In a perfect world for estimating the effect of taxes, the following conditions would be true:

  • i. we would only compare years that are not too far apart
  • ii. we would be able to observe the entire range of top marginal tax rates during the period in which we made the comparison

So how do we do both things (as much as is possible) at once? What I came up with is this: use rolling blocks of time. In the example below, we have the growth in real GDP per capita from one year to the next in the third column and the tax rate in the fourth column. The fifth column shows the correlation over the next five years between columns 3 and 4.

 Why MBA Chief Is OK with Ditching Mortgage Interest Tax Deduction -- The Mortgage Bankers Association is "not religiously wed" to the mortgage interest deduction, so long as any change comes as part of a comprehensive tax reform proposal rather than a one-off change to the tax code, said President and CEO David Stevens.  "If the entire tax code were to be looked at through a formal process and it was thorough and the mortgage interest deduction then became part of that dialogue, we certainly would support that," Stevens said in a television interview Wednesday. Nearly 33.6 million taxpayers deducted $72.4 billion in mortgage interest from their 2014 taxes, and that figure could rise to as much as $96.4 billion by 2019, according to estimates by the Congressional Joint Committee on Taxation. That makes it one of the largest tax breaks taken by individuals. Middle-class homebuyers benefit the most from the deduction. About 43% of taxpayers who took the deduction had adjusted gross incomes between $100,000 to $200,000, according to the committee's estimates, while another 40% of taxpayers who took the deduction made less than $100,000. Stevens' statements are a departure from the MBA's previous opposition to any attempt to eliminate or even reduce the deduction. The group opposed a November 2010 proposal on scaling back the deduction, citing the fragile state of the housing market. At the start of 2013, the deduction survived contentious negotiations on a deficit reduction bill. But it has remained a target for those looking to increase revenue for the government. So why the change in course? "Entry-level homebuyers typically don't deduct, don't itemize, and wealthy borrowers won't really care," Stevens said, adding later, "You can't say, 'touch everybody else's pocketbooks, but not mine.' So I think it needs to be part of the discussion."

Is corporate tax reform needed to boost weak US business investment? – AEI - My previous blog post was about weak US productivity growth. One big part of that weakness — perhaps cyclical, perhaps secular — is weak business investment. Check out this chart:  In the Financial Times last week, Northwestern University economist and productivity pessimist Robert Gordon notes that after soaring in the late 1990s, “capital formation has returned to levels last seen in the 1980s. Non-residential business investment in the US is 12.9 percent of gross domestic product, compared with 13.4 percent in 2007 and 14.7 percent in 2000.” And he has at least a partial solution:The American tax code, in particular, exerts a downward pressure on capital formation and therefore on economic growth. It is now 30 years since the passage of comprehensive federal tax reform in the US. In the intervening years, nearly every developed country has reformed its tax codes to make them more competitive than that of America. Meanwhile, the US has allowed its tax code to atrophy.It is one of only six members of the OECD group of rich countries that taxes overseas income earned by domestic businesses, a policy that has led American companies to park $2tn offshore rather than invest it at home. Also harmful is the US federal corporate tax rate, which, at 35 percent, is significantly higher than the average across the developed world, and this further reduces business investment.Tax laws, like equipment, depreciate in the sense that they accumulate special provisions called tax expenditures, where corporate income is taxed at different rates for particular companies and industries engaged in specific activities encouraged by the tax code. Once implemented, these special provisions accumulate, and their beneficiaries fight hard to retain them.When we start thinking about tax reform, we should start with the principle of revenue neutrality, the idea that all corporate income should be treated in the same way, no matter how it is earned. The goal should be to eliminate all special provisions and to reduce the corporate tax rate to a level competitive with our international partners such as the Japanese and the Europeans.

Chamber of Commerce Sues Treasury on Inversion Regs – Linda Beale - Back in April, the Chamber of commerce suggested that it might sue the Treasury Department for violating the Administrative Procedures Act (APA) over the new inversion regs that were issued in April (T.D. 9761, REG-135734-14).  See Fortune article (Apr. 6, 2016).   Well, now they have, not surprisingly in federal court in Austin, Texas, where business lawsuits against government regulations tend to get a favorable view.  See e.g., Business groups sue over new U.S. limit on tax-driven foreign buyouts, Reuters (Aug. 4, 2016); Liz Moyer & Leslie Picker, Tax-Avoiding Mergers Find Champion in U.S. Chamber of Commerce, N.Y. Times (Aug. 4, 2006); Alison Bennet, Businesses Launch First Suit Against Inversion Rule, Bloomberg BNA (Aug. 4, 2016); U.S. Chamber Sues So American Firms Can Move Overseas and Dodge Taxes, (linking to Washington Post article).  The  U.S. Chamber of Commerce and the Texas Association of Business have initiated a suit against the Treasury Department over the new regulations .  The complaint, filed on August 4, 2016, is available on BNA at the following link: Chamber of Commerce of the U.S. v. IRS, W.D. Tex., No. 1:16-cv-00944. The business groups claim that the regulations are making business harder for big companies to carry out transactions, referencing the proposed merger between U.S. drugmaker Pfizer and Ireland pharmaceutical company Allergan (both members of the Chamber of Commerce).  That merger, projected to save the U.S. company about $35 billion in taxes, fell apart immediately after the new regs were released. See Michael Merced and Leslie Picker, Pfizer and Allergan Are Said to End Merger as Tax Rules Tighten, NY Times (Apr. 5, 2016).  the lawsuit claims that Treasury did not have authority to issue the regulations and that there was insufficient notice to taxpayers under the Administrative Procedure Act.

EU hits Apple with $14.6 billion tax bill - Aug. 30, 2016: Ireland must recover up to 13 billion euros ($14.6 billion) in unpaid taxes from Apple, European officials said on Tuesday. The tax ruling is the biggest the European Union has ever made regarding a single company, and it could spark a huge transatlantic row over how Europe treats U.S. companies. The company will appeal the decision. It said the ruling upended the international tax system and would damage jobs and investment in Europe. The European Commission, which administers EU law, said the Irish government had granted illegal state aid to Apple by helping the tech giant to artificially lower its tax bill for more than 20 years.The United States fired back immediately, saying retroactive tax assessments by the EU were unfair. "The Commission's actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the U.S. and the EU," a Treasury spokesperson said. The decision amounted to "a transfer of revenue from U.S. taxpayers to the EU," White House press secretary Josh Earnest said. The Obama administration would fight for "American taxpayers and American businesses overseas when they're being treated unfairly," he added.

Jack Lew Furious After Europe Set To Hit Apple With "Largest Tax Penalty Ever" -- Just minutes after the excitement over Apple's new product announcement hit, The FT drops a rather more painful headline stating that Apple will on Tuesday be hit with Europe’s largest tax penalty after Brussels ruled that the company received illegal state aid from Ireland. Despite Treasury Secretary Lew's pleas/demands just a week ago that the EU back off, the company will have to pay billions of euro in back taxes to Dublin as the European Commission moves to redraw the boundaries on aggressive tax avoidance by the world’s biggest corporations.  A week ago, Jack Lew implored Europe to reconsider... After a meeting with U.S. Treasury Secretary Jack Lew last month, the European Union’s antitrust chief  Margrethe Vestager tweeted a photo of herself standing awkwardly next to the American finance chief, with the two of them facing in slightly different directions. It was a “very good meeting,” she tweeted. But the photo was fitting, for the two were far from seeing eye-to-eye over the EU’s investigations into the sweetheart tax deals some multinational companies have sealed with various European governments. But it appears Washington's might has been overlooked as The FT reports that Vestager circulated the final ruling to her counterparts in the EU’s executive branch only on Monday morning, deploying a fast-track procedure in a bid to minimise leaks. The usual notice period is two weeks. A 130-page judgment by the commission follows a three-year investigation into claims that two advance tax opinions issued by Dublin violated EU law by granting Apple an advantage not available to other companies. The decision is set to be the subject of appeals in the European courts by Apple and Ireland, both of which have denied any wrongdoing. The commission’s ruling calls on Dublin to raise a new tax assessment on Apple, which previously warned the US Securities and Exchange Commission that an adverse decision by Brussels could have a “material” impact on its finances.

Apple CEO Tim Cook Says E.U. Tax Ruling is ‘Total Political Crap’Apple Chief Executive Tim Cook on Thursday described the European Union’s imposition of a 13 billion euro ($14.5 billion) back tax bill as “total political crap” motivated in part by anti-U.S. bias, the Irish Independent reported. Cook told the newspaper in an interview he would work closely with Ireland to try to overturn the decision and said the U.S. tech giant was committed to its operations in Ireland. “No one did anything wrong here and we need to stand together. Ireland is being picked on and this is unacceptable,” Cook was quoted as saying by the newspaper. “It’s total political crap.”  He said anti-U.S. bias was “one reason why we could have been targeted,” the newspaper reported.

EU's Apple ruling 'step backward' in fighting tax abuse, former IRS leader says: The European Union's fight for Apple's tax money may actually create setbacks for tax reform, a former U.S. tax authority told CNBC. "I'm troubled by this — I think it's a step backward in going after tax abuses," former IRS Commissioner  Mark Everson told CNBC's "Squawk on the Street" on Wednesday. "There's a host of problems here that really set us quite far backwards." The European Commission on Tuesday ordered the Irish government to recover up to 13 billion euros ($14.5 billion) — plus interest — in back taxes from Apple. It comes as Apple managed to pay a 0.005 percent tax rate in 2014,  using a tax structure for its subsidiaries that the EU argued did not reflect "economic reality." There does need to be more balance in the taxes paid by businesses, said Everson, now vice chairman of Alliantgroup, which advises U.S. companies to take full advantage of federal and state tax credits, incentives and deductions. Everson said that the EU's recent ruling challenges the international cooperation that already surrounds this issue. "I don't think it's a fight about the money — I think it's a fight about the rule of law, and who has the authority to impose the tax. I don't think the EU does," Everson said. Everson pointed to organizations like the Joint International Tax Shelter Information Centre, where countries are already working together to determine appropriate taxes for large corporations. "This challenges that cooperation that has been building," Everson said. "If a third party can just come in and upset the apple cart, why should other countries cooperate?"

Stiglitz slams 'dishonest' Apple and ‘totally irresponsible’ Tim Cook: The European Commission's ruling that Apple should pay Ireland billions of dollars in back taxes was neither punitive nor unfair, one of the world's best-known economists told CNBC on Thursday. Joseph Stiglitz said the European Commission (the European Union's executive arm) was right to conclude Ireland had granted Apple undue tax benefits. This is illegal under European rules and led the commission to order the Irish government to recover up to 13 billion euros ($14.5 billion) — plus interest — from Apple on Tuesday. The commission's ruling was a "fair warning" that he supported, Stiglitz told CNBC. "The fundamental point here is Apple unambiguously was trying to avoid taxes and it was doing it in a dishonest way, with complicity from the Irish government, pretending that the money, the profits, the billions of profits it was making, were really being originated in some Irish company that was registered in cyberspace and therefore did not have to pay any taxes. And anybody looking at that says that is a ruse, that is an attempt at tax avoidance, tax evasion, whatever you want to call it," the 73-year-old U.S. economist said.A view of buildings on the Apple campus in Cork, Ireland.EU member countries are allowed to set their own tax rates and Ireland's low corporate rate of 12.5 percent has helped it attract U.S. multinationals, particularly tech and pharmaceutical giants, including Google, Facebook and Twitter. However, the commission said Apple had received "illegal tax benefits" from Ireland that allowed it to pay far less tax than other businesses. It said Apple paid corporate tax of only 1 percent on its European profits in 2003, which fell to 0.005 percent by 2014. "The tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU single market. This is due to Apple's decision to record all sales in Ireland rather than in the countries where the products were sold," the commission said in a statement on Tuesday.

 Cathy O'Neil: Weapons of Math Destruction - This Mathematician Says Big Data Is Causing a ‘Silent Financial Crisis’ - When there is wrongdoing in fields that are both complex and opaque, it often takes a whistle-blower to inform the public. That’s exactly what former quant trader turned social activist Cathy O’Neil has become for the world of Big Data. A Harvard trained mathematician, O’Neil spent the last several years teaching at Barnard, working for DE Shaw, one of the world’s leading hedge funds, and launching a technology start up designed to deliver targeted advertising. Her key takeaway from the last two experiences—that Big Data is increasing inequality and threatening democracy—is the subject of her important new book, Weapons of Math Destruction, out on September 6. Unlike the WMDs that were never found in Iraq, data driven algorithms are all around us. Already, many of our bosses use them to grade our performance. Our children’s teachers are hired and fired by them. They decide who gets access to credit and who pays higher insurance premiums, as well as who will receive online advertising for luxury handbags versus who’ll be targeted by predatory ads for for-profit universities.In fact, it was that last example that prompted O’Neil, who’s also a member of the Occupy Movement, to write her book. While working at the start-up, she heard a presentation from an investor lauding the fact that the company’s new technology would mean that he would “never have to see another ad for the University of Phoenix,” but would be automatically funneled more offers for “vacations in Aruba and jet skis.” “I realized that far from doing anything good, this technology was actually siloing people into online gated communities where they no longer had to even acknowledge the existence of the poor,” she says.O’Neil sees plenty of parallels between the usage of Big Data today and the predatory lending practices of the subprime crisis. In both cases, the effects are hard to track, even for insiders. Like the dark financial arts employed in the run up to the 2008 financial crisis, the Big Data algorithms that sort us into piles of “worthy” and “unworthy” are mostly opaque and unregulated, not to mention generated (and used) by large multinational firms with huge lobbying power to keep it that way. “The discriminatory and even predatory way in which algorithms are being used in everything from our school system to the criminal justice system is really a silent financial crisis,” says O’Neil.

PwC settles $5.5bn fraud detection lawsuit - PwC has settled a lawsuit brought against it over one of the biggest bank collapses in US history, in a landmark case that shone a light on the responsibility of auditors to detect fraud. The world’s biggest professional services firm by annual revenues had been accused of failing to catch a multibillion-dollar conspiracy between executives at Taylor, Bean & Whitaker, a defunct mortgage lender, and counterparts at Colonial Bank, an Alabama-based lender that supplied TBW with loans.PwC gave the bank’s parent, Colonial BancGroup, a clean audit opinion for six years until it collapsed in 2009, when it emerged that huge chunks of its loans to TBW were secured against assets that did not exist. The plaintiff, the bankruptcy trustee of TBW, had been seeking $5.5bn plus punitive damages, in the biggest accounting negligence lawsuit ever to go to trial. The decision to settle — for a confidential sum — came four weeks into proceedings in a state court in Miami. “The case was settled to the mutual satisfaction of the parties,” said PwC. Steven Thomas, lead trial lawyer for the plaintiff, declined to comment on Friday’s settlement. But speaking broadly, he told the Financial Times: “The history that has happened here over the last few years, and the fallout of the Great Recession, has shown that what auditors do, matters. Auditors owe ultimate allegiance to the investing public; I think that is becoming more and more clear.” A separate lawsuit filed against PwC by the Federal Deposit Insurance Corporation, the regulator, and Colonial’s bankruptcy trustee is pending in Alabama federal court.

SEC Takes Victory Lap for Pathetic Performance of Whistleblower Program -- naked capitalism by Jerri-lynn Scofield - The Securities and Exchange Commission (SEC) has absorbed lesson one of the Obama administration: messaging trumps performance. Yesterday, it released a self-congratulatory press release on its pathetic performance under the authority provided in Dodd-Frank’s whistleblower provisions that is a model of the genre. The SEC’s whistleblower program has proven to be a game changer for the agency in its short time of existence, providing a source of valuable information to the SEC to further its mission of protecting investors while providing whistleblowers with protections and financial rewards,” said Mary Jo White, Chair of the SEC, as quoted in the press release Let’s unpack this. Incentives for private parties to spill the beans are a hallowed component of the US legal system, dating back to the Civil War-era False Claims Act (FCA) and extended by Congress in 1986. So a long and venerable tradition of rewarding whistleblowers was in place before Congress authorized the SEC to create a whistleblower program in the 2010 Dodd-Frank legislation. Six years later, we can assess the success of that program– which suggests, shall we say, that the SEC’s victory lap is somewhat premature.  Some would say that the SEC program was badly designed from the start in that it left it to the SEC alone to decide whether to file a legal claim based on the whistleblower’s report. I would say this was a feature not a bug but will not belabor the point. From the SEC’s website “The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered.”  This means that the whistleblower cannot file a legal claim himself under this statute against the firm that has allegedly committed fraud or somehow violated securities laws. (Separately, the whistleblower might be able to file an action under other existing federal securities laws, but that discussion is beyond the scope of this piece.) Instead, the whistleblower’s only recourse under the Dodd-Frank statute is to report the violation to the SEC, and the agency prosecutes the case.  Why does this matter? As one of my cronies who practices in the qui tam area observes, he often floats arguments that various federal agencies consider to be unappealing on their face and will not pursue (perhaps for political reasons, e.g. the Air Force does not like suing Lockheed). But clever lawyering that ends up before the right judge can sometimes result in the success of some of these arguments, and eventually yield substantial recoveries– for both the government and the whistleblower– as well as have a deterrent effect.

Whistleblowers Motivated by Moral Reasons Above Monetary Ones -In May 2015, the Securities and Exchange Commission (SEC) punished Deutsche Bank with a $55 million fine. Deutsche’s crime was inflating the value of its portfolio of complex derivatives by $1.5 billion during the financial crisis. The SEC promised former Deutsche Bank risk analyst, Eric Ben-Artzi, $8.25 million for his role in exposing this overvaluation by providing documents to regulators. This payout results from the whistleblower program introduced under the 2010 Dodd-Frank law, which rewards eligible individuals who voluntarily provide information leading to successful sanctioning of over $1 million. Depending on the case, whistleblowers can receive 10 to 30 percent of the sanctions collected. The rationale behind this program is that it will motivate people to come forward to expose corporate wrongdoing. Indeed, Ben-Artzi noted when he first began helping the SEC investigation that the prospect of financial reward was a “powerful incentive.” Except, stunningly, now that it is time to collect, Ben-Artzi has refused to accept his payout. As he explained in an op-ed in the Financial Times last week, he is foregoing his multimillion dollar reward because the top executives responsible for Deutsche’s crime went completely unpunished and instead retired with multimillion dollar bonuses. What is more, as Ben-Artzi states, he believes that the SEC did not punish Deutsche’s executives because, “Deutsche’s top lawyers ‘revolved’ in and out of the SEC before, during, and after the illegal activity at the bank.” Ben-Artzi’s case illustrates that the motivations of whistleblowers extend far beyond practical concerns and financial gains, and also sheds light on the limited functionality of the current U.S. whistleblower program. Existing research on this topic consistently shows that whistleblowers are motivated by moral reasons above monetary ones. In a New England Journal of Medicine study of whistleblowers who initiated fraud cases against pharmaceutical companies, the authors report, “Every relator [whistleblower] we interviewed stated that the financial bounty offered under the federal statute had not motivated their participation in the qui tam lawsuit. Reported motivations coalesced around… integrity, altruism or public safety, justice, and self-preservation.” My own research with James Dungan and Liane Young of Boston College corroborates this point by showing that fairness and justice are the primary motivators of decisions to blow the whistle. In ongoing work examining a survey of approximately 42,000 federal employees, we have also found that moral concerns about fairness outweigh pragmatic concerns (e.g., personal benefits) in guiding decisions to report wrongdoing.

 The CIA’s Venture-Capital Firm, Like Its Sponsor, Operates in the Shadows - WSJ - Forterra Systems Inc., a California startup focused on virtual reality, was in need of money and its products didn’t have much commercial appeal. Then funds came in from a source based far from Silicon Valley: In-Q-Tel Inc., a venture-capital firm in Virginia funded by the Central Intelligence Agency. One catalyst for the 2007 infusion, according to a former Forterra executive and others familiar with it, was a recommendation by a man who sat on the board of the venture-capital firm—and also on the board of Forterra. In-Q-Tel pumped in cash, Forterra developed some tools useful to the military, and government contracts started coming in. Like the agency that founded it, the CIA-funded venture-capital firm operates largely in the shadows. In-Q-Tel officials regard the firm as independent, yet it has extremely close ties to the CIA and runs almost all investment decisions by the spy agency. The firm discloses little about how it picks companies to invest in, never says how much, and sometimes doesn’t reveal the investments at all. Even less well-known are potential conflicts of interest the arrangement entails, as seen in this Forterra example and others continuing to the present. Nearly half of In-Q-Tel’s trustees have a financial connection of one kind or another with a company In-Q-Tel has funded, a Wall Street Journal examination of its investments found. In-Q-Tel’s hunt for promising technology has led the firm, on at least 17 occasions, to fund businesses that had a financial link of some sort to an In-Q-Tel trustee. In three instances a trustee sat on the board of a company that had an In-Q-Tel investment, as in the Forterra case, according to the Journal’s examination, which was based on a review of investment records and interviews with venture-capital and In-Q-Tel officials, past and present. In-Q-Tel differs from other venture-capital firms in an important way: It is a nonprofit. Instead of trying to make money, it seeks to spur the development of technology useful to the CIA mission of intelligence gathering.

Half of Corporate America losing BILLIONS in Forex for no reason --Here's the big irony for the markets.  As we explain in Splitting Pennies book, Forex is the largest market in the world and the least understood.  Corporate America certainly doesn't understand Forex.  Well, according to this report, about 50% do:  Forty-eight percent of nonfinancial companies listed on U.S. stock exchanges remained exposed to volatility in foreign exchange rates, commodity prices and interest rates in 2012 because they did not hedge them, according to a new study by Chatham Financial.  The interest-rate and currency risk adviser studied a sample of 1,075 companies ranging from $500 million to $20 billion in revenue. The nearly half that did not use financial instruments to hedge their exposures demurred despite the threat the risks posed to both the balance sheets and reported earnings (see chart at bottom). “That was surprising, knowing the pressure senior management teams and treasury feel around identifying ways to reduce risk to factors within their control so business can focus on other areas,”Amol Dhargalkar, managing director for corporate advisory at Chatham, says. Many analysts have pointed to the fact that the new excuse of "Currency Headwinds" (accountant code word for "Don't Understand Forex") to define earnings in 2016:Companies that do business outside of the USA have substantial forex exposure. This exposure can be an asset, if properly managed - but often it is a liability. Recently, the trend in corporate accounting has been to blame "currency headwinds" which can be a good excuse for up to $10 billion in losses. Did these executives ever hear about hedging?  So what does this data mean?  It means that half of Corporate America is speculating BIG in Forex.  Not hedging, when you have FX positions, is speculating.

What is Behind the Surge in the Corporate Debt - Just as governments are cutting back on issuing new debt, the corporate sector has taken up the role of being the largest source of new debt in the United States. This shift in debt issuance is readily apparent in Chart 1. Since the crisis of 2008, the growth in government debt has dramatically decreased from nearly 20 per cent annually to less than 5 per cent, more in line with the nominal growth in the economy. Consumers continue to remain wary of increasing their debt load . On the other hand, the corporate bond market has been on a bit of a tear in recent years .That segment of the debt market now outpaces all other debt issuers. The U.S. corporate bond market is valued at nearly US $9 trillion; by comparison, it is larger than the GDP of Germany, France and the U.K. combined. No longer are governments the leaders in generating new debt, it has ceded that title to corporate America. As investors search for yield, corporate bonds are viewed as the darlings of the debt market, principally due to higher yields offered. As the demand for corporates grows, the spread in yields between corporates and U.S. Treasuries has narrowed, a further sign of the strength of the corporate bond market, thus encouraging more companies to issue debt. The rise in corporate debt is supplied mainly by investment-grade corporations i.e. from corporations with excellent credit ratings. High yielding debt (so-called junk bonds) is not as responsible for the burst in corporate debt as is often portrayed in the media . Well-heeled corporations have turned to corporate debt, rather than issuing additional equity, to meet their business needs.What lies behind the surge in new corporate debt? Profits are inadequate to fund capital expenditures. Notwithstanding the fact that the stock market is reaching historic highs, corporate profits have steadily declined. The S&P 500 companies have experienced six straight quarters of declining profits. Table 1 connects profit growth with capital expenditures. To begin with, capital expenditures are, initially, funded from internal resources------- profits less dividends, less income taxes, plus accumulated capital cost allowances. From 2010 to 2013, U.S. non-financial corporations were able to fund business capital expenditures from internal resources. Since 2013 the sector has turned to the debt market to make up the shortfall, currently at approximately $200 billion. In and of itself, there is nothing inherently wrong with this approach, since it is vital to a company's long-term viability to increase and improve its capital investment. Raising debt to fund business investment, rather than raising equity, is an acceptable strategy to take, especially in this low interest rate environment.

Exclusive: SWIFT discloses more cyber thefts, pressures banks on security | Reuters: SWIFT, the global financial messaging system, on Tuesday disclosed new hacking attacks on its member banks as it pressured them to comply with security procedures instituted after February's high-profile $81 million heist at Bangladesh Bank. In a private letter to clients, SWIFT said that new cyber-theft attempts - some of them successful - have surfaced since June, when it last updated customers on a string of attacks discovered after the attack on the Bangladesh central bank. "Customers’ environments have been compromised, and subsequent attempts (were) made to send fraudulent payment instructions," according to a copy of the letter reviewed by Reuters. "The threat is persistent, adaptive and sophisticated - and it is here to stay." The disclosure suggests that cyber thieves may have ramped up their efforts following the Bangladesh Bank heist, and that they specifically targeted banks with lax security procedures for SWIFT-enabled transfers. The Brussels-based firm, a member-owned cooperative, indicated in Tuesday's letter that some victims in the new attacks lost money, but did not say how much was taken or how many of the attempted hacks succeeded. It did not identify specific victims, but said the banks varied in size and geography and used different methods for accessing SWIFT. A SWIFT spokeswoman declined to elaborate on the recently uncovered incidents or the security issues detailed in the letter, saying the firm does not discuss affairs of specific customers. All the victims shared one thing in common: Weaknesses in local security that attackers exploited to compromise local networks and send fraudulent messages requesting money transfers, according to the letter.

Swift Warns Banks to Speed Up Compliance Following Fresh Hacks -- Swift is warning its member banks to quickly upgrade their software and security protocols for the global financial messaging system following a wave of recent hacks that triggered more bank losses. The Brussels-based organization notified its clients this week of a series of a fresh series of cyberattacks on banks that have occurred since June, the last time Swift provided a broad update on risks following the $81 million theft at the Bank of Bangladesh earlier this year, a Swift spokesperson confirmed. Reuters was first to report on Aug. 31 that Swift sent a private letter to its member banks alerting them to a new level of risk. Swift, the Society for Worldwide Interbank Financial Telecommunication, connects 11,000 financial services companies with its messaging platform for transfers. Swift declined to release its letter, but a spokesperson said the missive warns banks that the latest cyberthreat is "persistent, adaptive and sophisticated," and criminals are tailoring attacks to each individual target. Thieves attacking Swift members have used diverse methods to connect to banks and applied a variety of interfaces from different vendors to break into systems and send fraudulent transactions, the spokesperson added. In the wake of the Bangladesh incident, Swift hardened its security protocols and has urged its member banks to adopt new, beefed-up processes for authenticating transactions and managing passwords. Swift also is urging banks to install the latest version of its more secure software by Nov. 19, or it will report its members' security lapses to banking regulators and the industry at large, according to reports. Industry providers echoed the need for banks to reinforce their systems, noting that simply complying with Swift's requirements may not be enough protection against criminals that have already penetrated banks' defenses.

A Glimmer of Hope for Cyberthreat Data Sharing | American Banker - Sharing cyberthreat information is far from easy, but banks are adopting new tools to use strength in numbers to defend against attacks. Greater involvement by banks in the nonprofit Financial Services-Information Sharing and Analysis Center — founded in 1999 — to communicate threats is a given in the current security environment. But effective sharing among such a large slice of companies (7,000 members are in the group), technological complexities and regulatory hurdles pose challenges. Banks increasingly now are forming their own subgroups within the FS-ISAC — including one reportedly formed by the eight largest banks and several others — to focus sharing among cliques of peer institutions with common security concerns. Meanwhile, new technology offers hope of banks being able to communicate threats more efficiently to each other, and there is hope for better information-sharing between banks and the government. "Generally speaking, there's a willingness to share [cyberthreat information among financial institutions]," said Jason Witty, chief information security officer at U.S. Bank. "There was a realization a long time ago that we don't compete on safety and soundness. Sharing threat data with each other so that it doesn't affect the other guy is really quite common." A working group with the likes of JPMorgan Chase and Bank of America to share internal security details might sound at first like a shadowy gathering. But the new big-bank group, which was reported last week by the Wall Street Journal, is a natural outgrowth of work that's been going on for years. The league, which will also include Goldman Sachs, Bank of New York Mellon, Citigroup, Morgan Stanley, State Street and Wells Fargo, is the latest of a couple dozen such groups formed within FS-ISAC.

Congresswoman Presses Regulators on Volcker Rule Data - The New York Times: A senior Democrat on the House Financial Services Committee is pressing regulators to share two years of market data they have collected in connection with the Volcker Rule, a provision of the Dodd-Frank Act intended to rein in banks’ risky trading and investments.Representative Carolyn B. Maloney, Democrat of New York, sent a letter to regulators on Monday requesting information about certain quantitative trading metrics that the agencies had been collecting since before regulators prohibited banks from making risky bets with their own money last July.“The agencies currently have nearly two years of quantitative trading data, spanning periods both before and after the effective date of the proprietary trading ban,” Ms. Maloney said in the letter, which was reviewed by The New York Times. “I believe that these quantitative trading metrics can provide important information not only about the efficacy of the Volcker Rule, but also about the general trading activities of U.S. banks, and the degree to which these trading activities have changed over the past two years.”Such data could help inform the debate over the rule’s impact as well as broader discussions about how the crisis-era law and other regulations are influencing the financial system.There are growing questions, for example, about whether there has been a recent reduction in liquidity — the speed with which buyers and sellers can execute large trades — in certain markets, including the market for corporate bonds. “Data on the inventory turnover, inventory aging, and customer-facing trade ratios in the fixed-income market-making units of the large banks could prove particularly informative in this debate,” Ms. Maloney added in her letter, regarding the discussions over liquidity.

Robbing Banks - NEP’s Bill Black appears on the Ralph Nader Radio Hour.  Nowadays we have zero prosecutions of any of the people that led the three fraud epidemics that drove this crisis. And now they are highly skilled and have seen that they can get away with financial murder. And so they are already back in the business, already selling other toxic stuff and they’re going to produce the next crisis… You can listen to the podcast here.

Does Wall Street Do “God’s Work”? Or Even Anything Useful? - Lynn Stout  - In the wake of the 2008 crisis, Goldman Sachs CEO Lloyd Blankfein famously told a reporter that bankers are “doing God’s work.” This is, of course, an important part of the Wall Street mantra: it’s standard operating procedure for bank executives to frequently and loudly proclaim that Wall Street is vital to the nation’s economy and performs socially valuable services by raising capital, providing liquidity to investors, and ensuring that securities are priced accurately so that money flows to where it will be most productive. The mantra is essential, because it allows (non-psychopathic) bankers to look at themselves in the mirror each day, as well as helping them fend off serious attempts at government regulation. It also allows them to claim that they deserve to make outrageous amounts of money. According to the Statistical Abstract of the United States, in 2007 and 2008 employees in the finance industry earned a total of more than $500 billion annually—that’s a whopping half-trillion dollar payroll (Table 1168).  There’s just one problem: the Wall Street mantra isn’t true. Let’s start with the notion that Wall Street helps companies raise capital. If we look at the numbers, it’s obvious that raising capital for companies is only a sideline for most banks, and a minor one at that. Corporations raise capital in the so-called “primary” markets where they sell newly-issued stocks and bonds to investors. However, the vast majority of bankers’ time and effort is devoted to (and most bank profits come from) dealing, trading, and advising investors in the so-called “secondary” market where investors buy and sell existing securities with each other. In 2009, for example, less than 10 percent of the securities industry’s profits came from underwriting new stocks and bonds; the majority came instead from trading commissions and trading profits (Table 1219). So, what benefit does society get from all this secondary market trading, besides very rich and self-satisfied bankers like Blankfein? The bankers would tell you that we get “liquidity”–the ability for investors to sell their investments relatively quickly. The problem with this line of argument is that Wall Street is providing far more liquidity (at a hefty price—remember that half-trillion-dollar payroll) than investors really need. Most of the money invested in stocks, bonds, and other securities comes from individuals who are saving for retirement, either by investing directly or through pension and mutual funds. These long-term investors don’t really need much liquidity, and they certainly don’t need a market where 165 percent of shares are bought and sold every year.

Why No Punishment for Financial Executives? Fannie Mae Is A Case Study – NYT - Few executives have faced the punishment of prison and fines for misdeeds stemming from the financial crisis. The Securities and Exchange Commission’s recent decision to throw in the towel in its civil case against Daniel H. Mudd, the chief executive of Fannie Mae in the go-go years immediately preceding the crisis, helps explain why. Law enforcement officials have often protested that it is not easy to win cases against senior executives at financial firms, who are often far away from low-level wrongdoers on the organizational chart, and whose work product is usually filtered through compliance officers, risk managers and lawyers. Maybe so. The outcome of the Mudd case certainly looks like a loss. Last week, Mr. Mudd settled the case, which has been pending since 2011, for $100,000 – which Fannie Mae will pay. That is small change, given the $24 million he earned from Fannie Mae from 2006 to 2008. Five years of litigation in pursuit of $100,000 does not bespeak a particularly efficient allocation of law enforcement resources. Mr. Mudd and Fannie settled cheaply because of a feature of financial crisis enforcement cases. Although the headline allegations of malfeasance can look straightforward, wading through the proof has been, for the government, much harder. This dynamic might look surprising. The government should be happy to tell a simple story to a jury unlikely to be interested in accounting nuances. It leaves the defendant with the job of trying to win by raising the complications. And the basic business case against Mr. Mudd is easy to grasp. Fannie Mae was a publicly traded company, and so he and his subordinates owed the shareholders candid and comprehensive disclosures about the businesses the firm was in, and the risks it was taking. During the period that he was chief executive, the company expanded its subprime and Alt-A, or low disclosure, mortgage businesses. The value of those businesses collapsed in 2008, as did the housing market more generally. Fannie required a government takeover and, ultimately, an injection of $187 billion into the firm and its peer, Freddie Mac.

 FinCEN Seeks to Extend AML Requirements to All Banks - Risk & Compliance Journal. - WSJ: The U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, proposed a rule that would require banks lacking a federal regulator to establish an anti-money laundering compliance program. The proposal would eliminate what FinCEN called a “gap” in anti-money laundering coverage between banks with and without a regulator. The rule would require unregulated banks to have essentially the same compliance programs as regulated financial institutions, and unregulated banks could use their existing policies and procedures to fulfill the new obligations, FinCEN said in a brief statement. “Banks without a federal functional regulator may be as vulnerable to the risks of money laundering and terrorist financing as banks with one,” the proposal said. FinCEN said Thursday it estimated the proposal would affect a total of 740 banks across the country, most of which are private banks, as well as certain trusts and credit unions. Although these banks haven’t historically haven’t been required to establish anti-money laundering programs, they are required to comply with many other aspects of the Bank Secrecy Act, including the filing to FinCEN of suspicious activity reports and currency transaction reports. The proposal also would extend customer identification and beneficial ownership requirements to banks not already subject to them, FinCEN said, noting it made this decision for the purpose of regulatory consistency.

U.S. Defends Its Curbs on Money Laundering - WSJ: U.S. banking regulators sought Tuesday to “dispel certain myths” around anti-money-laundering rules that critics contend have inadvertently cut off access to the U.S. financial system for some countries, businesses and individuals. The Treasury Department, along with four bank regulators, published an unusual, four-page “fact sheet” along with a lengthy blog post to clarify regulatory expectations related to the rules. While the statements didn’t change the rules, they emphasized that the government doesn’t take a “zero-tolerance” approach to enforcing anti-money-laundering laws and reserves enforcement action for the most egregious instances of widespread or intentional wrongdoing, such as recent fines related to movement of drug-cartel money. Regulators resolve about 95% of compliance failures without penalties, three senior Treasury officials said in the blog post, in which they also said that banks don’t have to vet the customers of their foreign-bank customers.The problem, argue critics of the U.S. government’s approach, is that anti-money-laundering enforcement has caused banks to pull back from some customers who aren’t suspected of illegal activity. That has become a challenge recently along the southwestern U.S. border with Mexico, as well as for island nations and emerging-market economies. It is often harder to track the movement of cash in those areas, and banks don’t want to risk getting caught up in money tied to drug or human trafficking. For banks, the risk has grown particularly prominent given multibillion-dollar penalties levied in recent years on several banks that failed to keep dirty money out of the U.S. financial system or didn’t appropriately alert authorities to suspicious transactions.

 Five Areas Where We Need Regulatory Balance | Bank Think -- In sum, the state of the American banking system is something both bankers and regulators can take pride in. With that said, now comes the hard part. How regulators continue to implement new rules, and how banks continue to deal with what may be a lower interest rate environment and a heavy regulatory burden, will determine whether this has been a historic turning point for finance in America or whether the recent success merely sets the stage for another painful set of events. Now is the time where it is incumbent upon regulators and bankers to show courage and confidence in our futures. This is particularly the case as we face the reality of a new federal administration in the coming year. Some thoughts on the direction of regulatory policy follow:

  • The regulatory community and, if need be, Congress must level the playing field among all financial players. Failing to regulate the shadow banking system appropriately will end badly. Of this I am certain. This should be as much of a priority as anything else in finance.
  • While nobody who cares about finance wants a lax regulatory environment, it is in the interest of regulators, consumers, business borrowers and the overall economy that we strive to make supervision not only effective, but efficient. For example, I, like my friend Paul Volcker, have advocated for streamlining the number of regulators involved in supervising individual financial institutions. Today, some institutions can count dozens of regulators in this country, let alone internationally, that they have to deal with on site in their institution. This kind of waste hurts us all.
  • We have to do more to support community development financial institutions and other community and regional banks. These banks can make a huge difference in the lives of middle- and lower-income Americans and small businesses. While efforts have been made to rectify the situation, right now we continue to overburden these institutions with needlessly complex and overly intrusive regulation.
  • Bankers must redouble their own efforts to treat every consumer well, to squash even the appearance of unintended discrimination and to enhance financial stability. I have a great deal of faith in the private sector and the great American market economy. I believe banks can and should exceed the rules in these areas. And by doing so, they can take better charge of their own destinies.
  • It is time we gave financial institutions discretion to set their own allowance for loan and lease losses consistent with prudential regulatory requirements, not accounting complications. It is bank regulators, not the accounting profession, who should be in charge of this important issue. Whatever banks do in this regard is and should be transparent. Accounting efforts to tinker with this important safety and soundness tool over the last 20 years have been dangerous to safety and soundness and have complicated matters unnecessarily. It is time to put an end to this.

Regulatory Ambiguity Is Slowing Bank Adoption of Cloud Services | Bank Think: Public cloud service providers are increasingly wooing banks. But traditional and regulated financial institutions have been slow to adopt these services, which can accelerate innovation and reduce operational expenses. Earlier this year, media outlets reported that the dominant player in public cloud services — Amazon Web Services — was actively courting big banks. Already, Capital One has been using AWS to run various systems, including its mobile banking application, for instance. More big banks will follow Capital One's lead and adopt public cloud services. In fact, Deutsche Bank analysts predicted earlier this year that big banks will put 30% of their IT infrastructures in public cloud environments over the next three years. However, public cloud adoption in banking is rare right now for a reason: The industry's regulations around data privacy and security dramatically complicate the use of publicly hosted environments. For more banks to embrace the technology without taking on too much risk, guidance from regulators is necessary. Sure, the Federal Financial Institutions Examination Council has told financial institutions that it essentially views the use of public cloud services as the same as using other forms of technology outsourcing. But U.S. financial regulators need to develop guidelines that allow banks and fintech companies to use technology that helps accelerate innovation and reduces operational costs - benefits that regulatory agencies themselves are already accumulating. The Financial Industry Regulatory Authority, for instance, estimates that by putting 75% of its computing and storage infrastructure in AWS' data centers, it will save $20 million annually.

Liberty Reserve, Bitcoin, and the US Bank Regulatory Dog That Didn’t Bark - naked capitalism - Jerri-Lynn here. It is possible many readers are, at best, only vaguely familiar with Liberty Reserve and at worse completely unaware of what it was and what it did. Liberty Reserve was, put simply, a huge financial fraud, money launderer, sanctions evader and enabler of pretty much any kind of loathsome criminal activity you can mention. From the indictment… the scope of [Liberty Reserve’s] unlawful conduct is staggering. Estimated to have had more than one million users worldwide, with more than 200,000 users in the United States, Liberty Reserve processed more than 12 million financial transactions annually, with a combined value of more than $1.4bn. Overall, from 2006 to May 2013, Liberty Reserve processed an estimated 55 million separate financial transactions and it believed to have laundered more than $6bn in criminal proceeds.  Way back in 2013, when Liberty Reserve was shut down and the owners arrested, it did briefly make the mainstream media. This was after the U.S. Department of the Treasury discovered (I’m tempted to prefix this with the word “finally”, but I’ll resist the temptation) all the shady dealings going on at Liberty Reserve and promptly (well, not that promptly, it did take 7 years or more) threw the Patriot Act at it.  A trial ensued, followed by convictions and sentencing. Bitcoin promoters leapt in to say that even though Bitcoin looked like a duck (it used a digital /virtual currency), it walked like a duck (promoted by money services businesses which offer zero deposit protection and scant-to-no regulation) it quacked like a duck (Bitcoin has been shown to be used in criminal activity ) it really, honestly, wasn’t a duck at all . That’s despite the fact that Bitcoin is the asset class of choice for those allegedly trying their hand at a bit of amateurish blackmail and extortion. In some ways, and being as sympathetic to Bitcoin and the other digital currency proponents as I can be, the regulators are being hoist by their own petards. By taking the line that digital currencies aren’t currencies, they can hardly then complain about Bitcoin exchanges being honey pots to money launderers. Bitcoins are, if you accept the regulators’ and digital currency boosters’ arguments, no different to fine art, sport sponsorship, London apartments or even, being facetious, baseball cards in terms of being a vehicle to facilitate money laundering and hiding the sources of funds.  It was almost like they were designed as the perfect asset class to launder ill-gotten gains. Why, then, is the regulatory dog (or dogs) not barking?

Before AI Runs Amok, Banks Have Some Hard Decisions to Make | American Banker: Just as some people are starting to fear whether driverless cars will do us more harm than good, there's a growing concern that the use of artificial intelligence — letting software and machines make decisions rather than people — could lead to legal and ethical problems in financial services. Letting a software program decide on its own who may obtain a checking account, who can get a loan, and what rates they should be charged, could have unintended consequences that include people being excluded from mainstream finance. Some would argue there is nothing fairer than an algorithm — pure math, after all, cannot be biased, right? "A machine or a robot is going to base decisions on facts and criteria," said Steve Palomino, director of financial transformation at Redwood Software. "Removing the human element means you're going to apply criteria based on facts and circumstances, not based on preference or personal biases or experiences." A machine could also keep better records about exceptions, he said. One flaw in this argument is algorithms are written by people, who can be and usually are biased, often in subtle ways they themselves fail to recognize. Those biases can be built into algorithms. For example, last year Carnegie Mellon University researchers tested how Google's algorithms deliver ads to people. They found that Google showed jobs with higher salaries to people who had selected "male" in their ad settings than to those who clicked "female." At an extreme, an artificial intelligence engine making credit decisions could approve only people who graduated from Ivy League schools, for example, or who have household incomes above $300,000.

 These Banks Are Funding Fintech - American Banker (slides) The era of banks and fintech companies cozying up to each other is in full bloom. Fintechs realize they can better disrupt the industry from within, while banks are looking for partners to help them navigate the digital world. Here's a look at how banks worldwide are buying, investing in and in some cases lending to fintech firms.

5 Ways Blockchain Solves Inequality In The World - In a recent appearance on TED Talk, Don Tapscott, author and professor, explained How the blockchain is changing money and business. He believes that Blockchain is the next generation of the internet, and that it holds vast promise for every business, every society and for every individual.In order to understand the revolutionary aspect of Blockchain, it is key to understand that the whole world today relies entirely on big intermediaries: middlemen like banks, government, big social media companies, credit card companies and so on. And these intermediaries perform all the business and transaction logic of every kind of commerce, from authentication, identification of people, through to clearing, settling and record keeping. And overall, they do a pretty good job. But there are growing problems, including:

  • They’re centralized. That means they can be hacked, and increasingly are — JP Morgan, the US Federal Government, LinkedIn, Home Depot and others found that out the hard way. They exclude billions of people from the global economy, for example, people who don’t have enough money to have a bank account.
  • They slow things down. It can take a second for an email to go around the world, but it can take days or weeks for money to move through the banking system across a city. And they take a big piece of the action — 10 to 20 percent just to send money to another country.
  • They capture our data, and that means we can’t monetize it or use i to better manage our lives. Our privacy is being undermined.
  • And the biggest problem is that overall, they’ve appropriated the largesse of the digital age asymmetrically: we have wealth creation, but we have growing social inequality.

Blockchain the platform which has the potential to solve all these issues. It is some kind of vast, global, distributed ledger running on millions of computers and available to everybody. It allows every kind of asset, from money to music, to be stored, moved, transacted, exchanged and managed, all without powerful intermediaries.

CFPB Wins a Round Against CashCall - On Wednesday of this week, a federal district court in California handed the Consumer Financial Protection Bureau a victory in its lawsuit against consumer lender CashCall. The court's ruling grants the CFPB partial summary judgment on its claim that CashCall committed deceptive acts in violation of the Consumer Financial Protection Act by collecting illegal interest charges from its customers. The court's decision rejects CashCall's "tribal model" of lending, in which it sought to evade the application of state usury laws by using a company based on the Cheyenne River Sioux Reservation to originate its loans and claiming that tribal law, not state law, governed the loans. In its ruling, the district court held that although the loans were purportedly made by the tribal company (Western Sky) and then sold to CashCall, the true lender was CashCall, because under the arrangement between the companies, it was CashCall's money that was at risk. Thus, the court held, there was no basis for applying tribal law to the loans because the loan transactions bore no substantial relationship to the tribe. State usury laws therefore applied. Under those laws, the loans' interest rates, with APRs well into the triple digits, were illegal. And, the court ruled, telling consumers they were obligated to pay illegal interest is a deceptive act under federal law. The court also held CashCall's founder personally liable for the violations.

CFPB's Overreach Could Backfire. Just Ask the FTC - The Consumer Financial Protection Bureau's proposed rules on small-dollar loans are significant not only because they are sprawling, complex and tough, but also because they are the first rules the CFPB has issued pursuant to its powers to prohibit unfair, deceptive or abusive acts or practices. Before the small-dollar proposal, the consumer bureau had used this authority only as the basis of enforcement actions against specific companies, not industrywide rules. Proponents of the CFPB extol its so-called UDAAP powers as being among the bureau's most versatile and potent weapons. Indeed, they assert that these authorities are crucial to ensure that the CFPB can be nimble in addressing developments and innovations in consumer finance markets without having to wait for Congress to decide what conduct or products the agency may target. Critics of the CFPB, meanwhile, view its UDAAP powers with dread. They fear that the expansive, malleable and often subjective nature of these powers, when combined with the CFPB's unique autonomy and broad discretion in wielding them, allows for the prospect of unchecked regulatory overreach. Such overreach is not without precedent. Congress famously chastised the Federal Trade Commission in the late 1970s for misusing its own "unfairness" authority when the FTC sought to ban all advertisements aimed at children on the nebulous grounds that such advertising was immoral, unscrupulous and unethical. In response to the FTC's actions, Congress shut down the FTC for several days and restricted its authority to issue new unfairness regulations. Congress ultimately amended the FTC Act to require the FTC to engage in economic analyses of unfairness and to limit the role of subjective public policies when making unfairness determinations.Fears that the CFPB may overstep the boundaries of its UDAAP powers arguably have already been realized in the proposed small-dollar rulemaking. For instance, to support its assessment that small-dollar lenders act unfairly, the CFPB alleges that these lenders ensnare consumers in "debt traps." But the bureau plays down the comparative harms that consumers suffer when they lack access to these loans, such as when they confront emergency medical expenses or unexpected shortfalls in their income. This type of dismissive attitude suggests that what is really driving the CFPB's unfairness determination is not statutory factors, but rather moral distaste for the "high costs" of small-dollar loans and for small-dollar lenders preying on financially distressed consumers.

Amazon, Wells Fargo Unexpectedly Terminate Student Loan Partnership Announced Just One Month Ago -- Just over a month ago, on July 21, we reported that Amazon and Wells Fargo had launched a partnership which they dubbed at the time a "tremendous opportunity", to offer college students an even greater incentive to get buried under student loans when Wells Fargo announced it would offer a discount on private student loans to members of Amazon's "Prime Student" program.  "We are focused on innovation and meeting our customers where they are—and increasingly that is in the digital space," John Rasmussen, a Wells Fargo executive, said in a July 21 news release. "This is a tremendous opportunity to bring together two great brands." As we said then, "in Amazon's latest attempt to entice shoppers into its premium Prime program, Wells Fargo will cut half a percentage point from its interest rate on student loans to Amazon customers who pay for a "Prime Student" subscription, which provides the traditional Prime benefits such as free two-day shipping and access to movies, television shows and photo storage. The subscription-based service will cost $49 a year, half the regular Amazon Prime fee." Apparently, Wells was not interested enough, because just six weeks after revealing said "tremendous opportunity", the two companies unexpectedly ended their partnership. As Bloomberg recaps our previous thoughts, "the deal between the giant online retailer and the nation's third-largest bank by assets represented Amazon's first foray into the competitive market of lending to college students. For Wells Fargo, which has aggressively tried to build up its student loan business, the partnership was meant to help the bank reach millions of potential customers who shop on Amazon and might be enticed by the bank's half-percentage point discount on its higher-education loans." There was little justification for the abrupt deal failure: Catherine B. Pulley, a Wells Fargo spokeswoman, said Wednesday that the "promotion for Prime Student members has ended." She didn't immediately respond to messages seeking further details. Deborah Bass of Amazon e-mailed the same statement in response to questions but did not immediately respond to a message seeking additional information.

There Is No Such Thing as 'Overbanked' - Bank Think -- A recent American Banker story suggested that Chicago has become "overbanked." But casually asserting that a major American city is overburdened by local financial institutions dismisses the importance of community banks to our communities and overall banking system. In fact, that assertion runs counter to what many bankers view as a dangerous trend: the consolidation of the banking industry into fewer and fewer hands.  The diverse U.S. banking system of many community-based institutions has been essential for our nation's economy. Community banks are highly capitalized and locally owned institutions that reinvest in the communities in which they operate. As the only physical banking presence in nearly one in five U.S. counties, community banks are critical sources of financing, providing more than half of the nation's small-business loans under $1 million.  As locally owned institutions, community banks are held accountable by their communities and have an inherent incentive to treat their customers fairly. After all, you just can't afford to take advantage of a customer who knows you — and your other customers — on a first-name basis. Community banks are deeply involved in local affairs and use that knowledge to support prosperity county by county and neighborhood by neighborhood across the nation.  Our banking system is plagued not by oversupply, but rather consolidation that has shrunk the number of U.S. banks from more than 18,000 to roughly 6,000 in the past 30 years. This rising concentration — fueled in part by increasing regulatory burdens — puts many American communities in jeopardy of losing access to financial services. According to the Federal Deposit Insurance Corp., 16.3 million people in roughly one in three U.S. counties would have limited or no physical access to mainstream banking services without the presence of community banks.

 Index of Banking Activity: July IBA at 55.4 -Banking activity clung to a modest level of expansion in July according to the latest reading of American Banker's Index of Banking Activity, edging up from a relatively weak reading a month earlier. The IBA Composite Index rose to 55.4 in July compared to 54.9 in June. That June reading had been the weakest for the IBA since January. A noteworthy contributor to the gain came from a rise in the component that tracks real estate conditions across respondents' local markets. That component climbed to a reading of 57.3, up from 54.2 in June, with bankers in the Northeast and West signaling the strongest improvements. The July survey was not uniformly positive however. Respondents continue to report pressure on pricing for new loan business, and the July survey also saw some falloff in the pace of growth for consumer-loan applications, particularly in the South. In addition, bankers continue to express frustration with net interest margins, a concern unlikely to abate soon given uncertainty about the Federal Reserve's plans for interest rates over the next few months.

FDIC: Fewer Problem banks, Residential REO Declined in Q2 --  The FDIC released the Quarterly Banking Profile for Q2 today: Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $43.6 billion in the second quarter of 2016, up $584 million (1.4 percent) from a year earlier. The increase in earnings was mainly attributable to a $5.2 billion (4.8 percent) increase in net interest income and a $981 million decline in expenses for litigation reserves at a few large banks. Banks increased their loan-loss provisions by $3.6 billion (44.2 percent) compared to a year ago, partly in response to rising levels of troubled loans to commercial and industrial borrowers, particularly in the energy sector....“Income and revenue both increased from a year ago, loan growth remained strong, the number of unprofitable banks was at an 18-year low, and there were fewer banks on the problem list. Community banks reported strong net income, revenue, and loan growth,” “Problem List” Continues to Shrink: The number of banks on the FDIC’s Problem List fell from 165 to 147 during the second quarter. This is the smallest number of problem banks in more than seven years and is down significantly from the peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $30.9 billion to $29.0 billion during the second quarter. Two banks failed during the quarter. Deposit Insurance Fund’s Reserve Ratio Surpasses 1.15 Percent Benchmark: The DIF increased $2.8 billion during the second quarter, from $75.1 billion at the end of March to $77.9 billion at the end of June, largely driven by $2.3 billion in assessment income. The DIF reserve ratio rose from 1.13 percent to 1.17 percent during the quarter. Under previously approved FDIC regulations, once the reserve ratio exceeds 1.15 percent, lower regular assessment rates will go into effect. As a result of lower rates, the FDIC estimates that regular assessments paid by banks to the FDIC will decline by about one-third.

Banks Make Progress Freeing Selves from FDIC Loss- Sharing Pacts - - Regulators and failed-bank buyers are finally managing to negotiate an end to loss-share agreements inked during the financial crisis. Banks and the Federal Deposit Insurance Corp. have infrequently agreed on early ends to their loss-sharing deals, but that may be changing. Bank of the Ozarks, one of the most prolific failed-bank buyers, reached an agreement last month with the FDIC to terminate all seven of its outstanding loss-share agreements. That agreement is the most significant early-termination accord so far, and it could be an ice-breaker for other banks eager to exit similar loss-share deals.When the FDIC seizes and sells a failed bank, it agrees to reimburse the buyer for a portion of the failed bank’s loan losses, usually for five years. Such loss-sharing agreements make acquiring failed banks a viable strategy for buyers, by reducing exposure to problematic assets. These arrangements also have drawbacks. They involve complex accounting and, over time, amortization of the indemnification asset tied to the pacts can reduce a bank’s noninterest income. The administrative requirements, including collection efforts, can be particularly burdensome. As a result, banks are often keen on closing out the loss-share agreements as early as possible. For some banks, loan losses – and hence payments from the FDIC — have been lower than expected, while loss-share bookkeeping and reporting costs have been higher. From the FDIC’s perspective, too, administrative costs can make early termination appealing. Even when both sides are willing to consider an early end to such deals, negotiations have proven difficult, due largely to accounting challenges like the uncertainty of estimating future losses.

Production Profits Doubled in 2Q with Lower Costs: MBA: Production profits rose during the second quarter amidst higher volumes and lower expenses, the Mortgage Bankers Association reported in its Quarterly Mortgage Bankers Performance Report. During the second quarter, independent mortgage banks and mortgage subsidiaries of chartered banks recorded a $1,686 net gain for each originated loan in the second quarter. During the first quarter, the net gain per loan was much lower at $825. "Production profits more than doubled in the second quarter of 2016, as production volume rose and expenses dropped to a level not seen since the third quarter of 2015," said Marina Walsh, MBA vice president of industry analysis, in a news release Tuesday. "Mortgage lenders also benefited from higher loan balances that reached a series-high of $245,394 and drove production revenue to a series-high of $8,807 per loan." Additionally, the MBA reported that average production volume rose to $654 million and 2,721 loans per company in the second quarter from $517 million and 2,196 loans in the first quarter. The situation was less peachy on the servicing side, though. Companies reported a $160 net loss per loan for servicing versus a net loss per loan of $118 a quarter earlier, as a result of mortgage servicing rights markdowns and amortization caused by elevated prepayments. With MSR amortization and gains and losses for servicing rights valuations excluded, servicing operating income was just $192 per loan versus $205 per loan in the first quarter.

Struggling Malls Pose Outsized Risk to CMBS | Asset Securitization Report -- Like used cars and retired pro football players, regional shopping malls do not age well. In a span of no more than a decade, a popular mall with high-end anchor stores and boutique retail tenants can fall into substandard Class B or C property condition, left behind by shifting customer demographics or newer amenities at rival shopping centers. More so today, they also face the reality of more consumers choosing to stay home to shop online. When these malls become passé, that's when trouble starts for commercial mortgage bond investors, who can sustain outsized losses on their exposure to these properties, compared with other kinds of collateral such as office buildings, hotels and industrial property. In a report published Thursday, Moody's Investors Service warned that loans backed by shopping centers are an increasing cause of concern for mortgage bond investors and provided some criteria for evaluating the long-term viability of regional malls. "The ability of a mall to adapt to this changing environment and find new ways to attract shoppers is key to its ongoing success," the report states. "Very few of the top tenants in malls 20 years ago are still strong performers — or even in still in business — today." Moody's looked at the loss severity on loans backed by 30 regional malls that have liquidated since 2008: each averaged 75%, almost twice as severe as the 45% average for all other CMBS loan liquidations in that time period. In the case of 10 of the failed malls, the loss severity was over 100%. Loans backed by shopping malls are typically structured no differently than other kinds of commercial mortgages: they have 10-year tenors with large balloon payments due at maturity, meaning they amortize very little during their terms. The issue is that malls can have relatively short lives as premier properties, and so may need new capital investments — and thus new financing — within a decade to expand their shelf life.

 Why Subprime Mortgages Lend Themselves to Securitization - There's no shortage of banks making large mortgages to borrowers with pristine credit and plenty of liquid assets. Yet very few of these loans get bundled into collateral for mortgage bonds, putting them in the hands of capital markets investors. Contrast this with loans to borrowers with shaky or damaged credit, which many lenders are reluctant to make, but which are far more likely to be securitized. Overall, mortgage loan originations remained steady in the second quarter, with one- to four-family home originations up 4.5% from the prior quarter, according to the Mortgage Bankers Association. Yet there were just six securitizations of prime, jumbo mortgages totaling $3.7 billion in the first seven months of the year, according to Fitch Ratings. One player, Two Harbors Investment Corp., has announced plans to exit the market. The difference, according to Sreeni Prabhu, chief executive and chief investment officer of Angel Oak Capital, is that potential sponsors of prime jumbo mortgage bonds have a tough time competing for loans with banks that want to hold them on their balance sheets. By comparison, there is much less competition to acquire subprime loans. Banks have no interest in keeping them on their books. And the higher interest rates on these loans makes timing the market less tricky. Mortgage bonds backed by this kind of collateral can offer an attractive premium, even when prevailing interest rates are rising.

Credit Bureaus Are Making Lenders Buy Trended Data They Dont Need  -- Talk about jumping the gun. Equifax and TransUnion have stopped offering traditional credit reports, replacing them with the more expensive trended credit reports that Fannie Mae plans to start using, but that other investors don't. The move has forced mortgage lenders to pay for extra data they don't need and their investors don't require. "The industry now has trended credit data whether you want it or not," said Stan Baldwin, chief operating officer of credit reporting agency Informative Research, a company that provides merged reports from the bureaus to lenders. The two credit bureaus stopped selling the traditional reports earlier this month, well before the Sept. 24 implementation date that Fannie Mae has set to begin using trended data in its new Desktop Underwriter 10.0."There won't be an option to get the old version, but the old data's still there — it's just that the trended data is added," said Susan Chana, a senior director of public relations at Equifax. While a traditional credit report provides a "snapshot" of how borrowers have been using credit instruments like cards and auto loans, trended data shows how consumers have utilized these credit trade lines going back 24 months in Equifax's case and 30 months in TransUnion's. Equifax does charge a slightly higher price that varies by user for the trended data, Chana said. Both bureaus had expected to charge more for the expanded information

Bank of America Edges Closer to Settlement Target: Bank of America is approaching the consumer-relief target set in its mortgage settlement with the Department of Justice and six states, according to the settlement's monitor. The monitor, Eric Green, said he and his staff conditionally approved $1.93 billion in consumer-relief credit for the first quarter of 2016. Altogether, Bank of America has completed 91% of the $7 billion in consumer relief dictated by the settlement. "If Bank of America maintains its current pace in providing consumer relief, it will fulfill its obligations under the settlement agreement this year, well ahead of the four-year deadline," Green said in a news release Wednesday. More than $1.7 billion of the credit approved by Green for the first quarter came in the form of modifications to 64,072 loans. Additionally, $114 million of the credit Bank of America requested was community reinvestment and neighborhood stabilization in the form of mortgages, real estate and money that the bank donated to municipalities, land banks, nonprofits and other entities. The bank also received credit for nearly $54 million in new loans to 5,336 low- and moderate-income first-time homebuyers and borrowers in HUD-designated "Hardest Hit Areas" or to borrowers who previously lost homes to foreclosures or short sales.

Foreclosure crisis worsens in Massachusetts, spurring cries of state inaction  -- The effects of the Great Recession may be receding, but many Massachusetts homeowners remain underwater. The number of foreclosures is rising, and that trend is expected to continue. The reason, experts say, is a backlog of old foreclosures that were stalled due to a state law that are only now proceeding. But advocates for homeowners say the state is also not doing enough to help struggling homeowners.According to data from The Warren Group, a real estate information company, there were more than 5,000 foreclosure petitions filed in Massachusetts between April and June 2012. By the second quarter of 2013, that number dropped to 820 petitions. Since then, foreclosures have been steadily increasing. This past June marked the 28th consecutive month of year-over-year increases in foreclosure starts, with 1,002 foreclosure petitions filed. The numbers of foreclosure auctions and completed foreclosures have also risen the last two years — although the numbers are still lower than at the height of the crisis in 2007 and 2008. State officials say the steep drop in 2012, and the growth today, are due primarily to state law. Massachusetts passed laws in 2007, 2010 and 2012 aimed at reducing foreclosures. The laws gave more protections to homeowners — for example, extending the time a homeowner has to pay off a loan before foreclosure proceedings begin.

FTC Secures Permanent Ban for Mortgage Modification Scammers: The Federal Trade Commission has obtained a court order barring the owners of several Florida companies that operated under the guise of being law firms from offering mortgage loan modification and debt relief services. The ban signed by U.S. District Court Judge Marcia Morales Howard resolves Federal Trade Commission charges that the three men — Edward Rennick 3rd, Michael Lanier and Rogelio "Roger" Robles — falsely told homeowners in financial distress that they would provide legal representation to prevent foreclosure or lower loan payments. The order also covers the entities the three were associated with. Additionally, it was alleged that the men and their companies, which include Lanier Law LLC, Fortress Law Group, Redstone Law Group and Surety Law Group, would illegally charge customers thousands of dollars in advance, the FTC said in a news release Thursday. A permanent injunction agreed to by Rennick, Surety Law Group and Redstone Law Group blocks them from selling secured and unsecured debt relief products or services, misrepresenting any financial products and services and violating the Do Not Call Registry rules. Additionally, the court levied an $8 million penalty, which will be suspended when the parties surrender frozen assets. In addition, the court imposed an order with similar terms on Lanier, Robles and their companies. This separate order also stipulated a $13.5 million fine, representing the net revenues they earned from their allegedly fraudulent activities.

Freddie Mac: Mortgage Serious Delinquency rate unchanged in July -- Freddie Mac reported that the Single-Family serious delinquency rate was unchanged in July at 1.08%, the same as in June.  Freddie's rate is down from 1.48% in July 2015. This ties the lowest rate since July 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  Although the rate is generally declining, the "normal" serious delinquency rate is under 1%.   The Freddie Mac serious delinquency rate has fallen 0.40 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will be below 1% in two or three months.

Fannie Mae: Mortgage Serious Delinquency rate declined in July, Lowest since May 2008 - Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in July to 1.30%, down from 1.32% in June. The serious delinquency rate is down from 1.63% in July 2015. These are mortgage loans that are "three monthly payments or more past due or in foreclosure".   This is the lowest rate since May 2008. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.  Although the rate is generally declining, the "normal" serious delinquency rate is under 1%.   The Fannie Mae serious delinquency rate has fallen 0.33 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until next summer.

Lawler: Table of Distressed Sales and All Cash Sales for Selected Cities in July - Economist Tom Lawler sent me the table below of short sales, foreclosures and all cash sales for selected cities in July.  On distressed: Total "distressed" share is down year-over-year in all of these markets (except Springfield).   Short sales and foreclosures are down in all of these areas. The All Cash Share (last two columns) is mostly declining year-over-year. As investors continue to pull back, the share of all cash buyers continues to decline.

Realtors Press HUD for Quicker Action on FHA Condo Rules: The National Association of Realtors is calling on the Department of Housing and Urban Development to speed up implementation of reforms to the Federal Housing Administration's condominium reforms. Legislation signed by President Obama in July that makes numerous reforms to government housing programs included provisions that reduce restrictions on condominium buildings being FHA approved so that more FHA borrowers can purchase condominium units. The Realtors are hoping HUD will issue an interim proposed rule soon that will allow some of the condo provisions to go into effect right away. But some in the housing industry worry a slow rulemaking process could delay implementation to after the November elections and the transition to a new administration. The Realtors estimate that less than 10% of condominiums currently qualify for FHA mortgage insurance. "Realtors and homebuyers alike have been waiting for relief on FHA's condo regulations for years, and we're nearly at the finish line on owner-occupancy ratios, recertification, and other important issues," said Tom Salomone, president of the Realtors, in a recent statement. "NAR is encouraging leaders at HUD to move quickly and in the spirit of the law as they implement the provisions of H.R. 3700, and we're hopeful that we'll see action on this soon." Under the bill, Congress lowered the FHA's requirement for owner-occupied condominium units in a development to 35% from 50%. The new law also directs FHA to streamline its condominium recertification process and allow more commercial space in FHA-approved condominium buildings.

 Comradely capitalism: How America accidentally nationalised its mortgage market -- The Economist - First, banks have partially withdrawn from the mortgage game after facing swathes of new rules and $110 billion of fines for misconduct. They still own mortgage-backed bonds and they still make home loans to wealthy folk, which they keep on their balance-sheets. But with the exception of Wells Fargo they are less keen on writing riskier loans in their branches and feeding them to securitisers. New, independent firms like Quicken Loans and Freedom Mortgage have filled the gap. They originate roughly half of all new mortgages.  The second big change is that the government's improvised rescue of the system in 2008-12 has left it with a much bigger role (see chart 3). It is the majority shareholder in Freddie Mac and Fannie Mae, mortgage companies that were previously privately run (though with an implicit guarantee). They are now in "conservatorship", a type of notionally temporary nationalisation that shows few signs of ending. Other private securitisers have withdrawn or gone bust. This means that the securitisation of loans, most of which used to be in the private sector, is now almost entirely state-run. Along with Fannie and Freddie, the other main players are the Veterans Affairs department (VA), the Federal Housing Administration (FHA) and Ginnie Mae, which helps the FHA and VA package loans into bonds and sell them.

Regulators Down Payment Disconnect Puts Strain on Homeownership: Amid the constant regulatory ambiguity that has become commonplace for lenders since 2011, they have also received two distinctly different messages relating to bond loans offered by down payment assistance programs. On one hand, regulators and industry critics have encouraged lenders to participate in programs which benefit the very borrowers for whom the majority of the protections in the Dodd-Frank Act were intended to support. Yet, almost every general regulation passed by the Consumer Financial Protection Bureau has exponentially increased the difficulty in making these loans. For instance, the loan officer compensation laws make bond loans inherently unprofitable. The TILA-RESPA Integrated Disclosure rules create even more barriers due to the possibility of tolerance violations and timing complications. Now, the Office of the Inspector General for the Department of Housing and Urban Development is openly and publicly disagreeing with both Federal Housing Administration and HUD's own Deputy Secretary as to whether such bond loans are permissible if they rely on premium pricing to fund the housing assistance. Specifically, FHA explicitly states that such lending is lawful, but HUD's OIG is advising lenders of an opposing view which it intends to rely upon and enforce in connection with its audits. HUD's OIG is going so far as to bring the matter to Congress for resolution. In the meantime, however, lenders are essentially making such loans at their own risk.

Why Low-Down-Payment Mortgages Could Be a Tough Sell: When Fifth Third Bancorp this summer began offering mortgages with 3% down, it joined a growing list of big banks that have made splashy commitments this year to expanding access to homeownership. Through a partnership with Freddie Mac, the Cincinnati bank is offering so-called "Home Possible" loans to borrowers in underserved neighborhoods. It has also sweetened the deal, offering up to $3,600 in down-payment assistance — a feature not offered by its larger peers. But applicants are not exactly lining up at the door — at least not yet. Fifth Third has received about 70 applications since July, though it has a goal of collecting 850 by the end of the year. The bank says it is confident it will meet its target as marketing efforts continue to ramp up. The slow start at Fifth Third illustrates some of the logistical challenges with low-down-payment programs, which are on the rise across the industry. After years of facing tight credit standards, many prospective borrowers are simply unaware that they can get a mortgage with so little skin in the game. And, following the housing crash, many are wary of doing so, observers said. Offering low-down-payment loans simply requires extensive community outreach. "There's a lot of grass-roots effort to make sure we have a lot of community involvement," said Ed Robinson, head of Fifth Third Mortgage. He added while the number of loans funded so far is "very small in number," the demand in the marketplace is high. To attract interested buyers in two of its largest markets, Fifth Third has partnered with a Spanish-language website in Florida and a black-owned newspaper in Michigan. It has also spent time reaching out to nonprofits and real estate agents in low-income neighborhoods.After years of essentially being shut of the mortgage market, prospective borrowers with low incomes or blemished credit histories are reluctant to move back in, according to Michael Calhoun, president of the Center for Responsible Lending.

Fees Meant to Shield GSEs from Risk Are Hurting Homebuyers | Bank Think: There's a conversation happening right now within the housing industry about how best to manage risk inside the government-sponsored enterprises Fannie Mae and Freddie Mac. It's a good one to have. But while we work to solve these complex problems, homebuyers are paying a steep price at the closing table in the form of unnecessary fees that, for some, put homeownership out of reach. How did we get here? It started in 2008, when the Federal Housing Finance Agency and the GSEs implemented loan level price adjustments, or LLPAs. Loan-level price adjustments are fees paid by the borrower either as part of upfront closing costs or over the life of the mortgage. They were intended to help the GSEs manage risk. To be clear, NAR believes that FHFA and the GSEs should continue taking responsible steps to manage their risk exposure. However, we also believe the GSEs can do so even after reducing or eliminating LLPAs. Three significant factors have led us to this conclusion: improved mortgage credit quality, stricter regulations on risk management within the industry, and the fact that guarantee fees, or "g-fees," charged to homebuyers have risen steadily since 2011 to cover Fannie and Freddie's risk exposure. We are not alone in this belief either. Earlier this year, the National Association of Realtors — along with 24 other organizations — sent a letter to FHFA Director Mel Watt on the need to reduce or eliminate LLPAs.We didn't find agreement from FHFA. To the contrary, the FHFA released a report on the fees charged by the GSEs finding "no compelling economic reason to change the overall level of fees." This is a politically safe position for Director Watt, but it doesn't make sense for consumers.

MBA: "Mortgage Applications Increase in Latest Weekly Survey" - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey  Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 26, 2016.  ... The Refinance Index increased 4 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 5 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) remained unchanged at 3.67 percent, with points decreasing to 0.33 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990.  Refinance activity has increased this year since rates have declined.  However it would take another significant move down in mortgage rates to see a large increase in refinance activity.  The second graph shows the MBA mortgage purchase index.  The purchase index is "5 percent higher than the same week one year ago".

Purchase Applications Are at Five-Year High: Freddie Mac: Home purchase applications are at their highest level in almost five years, driving the year-over-year improvement in the Freddie Mac Multi-Indicator Market Index. The June index is 85, up just 0.08% from May but an increase of 5.76% over June 2015. This is the 50th consecutive month of year-over-year increases. The purchase application component is at 77.5, an increase of 1.75% from May and 18.66% over the previous June. The index and its components are benchmarked to 100 and any item below 20 points of that level is considered weak. So even with the large improvement since last June, the purchase application component is thought of as weak. "Low mortgage rates and consistent job gains are helping to bolster homebuyer demand, which is reflected in the MiMi purchase applications indicator," said Len Kiefer, Freddie Mac deputy chief economist, in a press release. The other three index components are payment-to-income at 68.7, down 2.19% from a year ago; current on mortgage, 87.0, up 5.19%; and employment, 106.8, up 3.41%. North Carolina had the largest month-to-month improvement, up 0.91%, while Charlotte was the most improved metropolitan area, up 1.7%. The next three areas with the largest month-to-month improvement were all in upstate New York: Albany, up 1.53%; Syracuse, up 1.49%; and Buffalo, up 1.43%. Oregon had the largest year-over-year improvement, up 12.28%, while Orlando, Fla., had the largest improvement for a metro area, up 16.85%.

USDA to Lower Fees to Lenders in October: Lenders who use the U.S. Department of Agriculture Rural Housing Service's Single Family Housing Guarantee Program will pay less beginning in October, the department said last week. The USDA will lower the upfront and annual fees charged to lenders starting Oct. 1. The department cited low delinquency and foreclosure rates as the reason why it chose to lower fees. The upfront fee will be lowered from 2.75% of the loan-at-close amount to 1%. And the annual fee will drop to 0.35% of the unpaid principle loan balance from 0.45%. "When our borrowers succeed, the program succeeds," USDA Rural Housing Service Administrator Tony Hernandez said in a news release. "Excellent overall performance in our Single Family Housing Guaranteed Loan Program means we can charge less for the life-changing opportunity to own a home." Black Knight: House Price Index up 0.8% in June, Up 5.3% year-over-year --Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.
From Black Knight: Black Knight Home Price Index Report: June 2016 Transaction

• U.S. Home Prices Up 0.8 Percent for the Month; Up 5.3 Percent Year-Over-Year
• At $265K, the U.S. HPI is up 32.6 percent from the market's bottom and is within just 1.1 percent of a new national peak
• Home prices in six of the nation's 20 largest states and 14 of the 40 largest metros hit new peaks in June
The year-over-year increase in this index has been about the same for the last year.
Note that house prices are close to the bubble peak in nominal terms, but not adjusted for inflation.

Case-Shiller: National House Price Index increased 5.1% year-over-year in June -- S&P/Case-Shiller released the monthly Home Price Indices for June ("June" is a 3 month average of April, May and June prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: Home Price Gains in June Concentrated in South and West According to the S&P CoreLogic Case-Shiller Indices The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in June, unchanged from last month. The 10-City Composite posted a 4.3% annual increase, down from 4.4% the previous month.The 20-City Composite reported a year-over-year gain of 5.1%, down from 5.3% in May...Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% while both the 10-City Composite and the 20-City Composite posted a 0.8% increase in June. After seasonal adjustment, the National Index recorded a 0.2% month-over-month increase, and both the 10-City Composite and 20-City Composite posted 0.1% month-over-month decreases. After seasonal adjustment, nine cities saw prices rise, two cities were unchanged, and nine cities experienced negative monthly prices changes.Feedspot: The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 11.1% from the peak, and down 0.1% in June (SA). The Composite 20 index is off 9.1% from the peak, and down 0.1% (SA) in June. The National index is off 2.6% from the peak, and up 0.2% (SA) in June. The National index is up 31.6% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 4.3% compared to June 2015. The Composite 20 SA is up 5.1% year-over-year. The National index SA is up 5.1% year-over-year. Note: According to the data, prices increased in 10 of 20 cities month-over-month seasonally adjusted.

Home Prices in 20 U.S. Cities Climbed 5.1%, Led by Northwest - Home prices in 20 U.S. cities continued to moderate in June, according to S&P CoreLogic Case-Shiller data released Tuesday. 20-city property values index increased 5.1 percent from June 2015, matching the median forecast and the smallest gain since August, after a 5.3 percent year-over-year advance in May National home-price gauge also rose 5.1 percent from 12 months earlier On a monthly basis, the seasonally adjusted 20-city gauge fell 0.1 percent for a second month The report shows more gradual price appreciation that’s allowing the housing market to strengthen. New-home sales unexpectedly surged in July to the strongest level in more than nine years. At the same time, consistent appreciation might convince more sellers to put their homes on the market, and cheap borrowing costs and solid labor-market gains are supporting potential buyers. “Overall, residential real estate and housing is in good shape,” David Blitzer, chairman of the S&P index committee, said in a statement. “While the real estate sector and consumer spending are contributing to economic growth, business capital spending continues to show weakness.” All 20 cities in the index showed a year-over-year gain, led by a 12.6 percent advance in Portland, Oregon New York and Washington posted the smallest 12-month advances After seasonal adjustment, Portland had the biggest month-over-month increase at 0.7 percent, while Atlanta and Chicago showed the largest declines at 0.6 percent Nine showed seasonally adjusted price decreases in June over the prior month, including New York, Detroit and Cleveland.

US Home Prices Suffer 3rd Consecutive Decline For First Time Since 2012 -- For the first time since Feb 2012, S&P CoreLogic's 20-City Composite price index declined for 3 straight months (dropping 0.07% in August, in line with expectations). The non-seasonally-adjusted annual growth rate of home prices rose just 5.13% - the slowest since since Aug 2015. San Francisco and San Diego showed the weakest growth of the 20-City composite while Portland and Seattle rose the most MoM, and Atlanta and Chicago saw the largest declines in price MoM. All 20 cities in the index showed a year-over-year gain, led by a 12.6 percent advance in Portland, Oregon. New York and Washington posted the smallest 12-month advances. After seasonal adjustment, Portland had the biggest month-over-month increase at 0.7 percent, while Atlanta and Chicago showed the largest declines at 0.6 percent. Nine showed seasonally adjusted price decreases in June over the prior month, including New York, Detroit and Cleveland.  “In the strongest region, the Pacific Northwest, prices are rising at more than 10%; in the slower Northeast, prices are climbing a bit faster than inflation. Nationally, home prices have risen at a consistent 4.8% annual pace over the last two years without showing any signs of slowing. “Overall, residential real estate and housing is in good shape. Sales of existing homes are at running at about 5.5 million units annually with inventory levels under five months, indicating a fairly tight market. Sales of new single family homes were at a 654,000 seasonally adjusted annual rate in July, the highest rate since November 2007. Housing starts in July topped an annual rate of 1.2 million units. While the real estate sector and consumer spending are contributing to economic growth, business capital spending continues to show weakness.” Chart: Bloomberg

 Real Prices and Price-to-Rent Ratio in June -- The year-over-year increase in prices is mostly moving sideways now around 5%. In June, the index was up 5.1% YoY. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).  It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 2.6% below the bubble peak.   However, in real terms, the National index is still about 17.0% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through June) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to November 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 2005 levels, and the CoreLogic index (NSA) is back to July 2005. The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). CPI less Shelter has declined over the last two years pushing up real house prices. In real terms, the National index is back to January 2004 levels, the Composite 20 index is back to October 2003, and the CoreLogic index back to November 2003. In real terms, house prices are back to late 2003 levels.On a price-to-rent basis, the Case-Shiller National index is back to July 2003 levels, the Composite 20 index is back to April 2003 levels, and the CoreLogic index is back to June 2003. In real terms, and as a price-to-rent ratio, prices are back to late 2003 - and the price-to-rent ratio maybe moving a little more sideways now.

 No Country for Housing Inventory: Housing inventory continues to remain near record lows while Bay Area housing gets even nuttier.--Last week I was driving throughout the Inland Empire and one thing becomes rather apparent.  There is a ton of building out in the Inland Empire – this applies to work on freeways, new housing communities, and new commercial development.  Also, traffic is a nightmare.  Westside traffic is also horrendous.  There are many people that make the commuting odyssey each day from the Inland Empire into L.A. or O.C. and that commute is only going to get worse from what I was seeing.  I was also in the Bay Area recently and prices there defy gravity.  In the Inland Empire you can get a McMansion while in the Bay Area you will get a crap shack for one million dollars if you are lucky.  It really boils down to a lack of housing inventory and uncertainty that has made builders anxious since the housing bubble is fresh in their collective memories.  But alas, the public is drawn to housing like moths to the light.  Being stuck in mind crushing traffic for a brief period only highlights that people are willing to sacrifice quality of life for a piece of the American Dream. Home prices have been moving steadily up for a few years now and typically when prices start moving up and inventory is tight, builders get building even if this means converting apartments into condos in areas where NIMBYism rules the day.  That is simply not the case this time around (not in mass and only now does it seem like building is accelerating).  Builders look at demographics and realize that renting is going to be the bigger trend moving forward. And this is apparent when you look at existing housing inventory: Back in the summer of 2011 there were 4.5 million homes for sale.  Today it is down to 2.7 million.  That is a big drop in available inventory.  It also helps to explain why people are desperate to spend ridiculous amounts of money on a crap shack.  Say you buy a $700,000 crap shack with 10 percent down.  You take out a $630,000 mortgage at 3.5 percent.  The true cost of the home is going to be $1,018,433.  In other words, even when housing cheerleaders house hump the low mortgage rate, you are still paying $1 million dollars for a piece of junk over a 30 year note.

NAR: Pending Home Sales Index increased 1.3% in July, up 1.4% year-over-year --From the NAR: Pending Home Sales Tick Up in July Pending home sales expanded in most of the country in July and reached their second highest reading in over a decade, according to the National Association of Realtors®. Only the Midwest saw a dip in contract activity last month. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.3 percent to 111.3 in July from a downwardly revised 109.9 in June and is now 1.4 percent higher than July 2015 (109.8). The index is now at its second highest reading this year after April(115.0).... The PHSI in the Northeast moved up 0.8 percent to 96.8 in July, and is now 1.1 percent above a year ago. In the Midwest the index decreased 2.9 percent to 105.8 in July, and is now 1.1 percent lower than July 2015.
Pending home sales in the South inched higher (0.8 percent) to an index of 123.9 in July and are now 0.4 percent higher than last July. The index in the West surged 7.3 percent in July to 108.7, and is now 6.2 percent above a year ago. 
This was above expectations of a 0.6% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in August and September.

Pending Home Sales Tumble For 2nd Month In A Row - Thanks to a series of negative revisions, pending home sales have now tumbled YoY for two consecutive months (dropping 2.2% in July versus an expectation of a 2.2% rise). The revisions enabled the MoM print of +1.3% to beat expectations optically (thanks to a surge in The West sales +7.3%). The good news for affordability is that NAR's Larry Yun notes homebuilders focusing down-market; the bad news, obviously, is that more supply will disable the low-inventory bid holding prices up at record highs. Probably time to hike rates... Revisions pushed the series lower, making this the 2nd monthly decline YoY in a row... Thanks to revisions, the MoM gain of 1.3% headline beat expectations, thanks in large part to The West

  • Northeast up 0.8%; June rose 3.2%
  • Midwest fell 2.9%; June rose 0.9%
  • South up 0.8%; June fell 2.9%
  • West up 7.3%; June fell 1.3%

Of course the lagged movement in mortgage rates is still a positive... (until The Fed hikes?)

 Construction Spending unchanged in July --Earlier today, the Census Bureau reported that overall construction spending was "nearly the same" as in June: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2016 was estimated at a seasonally adjusted annual rate of $1,153.2 billion, nearly the same as the revised June estimate of $1,153.5 billion. The July figure is 1.5 percent above the July 2015 estimate of $1,135.9 billion.  Private spending increased and public spending decreased in July: Spending on private construction was at a seasonally adjusted annual rate of $875.0 billion, 1.0 percent above the revised June estimate of $866.5 billion. ... In July, the estimated seasonally adjusted annual rate of public construction spending was $278.2 billion, 3.1 percent below the revised June estimate of $287.0 billion. This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Residential and public spending have slumped a little recently. Private residential spending has been generally increasing, but is 34% below the bubble peak. Non-residential spending is now 3.6% the peak in January 2008 (nominal dollars). Public construction spending is now 15% below the peak in March 2009. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 2%. Non-residential spending is up 7% year-over-year. Public spending is down 7% year-over-year. Looking forward, all categories of construction spending should increase in 2016. Residential spending is still fairly low, non-residential is increasing, and public spending is also generally increasing after several years of austerity. This was well below the consensus forecast of a 0.6% increase for July, however construction spending for the previous two months were revised up.

July 2016 Construction Spending Flat: The headlines say construction spending was unchanged, and was significantly below expectations. The backward revisions make this series wacky - but the rolling averages significantly declined. Private construction now has little growth while public construction is in contraction. There is little evidence in this data of an improving construction sector. Public construction fell off of a cliff this month, whilst private construction seemed to hold its own (no improvement or decline). The backward revision for the previous months were upward. Not a good start for 3Q2016 GDP. Econintersect analysis:
  • Growth deceleration 1.3 % month-over-month and up 0.7 % year-over-year.
  • Inflation adjusted construction spending down 0.1 % year-over-year.
  • 3 month rolling average is 0.5 % above the rolling average one year ago, and decelerated 1.8 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.
  • Backward revision for the last 3 months was up.

This month's headline statement from US Census: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2016 was estimated at a seasonally adjusted annual rate of $1,153.2 billion, nearly the same as (±1.5%)* the revised June estimate of $1,153.5 billion. The July figure is 1.5 percent (±2.3%)* above the July 2015 estimate of $1,135.9 billion. During the first 7 months of this year, construction spending amounted to $647.7 billion, 5.6 percent (±1.3%) above the $613.1 billion for the same period in 2015. Spending on private construction was at a seasonally adjusted annual rate of $875.0 billion, 1.0 percent (±1.5%)* above the revised June estimate of $866.5 billion. Residential construction was at a seasonally adjusted annual rate of $445.5 billion in July, 0.3 percent (±1.3%)* above the revised June estimate of $444.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $429.5 billion in July, 1.7 percent (±1.5%) above the revised June estimate of $422.5 billion. In July, the estimated seasonally adjusted annual rate of public construction spending was $278.2 billion, 3.1 percent (±2.6%) below the revised June estimate of $287.0 billion. Educational construction was at a seasonally adjusted annual rate of $64.6 billion, 8.3 percent (±3.9%) below the revised June estimate of $70.4 billion. Highway construction was at a seasonally adjusted annual rate of $89.8 billion, 0.3 percent (±6.4%)* above the revised June estimate of $89.5 billion.

 Wolf Richter: Fear Spreads of a Housing Crash in Canada -Canadians have been gung-ho about their magnificent housing bubble, feeding it with an endless willingness to pay every higher prices, even as regulators and international institutions issued warnings, as short sellers began circling, as subprime liar-loan scandals made their reappearance, and as a generation was getting priced out of the hottest housing markets in Canada, the metros of Toronto and Vancouver, and as locals came up with an acronym to describe what has fired up the market: HAM – Hot Asian Money. But the Vancouver housing bubble, the hottest even in Canada, hit rough waters in early summer. By July the first serious troubles appeared. Even as apartment prices soared 27% year-over-year and detached house prices 38%, overall sales plunged 19%, while sales of detached homes plummeted 31% [Vancouver Housing Bubble, Meet Pin]. Then on August 2, British Columbia’s notorious 15% transfer tax on home purchases involving foreign investors took effect. Preliminary data indicate that sales over the first two weeks in August plunged 51% year-over-year, with sales of detached homes down 66%.And this flood of news on the Canadian housing bubble and speculations about a Canadian housing crash have now begun to slice into the previously imperturbable confidence of regular Canadians in their housing miracle. The housing related part of the Bloomberg Nanos Canadian Confidence Index just had its worst spill in the history of the monthly data series, going back to May 2013: The percentage of the respondents who expected a decline in local home prices jumped from 12% to 20.5% in one fell swoop.The percentage of those who expected home prices to rise dropped 2.3 percentage points to 41.4%, and the percentage of those expecting little change dropped 5.3 percentage points to 36.3%. Bloomberg:The reading marks a change from almost unbridled consumer optimism in a housing market that has carried the Canadian economy since the 2008 global financial crisis, even as policy makers warn price gains in some cities are unsustainable. That list of fretting policy makers, regulators, and other organizations now includes:  The IMF (January 2015), the Bank of Canada (most recently in June 2016), the Canada Mortgage and Housing Corporation (CMHC), which found “strong evidence of problematic conditions,” and the Office of the Superintendent of Financial Institutions (July 2016), which said that it would require smaller banks to stress-test their mortgage portfolios to ensure they could withstand a drop in Vancouver home prices of 50%.

Hotels: Occupancy Rate on Track to be 2nd Best Year --From STR: US hotel results for week ending 27 August The U.S. hotel industry recorded positive results in the three key performance metrics during the week of 21-27 August 2016, according to data from STR.  In year-over-year comparisons, the industry’s occupancy grew 4.3% to 67.5%. Average daily rate increased 4.2% to US$121.22. Revenue per available room rose 8.7% to US$81.85. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. The red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels. 2015 was the best year on record for hotels. So far 2016 is tracking just behind 2015, and well ahead of the median rate. Also 2016 is tracking just ahead of 2000 (the previous 2nd best year). The Summer travel period is ending, and the occupancy rate will decline seasonally over the next month.

Personal Income increased 0.4% in July, Spending increased 0.3% -- The BEA released the Personal Income and Outlays report for July:  Personal income increased $71.6 billion (0.4 percent) in July according to estimates released today by the Bureau of Economic Analysis ... personal consumption expenditures (PCE) increased $42.0 billion (0.3 percent).
... Real PCE increased 0.3 percent. The PCE price index was unchanged from June. Excluding food and energy, the PCE price index increased 0.1 percent in July.
The July PCE price index increased 0.8 percent year-over-year and the July PCE price index, excluding food and energy, increased 1.6 percent year-over-year. The following graph shows real Personal Consumption Expenditures (PCE) through July 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.The dashed red lines are the quarterly levels for real PCE. Both the increase in personal income and the increase in PCE was at consensus expectations. A solid start for Q3.

July 2016 Personal Consumption and Income Growth At Expectations.: The headline data this month continues to show consumer expenditure growth. This is postive for 3Q2016 GDP if one considers GDP as a good measure of the economy. The negative of the headlines is that year-over-year income is still growing slower than expenditures. There was again significant revision - and it is nearly impossible to ACCURATELY trend this data set to ascertain which way is up. When you think you know, the backward revisions reverse what you thought your understood. Nonetheless, the data was relatively strong this month - with the year-over-year growth very strong for the consumer end of the economy. This bodes well for 3Q2016 GDP.

  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend accelerated while consumption's growth rate is decelerating.
  • Real Disposable Personal Income is up 2.7 % year-over-year (published 2.2 % last month - now revised to 2.6 %), and real consumption expenditures is up 3.0 % year-over-year (published 2.8 % last month - now revised to 2.9%)
  • this data is very noisy and as usual includes moderate backward revision - this month the changes modified the year-over-year trends.
  • The second estimate of 2Q2016 GDP indicated the economy was expanding at 1.1 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - consumer income and expenditure grow at the same rate.
  • The savings rate continues to be low historically, and "declined" to 5.7 % this month.

  US Personal Spending Growth Slows As Savings Rate Jumps Most Since March -- A broadly in-line-with-expectations print in US income and spending data (+0.4% MoM and +0.3% MoM respectively) hides a bigger problem for the consumption-driven US economy. For the first time since March, the savings rate increased as US consumers dared not spend above their means (up from 5.5% to 5.7%).  Year-over-year, US spending growth is slowing once again, despite a bounce in incomes...Is this some oddly conservative behavior? Pushing the savings rate higher for the first time since March... This does not bode well for Q3 GDP for now with July off to a less exuiberant start.

Why Millennials, by the Numbers, Can't & Won't Grow the US Out of Trouble: As the Millennials are making their way into adulthood, countless economists and nervous Boomers have pinned their hopes on this generation to kickstart the moribund US economy. There are 3 basic sources of consumptive growth in a nation with twin budget and trade deficits...population growth, wage growth, and/or credit growth and population growth the greatest among these to drive greater demand. So, the growth of the population, and the Millennials in particular, is worth a pretty close look. I'll dive deep on the quantitative inferiority and just skim along on the inferior quality of Millennials vs. Boomers. It is true that there are more Millenials than Boomers. But to compare apples to apples, I'll compare the two groups as they made their way through the 15-34yr/old population segment. When the Boomers exited this segment in 1981 (heading for adult prime time), they numbered about 81 million. Likewise, the Millenials are now making their transition to adulthood and they number about 88m. Or simply put, there are about 6.7 million more Millenials than Boomers (comparing peak to peak). But to understand the impact of the two different generations, the chart below shows the total population growth during each generations time...since it is not just growth but the rate of growth that is paramount to make our economic system function. The Boomers represented an increase of 33 million (a 40% increase of the 15-34yr/old population) vs. the Millenials 9 million (a 10% increase in the 15-34yr/old population).Based on the generations relative population growth vs. total population, the Boomers added an average 0.8% annually vs. the Millenials which, on average, added 0.15% annually...or about 1/5th the impact the Boomers had on growth. Really simply, Millennials require far fewer new houses that did Boomers, far fewer new cars, far fewer new factories to produce the new goods, fewer new suppliers, far less new infrastructure to support them, etc. etc. The virtuous loop of growth creating growth is an absolute minimum. Millenials economic impact, by the numbers, is nothing like that of the Boomers now nor will it be akin to the Boomers over the coming decades.

 August 2016 Conference Board Consumer Confidence at 11-Month High: The Conference Board Consumer Confidence Index increased to 101.1, compared to 96.7 in July. The market expected (from Bloomberg) this index to come in between 94.5 to 98.3 (consensus 97.3). Analyst Opinion of Conference Board Consumer Confidence The index level this month is on the high side of the values seen during the last year. There is no apparent trend (one month of data is not a trend) - and this index has been jumping around within a narrow band for the last year. If the index maintains this value next month, then a positive upward trend would be validated. Note that this data is considered preliminary, and the cutoff for these results was 18 August 2016. Here is an excerpt from The Conference Board: The Conference Board Consumer Confidence Index®, which had decreased slightly in July, increased in August. The Index now stands at 101.1 (1985=100), compared to 96.7 in July. The Present Situation Index rose from 118.8 to 123.0, while the Expectations Index improved from 82.0 last month to 86.4. The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. "Consumer confidence improved in August to its highest level in nearly a year, after a marginal decline in July," said Lynn Franco, Director of Economic Indicators at The Conference Board. "Consumers' assessment of both current business and labor market conditions was considerably more favorable than last month. Short-term expectations regarding business and employment conditions, as well as personal income prospects, also improved, suggesting the possibility of a moderate pick-up in growth in the coming months."

Consumer Confidence Soars To 11-Month Highs (With 5 Standard Deviation Beat) --Slumping economic growth and rising gas prices don't matter. US Consumer Confidence jumped to 101.1 in August - highest since Sept 2015 - smashing expectations by almost 5 standard deviations as stocks hit record highs. Notably 'current expectations' rose to their highest since Aug 2007.Not as expected...“Consumer confidence improved in August to its highest level in nearly a year, after a marginal decline in July,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of both current business and labor market conditions was considerably more favorable than last month. Short-term expectations regarding business and employment conditions, as well as personal income prospects, also improved, suggesting the possibility of a moderate pick-up in growth in the coming months.” Consumers’ appraisal of current conditions improved in August. Those stating business conditions are “good” increased from 27.3 percent to 30.0 percent, while those saying business conditions are “bad” remained virtually unchanged at 18.4 percent. Consumers’ assessment of the labor market was also more favorable. Those claiming jobs were more “plentiful” increased from 23.0 percent to 26.0 percent, however, those claiming jobs are “hard to get” also rose, from 22.1 percent to 23.4 percent.

Black American Consumer Confidence Just Crashed Most In 15 Years - While consumer comfort among black Americans is more volatile than among white Americans, Bloomberg's confidence survey points to a massive collapse in comfort for black Americans last week (from an exuberant 47.9 to a dismal 37.7). This is the biggest percentage drop since Obama's Syria "red line" in Aug 2012 and biggest absolute drop since Feb 2001. The biggest plunge in Black Americans' comfort in over 15 years... And this happened while White American's comfort barely budged...

Food Price Deflation Cheers Consumers, Hurts Farmers, Grocers and Restaurants - WSJ: The U.S. is on track this year to post the longest stretch of falling food prices in more than 50 years, a streak that is cheering shoppers at the checkout line but putting a financial strain on farmers and grocery stores. The trend is being fueled by an excess supply of dairy products, meat, grains and other staples and less demand for many of those same products from China and elsewhere due to the strong dollar. Lower energy costs for transportation and refrigeration also are contributing to sagging food prices, say economists. Nationwide, the price of a gallon of whole milk on average was down 11% to $3.06 in July over a year ago; the price of a dozen large eggs fell 40% to $1.55 in the same period..Those great bargains at the grocery store are spreading pain across the Farm Belt. Farmers and ranchers are getting less money for raw milk, cheese and cattle, forcing them to slash spending. Tractor suppliers like Deere & Co. DE 0.22 % are cutting production due to the farming slump. Economists and food analysts say the supermarket price declines could last at least through year-end. The drop comes as weaker demand from China is resetting commodities prices in everything from cheese to iron ore. The current food-price slump soon could beat the nine months of year-to-year declines experienced in 2009 and 2010—the longest stretch since 1960, according to the Bureau of Labor Statistics. The price of food at home is down 1.6% on a seasonally unadjusted basis in the 12 months through July, says the BLS.

California Just Passed A $1 Billion Tax On The Whole Country That No One Noticed - The California State Assembly recently passed a bill that received minimal recognition by the press, outside of the state, but has substantial negative consequences for basically everyone in the country.  Once signed by Jerry Brown, the bill, known as AB 1066, will make California the only state in the entire country to provide overtime wages to ag workers after 8 hours a day or 40 hours per week.  This change will add about $1BN annually to the cost of growing food in California which will ultimately be passed along to consumers.  And since eating isn't really optional, this is effectively a $1BN tax that California has decided to levy on the entire country.  Worse yet, increasing food prices is essentially the most regressive form of "tax" possible given the disproportionate share of wages spent on food by low-income families.  And, while you may not know it, California is an agricultural powerhouse that produces roughly 1/3 of all vegetables consumed in this country and 2/3s of the fruits and nuts.

The Feds Just Gave Amtrak $2.4 Billion. This Is Why It Needs the Money  - In the waning days of his vice presidency, Joe Biden returned to the station—his home state station in Wilmington, Delaware—to announce the largest Department of Transportation loan in history: $2.45 billion dollars to buck up Amtrak’s Northeast Corridor. Joe is so hyped about the future of American rail, he broke out his hanky and wept. The struggling passenger rail system will spend that money upgrading railroad tracks and rehabbing four stations, including Union Station in Washington, DC and New York’s Penn Station. Amtrak will also seriously update its “high-speed” Acela service. The 28 slick new train sets—arriving in 2021 at the cost of a cool $2 billion—will increase passenger seating by a third, improve food options, and speed up on-board WiFi. They’ll be able to travel at 186 mph (today’s Acela hits 150 mph, while Japan’s standard bullet trains go 200 mph), even though current regulations prevent trains on this stretch of track from going above 160 mph. The trains will also come more frequently: every half hour between DC and New York during peak hours. Amazing how fast billions go, isn’t it? But truth is, Amtrak needs the help—especially its overburdened Northeast Corridor, which extends from Boston to DC. In 2015, a third of all Amtrak riders—that’s more than 11 million people—boarded a Northeast Corridor train. Low gas prices contributed to a drop-off in ridership last year, but in the mid-Atlantic, passenger numbers are still up by nearly 50 percent since 2000. Thanks to millennials (who are not super into driving), olds (who are getting their keys repossessed), and the profound annoyingness of air travel, rail is even beating out airplanes as the preferred DC to New York route. Three times over. But the Northeast Corridor’s infrastructure blows. According to a special congressional commission report released last year, hundreds of bridges along the route—some date back to 1880—need repairs. A series of fixable bottlenecks slow down service all along the coast. And the decades-old Acela equipment was built explicitly for Amtrak, which makes it hard to replace. Last year’s commission calculated that eliminating the backlog in basic infrastructure repairs would cost $1 billion every year until 2030. On the other hand, it estimated losing the corridor for just one day “could cost the country $100 million in added congestion, productivity losses, and other transportation impacts.”

Rail Week Ending 27 August 2016: All Rolling Averages Worsen And Remain In Contraction: Week 34 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' contraction worsened.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 539,657 carloads and intermodal units, down 6.2 percent compared with the same week last year. Total carloads for the week ending August 27 were 269,645 carloads, down 7.3 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 270,012 containers and trailers, down 5.1 percent compared to 2015. Four of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included grain, up 18.8 percent to 21,727 carloads; motor vehicles and parts, up 6 percent to 19,392 carloads; and farm products excl. grain, and food, up 2.1 percent to 16,465 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 27.5 percent to 10,076 carloads; coal, down 15.9 percent to 91,469 carloads; and metallic ores and metals, down 7.9 percent to 21,493 carloads. For the first 34 weeks of 2016, U.S. railroads reported cumulative volume of 8,395,455 carloads, down 11.3 percent from the same point last year; and 8,776,969 intermodal units, down 3 percent from last year. Total combined U.S. traffic for the first 34 weeks of 2016 was 17,172,424 carloads and intermodal units, a decrease of 7.2 percent compared to last year.

U.S. Light Vehicle Sales increase to 16.9 million annual rate in August -- Based on a preliminary estimate from WardsAuto (ex-Porsche), light vehicle sales were at a 16.89 million SAAR in August. That is down about 5% from August 2015, and down 5.0% from the 17.77 million annual sales rate last month. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for August (red, light vehicle sales of 16.89 million SAAR from WardsAuto).  This was below the consensus forecast of 17.1 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. Sales for 2016 - through the first eight months - are up slightly from the comparable period last year. After increasing significantly for several years following the financial crisis, auto sales are now moving mostly sideways ...

August Auto Sales A Disaster As Ford Admits "We Think Sales Have Reached A Plateau" - August auto sales were pretty much a disaster this morning with every single OEM missing analyst forecasts.  Ford executives provided the most sobering commentary on future auto sales saying they believe sales have "reached a plateau" and will be "at a lower level" in 2017.  When questioned on the notion that sales had "plateaued," Ford noted that "we're no longer in a period where we have a lot of pent-up demand coming out of the financial crisis."  Ford also noted that retail incentives continue to run at "historically high levels."  Below are some of the key comments from Ford executives describing the current conditions in the auto market: "For the remainder of the year, we continue to see retail in the industry provide incentives still running at historically high levels, but down versus the record that we experienced in 2015.  Looking ahead to 2017, we continue to see industry sales are strong, but at a lower level than this year." "Sales have reached a plateau.""It's just that we're no longer in a period where we have a lot of pent-up demand coming out of the financial crisis. So that's why, I think we use the term plateau""Comparisons for the rest of the year are going to be really tough." Ford also noted that dealer inventory ballooned to 81 days this August compared to only 62 days last year.  Moreover, fleet sales to rental companies were down 32% YoY.  Meanwhile, Ford's largest vehicle lines were all down YoY, including:  F-Series down 6.1%, Escape down 2.8%, Explorer down 15.5% and Fusion down 32.6%. Meanwhile, GM also missed with overall sales down 5.2% vs. estimates of -4.9%.  Dealer inventory also increased for GM to 74 days from 66 days last year.  Meanwhile, GM's popular pickups were also down YoY with the Silverado down 4.7% and the Sierra down 17.7%.   The other OEMs didn't do any better:

FAA forecast: 600,000 commercial drones within the year (AP) — There will be 600,000 commercial drone aircraft operating in the U.S. within the year as the result of new safety rules that opened the skies to them on Monday, according to a Federal Aviation Administration estimate. The rules governing the operation of small commercial drones were designed to protect safety without stifling innovation, FAA Administrator Michael Huerta told a news conference. Commercial operators initially complained that the new rules would be too rigid. The agency responded by creating a system to grant exemptions to some of the rules for companies that show they can operate safely, Huerta said. On the first day the rules were in effect the FAA had already granted 76 exemptions, most of them to companies that want to fly drones at night, Huerta said. “With these rules, we have created an environment in which emerging technology can be rapidly introduced while protecting the safety of the world’s busiest, most complex airspace,” he said. Transportation Secretary Anthony Foxx said people are “captivated by the limitless possibilities unmanned aircraft offer.” The few thousand commercial drones that had been granted waivers to operate before Monday have been used to monitor crops, inspect bridges and transmission lines, assist firefighters, film movies, and create real estate and wedding videos, among dozens of other uses. In general, the new rules apply to drones weighing 55 pounds or less

Trade Deficit at $39.5 Billion in July - Earlier from the Department of Commerce reportedThe U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $39.5 billion in July, down $5.2 billion from $44.7 billion in June, revised. July exports were $186.3 billion, $3.4 billion more than June exports. July imports were $225.8 billion, $1.8 billion less than June imports.  The trade deficit was smaller than the consensus forecast of $41.3 billion.  The first graph shows the monthly U.S. exports and imports in dollars through July 2016.Imports decreased and exports increased in July. Exports are 13% above the pre-recession peak and down 2% compared to July 2015; imports are also down 2% compared to July 2015. It appears trade might be picking up a little. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $41.02 in July, up from $39.38 in June, and down from $54.20 in July 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012. The trade deficit with China decreased to $30.3 billion in July, from $31.7 billion in July 2015. The deficit with China is a substantial portion of the overall deficit.

July 2016 Trade Data Continues To Show A Slowing USA and Global Economy: A quick recap to the trade data released today continues to paint a relatively soft view of global trade. The unadjusted three month rolling average value of goods exports decelerated with the three month rolling averages in contraction., The unadjusted three month rolling average value imported goods accelerated with the rolling average in contraction. Many care about the trade balance which improved from last month. It continues to look soft. There is a difference each month between the adjusted and unadjusted data - but if you step back and look at the overall trends - they generally correlate. Both the adjusted and unadjusted data is in contraction year-over-year. This is normally a sign of a recession but in the new normal trade is doing crazy things ........

  • Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported down month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth decelerated 2.1 % month-over-month (unadjusted data) - down 5.7 % year-over-year (down 1.9 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating.
  • Exports of goods were reported up, and Econintersect analysis shows unadjusted goods exports growth deceleration of (not including services) 2.2 % month-over month - down 6.6 % year-over-year (down 3.7 % year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating.

 "The Ripple Effect Could Be Tremendous" - Retailers Demand Government Bailout After Hanjin Collapse Paralyzes Trade - When we first reported about the imminent paralysis of an unknown number of global supply chains and a potential shock in worldwide trade as a result of the historic bankruptcy of Hanjing Shipping, one of the world's largest container shipping companies which handles 8% of Trans-Pacific trade volume for the US market, we concluded that "the global implications from the bankruptcy are unknown: if, as expected, the company's ships remain "frozen" and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos. The good news is that both economists and corporations around the globe, both those impacted and others, will now have yet another excuse on which to blame the "unexpected" slowdown in both profits and economic growth in the third quarter." However, not even this extreme forecast captured what would happen just 48 hours later,when as the WSJ reported overnight, retailers have gone far beyond simply blaming the Hanjing bankruptcy for their upcoming woes: they are petitioning for a government bailout, or as the WSJ put it, they are "bracing for a blow as they stock up for the crucial holiday sales season, asked the government to step in and help resolve a growing crisis." Or, as America's banks would call it, "get bailed out." And, in taking a page right out of the 2008 bank bailout, the doom and gloom scenarios emerge: “While the situation is still developing, the prospect of harm is significant and apparent,” Sandra Kennedy, president of the Retail Industry Leaders Association, wrote in a letter to the Department of Commerce and the Federal Maritime Commission. Hanjin’s recent bankruptcy filing “presents an enormous challenge to U.S. shippers,” she said, and “could have a substantial impact on consumers and the economy at large.” The trade group is urging the U.S. to work with ports, cargo handlers and the South Korean government to resolve the widespread disruption in freight shipments caused by the Hanjin bankrupcy filing. Futhermore, the spokesman for the Retail Industry Leaders Association said they’re hoping the South Korean government could help provide clarity and speed to the bankruptcy proceedings, which are being considered by courts there.

Factory orders jump in July by biggest gain in nine months - —Orders for goods produced in U.S. factories rose 1.9% in July, the biggest gain since last October, the Commerce Department said Friday. The rise was led by a 4.4% climb in orders for durable goods, which was powered by the volatile civilian aircraft sector. Economists surveyed by MarketWatch had expected factory orders to rise 2.3% in July. The key orders for nondefense capital goods, excluding aircrafts, rose 1.5% in July, cut from the prior estimate of a 1.6% gain. Factory orders for June were cut to a decline of 1.8% from the previous estimate of a 1.5% drop.

U.S. factory orders post largest increase in nine months | Reuters: New orders for U.S. factory goods recorded their largest increase in nine months in July as demand increased broadly, in a hopeful sign for the embattled manufacturing sector. The Commerce Department said on Friday that new orders for manufactured goods rebounded 1.9 percent after a downwardly revised 1.8 percent decrease in June. It was the biggest rise since October 2015 and followed two straight months of declines. Economists polled by Reuters had forecast factory orders rising 2.0 percent in July after a previously reported 1.5 percent decline in June. The department also said orders for non-defense capital goods excluding aircraft increased 1.5 percent in July instead of the 1.6 percent rise it reported last month. These so-called core capital goods are seen as a measure of business confidence and spending plans on equipment. Core capital goods shipments, which are used to calculate business equipment spending in the gross domestic product report, fell 0.5 percent in July. They were previously reported to have slipped 0.4 percent in July. Manufacturing, which accounts for about 12 percent of the economy, remains constrained by the lingering effects of a strong dollar and weak global demand, which have crimped exports of factory goods. A collapse in oil drilling activity following a plunge in oil prices has also squeezed manufacturing by undermining business spending, leading to weak demand for heavy machinery. In addition, a U.S. inventory correction has resulted in factories receiving fewer orders. The Institute for Supply Management reported on Thursday that its national factory activity index fell into contraction territory in August for the first time in six months. In July, orders for transportation equipment surged 10.6 percent, also the biggest gain since last October. Orders for motor vehicles and parts slipped 0.5 percent.

WTF Chart Of The Day: US Factory Orders Tumble For Longest Streak In History -- 21 Months... US Factory Orders have decline year-over-year every month since October 2014 (the end of QE3). This is the longest period of decline in US history (since 1956) and has always indicated the US economy is in recession... While headlines will crow of 1.9% MoM gain (which missed expectations of a 2.0% rise), the trend is simply ugly - Year-over-year Factory Orders fell 3.5% As Bloomberg also notes, there’s one key takeaway from the Commerce Department’s report Friday on U.S. factory orders. The value of unfilled orders dropped in July to the lowest level in two years, indicating producers are having an easier time meeting demand. With soft sales, factories have little reason to add as many workers to their payrolls and may find it difficult to raise prices. Employment in manufacturing dropped 14,000 in August, the most in three months, another report from the Labor Department showed Friday.

  • Unfilled orders to all manufacturers fell 0.1 percent to $1.13 trillion, the lowest since June 2014, after a 0.9 percent slump
  • Unfilled orders have increased just once since November
  • Total factory orders rose 1.9 percent in July after a 1.8 percent drop.

 July 2016 Manufacturing New Orders Declined: US Census says manufacturing new orders improved. Our analysis disagrees. The rolling averages declined. Analyst Opinion of Census Manufacturing Sales You do not need to be a genius to see that the year-over-year growth rate of manufacturing is slowing and in contraction (both seasonally and unadjusted data) - even though the headlines say growth was up. There is little in the manufacturing data for July that would bring smiles to the FOMC to support a rate increase - and the August manufacturing surveys were also weak. Civilian aircraft is the reason there was any strength in this report - most everything was weak.

US Census Headline:

  • The seasonally adjusted manufacturing new orders is up 1.9 % month-over-month, and down 3.1 % year-to-date (last month was down 2.6 % year-to-date)..
  • Market expected (from Bloomberg / Econoday) month-over-month growth of 0.2 % to 2.8 % (consensus +2.0 %) versus the reported -1.9 %.
  • Manufacturing unfilled orders down 0.1 % month-over-month, and down 2.2 % year-to-date.

Econintersect Analysis:

  • Unadjusted manufacturing new orders growth decelerated 0.3 % month-over-month, and down 6.0 % year-over-year.
  • Unadjusted manufacturing new orders (but inflation adjusted) down 3.1 % year-over-year.
  • Three month rolling new order rolling averages decelerated 1.0 % month-over-month, but is down 3.9 % year-over-year.
  • Unadjusted manufacturing unfilled orders growth decelerated 0.2 % month-over-month, and down 2.2 % year-over-year
  • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production growth decelerated 0.3 % month-over-month, and up 0.3 % year-over-year.

Dallas Fed: Regional Manufacturing Activity Increases in August - From the Dallas Fed: Texas Manufacturing Activity Increases Texas factory activity increased in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 4.5 after a near-zero reading in July, suggesting output picked up this month. Other measures of current manufacturing activity also reflected expansion. Demand bounced back, with the new orders index rising from -8.0 to 5.3 in August and the growth rate of orders index pushing up to 2.1, its first positive reading in nearly two years. The capacity utilization index remained only barely positive at 0.9, while the shipments index rose nearly 10 points to 9.9, with nearly a third of manufacturers reporting higher volumes of shipments this month. Perceptions of broader business conditions remained fairly pessimistic. The general business activity index was negative for a 20th month in a row and moved down from -1.3 to -6.2. The company outlook index was largely unchanged at -2.8. Labor market measures indicated slight employment declines and shorter workweek length. The employment index came in at -5.0, down from -2.6 last month. ...  The impact of lower oil prices is still impacting manufacturing. This was the last of the regional Fed surveys for August.

August 2016 Texas Manufacturing Survey Improves Further Into Expansion.: Of the four Federal Reserve districts which have released their August manufacturing surveys - two are in contraction and two are in expansion. A complete summary follows. One must assume with surveys that improvement is relative to the previous month. Unfilled orders remains in contraction, while new orders is now in expansion. With the district Feds evenly split between expansion and contraction - it looks like it will be weak growth for Industrial Production this month.From the Dallas Fed: Texas factory activity increased in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 4.5 after a near-zero reading in July, suggesting output picked up this month. Other measures of current manufacturing activity also reflected expansion. Demand bounced back, with the new orders index rising from -8.0 to 5.3 in August and the growth rate of orders index pushing up to 2.1, its first positive reading in nearly two years. The capacity utilization index remained only barely positive at 0.9, while the shipments index rose nearly 10 points to 9.9, with nearly a third of manufacturers reporting higher volumes of shipments this month. Perceptions of broader business conditions remained fairly pessimistic. The general business activity index was negative for a 20th month in a row and moved down from -1.3 to -6.2. The company outlook index was largely unchanged at -2.8. Labor market measures indicated slight employment declines and shorter workweek length. The employment index came in at -5.0, down from -2.6 last month. Seventeen percent of firms noted net hiring, while 22 percent noted net layoffs. The hours worked index edged down to -4.5 after coming in near zero in July.

 Dallas Fed Dead-Cat-Bounce Dies - Economy Contracts For 20th Month In A Row - Having jumped miraculously from -18 to -1.3 in July, August's Dallas Fed plunged back to -6.2 -contracting for the 20th month in a row. The worse than expected headline data came despite a rise in new orders as the number of employees, average workweek, and capex all plunged into contraction. Hope also tumbled from 18.4 to 7.0 with inventories and new orders expected to slow. Despite the surge in oil prices, the Dallas economy continues to contract...Charts: Bloomberg

ISM Manufacturing index decreased to 49.4 in August - The ISM manufacturing index indicated contraction in August. The PMI was at 49.4% in August, down from 52.6% in July. The employment index was at 48.3%, down from 49.4% in July, and the new orders index was at 49.1%, down from 56.9% in July. From the Institute for Supply Management: August 2016 Manufacturing ISM® Report On Business® Economic activity in the manufacturing sector contracted in August following five consecutive months of expansion, while the overall economy grew for the 87th consecutive month,  "The August PMI® registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent. The New Orders Index registered 49.1 percent, a decrease of 7.8 percentage points from the July reading of 56.9 percent. The Production Index registered 49.6 percent, 5.8 percentage points lower than the July reading of 55.4 percent. The Employment Index registered 48.3 percent, a decrease of 1.1 percentage points from the July reading of 49.4 percent. Inventories of raw materials registered 49 percent, a decrease of 0.5 percentage point from the July reading of 49.5 percent. The Prices Index registered 53 percent, a decrease of 2 percentage points from the July reading of 55 percent, indicating higher raw materials prices for the sixth consecutive month. Manufacturing contracted in August for the first time since February of this year, as only six of our 18 industries reported an increase in new orders in August (down from 12 in July), and only eight of our 18 industries reported an increase in production in August (down from nine in July)." Here is a long term graph of the ISM manufacturing index. This was below expectations of 52.2%, and suggests manufacturing contracted in August following five months of expansion.

August 2016 ISM Manufacturing Survey Returns to Contraction: The ISM Manufacturing survey slipped slightly into contraction after five month in expansion. The key internals declined and are in contraction. The PMI manufacturing Index, also released today, is in positive territory and marginally declined. Based on this survey and the district Federal Reserve Surveys, one would expect the Fed's Industrial Production index to be unchanged for August. All manufacturing surveys for August have been around the zero growth line (either slightly in expansion or slightly in contraction. ADP's employment for manufacturing was unchanged also for August. Manufacturing seems flat. The ISM Manufacturing survey index (PMI) marginally declined from 52.6 to 49.4 (50 separates manufacturing contraction and expansion). This was slightly below expectations which were 51.3 to 53.0 (consensus 49.4). Earlier today, the PMI Manufacturing Index was released:Markit's U.S. manufacturing sample continues to report month-to-month growth but slow growth. The PMI for August came in at 52.0 which is only modestly above the 50 level that divides monthly growth from monthly contraction. Growth in new orders slowed which is a key negative in the report, along with slowing in employment. The sample is also cutting its inventories which points to lack of confidence in the business outlook. Price data are flat which is yet another indication that demand is soft. But there are positives including strength in production, which however won't last long if orders remain weak. And there's an important indication of strength in orders as new export orders posted a rare gain. This report in sum points to no better than flat conditions ahead for manufacturing. The regional Fed manufacturing surveys are mixed, and now the ISM indicates manufacturing shows contraction. Relatively deep penetration of this index below 50 has normally resulted in a recession. The noisy Backlog of Orders declined and remans in contraction. Backlog growth should be an indicator of improving conditions; a number below 50 indicates contraction. Backlog accuracy does not have a high correlation against actual data.

Chicago PMI Slumps Suggesting "June's Momentum Was Only A Temporary Revival"-- After bouncing miraculously in June (to 18mo highs), slipped lower in July and has now tumbled in August to 51.5 (missing expectations of 54.09 markedly).With weakness across the board - new orders, inventories, and production all slumping - MNI warns, "Economic activity slowed down into the summer, suggesting June's momentum was only a temporary revival in activity. Overall, it wasn't a rosy month." The June jump has been erased... Chicago PMI was weak across the board...

  • Prices Paid fell compared to last month
  • New Orders fell compared to last month
  • Employment rose compared to last month
  • Inventory fell compared to last month
  • Supplier Deliveries fell compared to last month
  • Production fell compared to last month
  • Order Backlogs fell compared to last month
  • Business activity has been positive for 7 months over the past year.

The MNI Chicago Business Barometer fell 4.3 points to 51.5 in August from 55.8 in July, led by a large setback in Order Backlogs and a deceleration in New Orders. Four of the five Barometer components fell between July and August. Only Employment increased, hitting a 16-month high. The latest fall left the Barometer, New Orders and Production running at the slowest pace since May, when they all slipped below 50. Order Backlogs fell 14.5 points to 41.7, moving back into contraction territory as they hit the lowest level since April 2016. Backlogs were above 50 for only two months (June and July) following a 16-month run of sub-50 readings. New Orders and Production also subtracted from the Barometer in August. Although both remained in expansion, they were much softer than at the end of Q2. Supplier Deliveries were little changed on the month while the three buying policy measures shortened, a positive for businesses but another indication of weaker overall activity.

The economics and politics of manufacturing fetishism | John Kay: Donald Trump will bring ‘millions of manufacturing jobs’ to the US. Ohio – a key swing state – will become ‘a manufacturing behemoth’. Hilary Clinton has promised $10 billion for manufacturing investment, and told her supporters ‘we need to get back to building things’. Theresa May may have sacked George Osborne, who pledged a Britain ‘carried aloft by the march of the makers’, but ‘the makers’ are at the centre of her new industrial strategy. And Jeremy Corbyn has promised that promoting manufacturing will be a priority for his national investment bank. Steel is the archetypal manufacture, and politicians have long been obsessed by it. The future of Tata Steel, the last remnant of Britain’s steel industry, now owned by the Indian conglomerate, has been a matter of political debate and a dominant issue for the Business Secretary for the last six months. The steel industry, nationalised by Labour in 1951 and 1967, privatised by Conservative governments in 1953 and 1988, was the totemic ‘commanding height’ of the British economy. The central derangement of Mao’s Great Leap Forward was the backyard furnace, with peasants urged to melt down their pots and pans to put the metal at the service of the nation. When the Soviet Union collapsed its steel-making capacity far exceeded that of the United States although Soviet GDP was far less. I first encountered manufacturing fetishism in 1980, when I wrote an article observing that a decline in UK manufacturing was an inevitable consequence of the growth of North Sea oil output. Since in the long run the trade balance balances, a surge in one category of exports or import substitutes would necessarily squeeze other export sectors, particularly less differentiated commodity products such as steel.The article received wide publicity, much of it hostile. The nature of the criticism was exemplified by an encounter with the late Lord Kaldor, the architect of the 1960’s Selective Employment Tax, which taxed service sectors in order to subsidise manufacturing employment. ‘I haven’t read your article’, he told me, ‘but it’s rubbish, absolute rubbish.’

 Viktor Shvets: 'The Private Sector Will Never Recover': Do you feel something is wrong with the United States and the global economy? Despite a respectable recovery and low unemployment, many people aren’t happy with their current economic situation or their outlook for the future. From rising prices for basic necessities or schooling, to harsh competition and low pay for lower income jobs to negative interest rates—the poor and the middle class all have their problems to deal with. Experts in the government or central banks are trying to manage a suboptimal situation but cannot isolate the problem, let alone offer solutions. Or maybe they know what’s wrong but don’t want to talk about it because the truth is too shocking. Enter Viktor Shvets, the global strategist of the investment bank Macquarie Group. He not only dares to think outside the box but also isn’t afraid to openly voice his opinions, which are fascinating and shocking at the same time.

Weekly Initial Unemployment Claims increased to 263,000 The DOL reported: In the week ending August 27, the advance figure for seasonally adjusted initial claims was 263,000, an increase of 2,000 from the previous week's unrevised level of 261,000. The 4-week moving average was 263,000, a decrease of 1,000 from the previous week's unrevised average of 264,000.  There were no special factors impacting this week's initial claims. This marks 78 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.

August 2016 Job Cuts Down As Downsizing Slowed: Downsizing slowed in August, as US-based employers announced plans to cut their payrolls by 32,188, a 29 percent decline from the 45,346 cuts in July The August figure was the lowest monthly total since May (30,157) and the second lowest of the year. It was 22 percent lower than August 2015, when 41,186 planned job cuts were announced. To date, employers have announced 391,288 job cuts in 2016. That is 10 percent fewer than the 434,554 job cuts recorded between January and August 2015. The computer sector saw the heaviest job cuts during the month with 6,103. The bulk of the cuts came from Cisco Systems, which announced plans to reduce its workforce by 5,500. That was lower than the initially reported 14,000 cuts that were expected from the tech giant, but still represents a sizable downsizing in an industry that has experienced a surge in job cuts over the last 18 months. Said John A. Challenger, chief executive officer of Challenger, Gray & Christmas: Since January of last year, there has been a string of large scale job cuts from major players in the technology sector, including Hewlett-Packard, Intel, Dell, Microsoft and, now, Cisco. The surge in cuts does not necessarily signal weakness in the sector, but it certainly signals a shift. In most cases, we are seeing these firms move from making hardware to providing services. Computer firms have announced 55,567 job cuts this year. That is up 111 percent from last year, when cuts totaled 26,374 through the first seven months.The computer sector ranks second in year-to-date job cuts behind the energy sector, which has announced 97,366 job cuts in 2016, including 2,430 in August. Unlike most months, August energy cuts were not dominated by oil-focused firms. Surprisingly, the majority of last month's cuts came from solar firms, including SolarCity and SunPower.

 ADP: Private Employment increased 177,000 in August --- From ADP: Private sector employment increased by 177,000 jobs from July to August according to the August ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. ... Goods-producing employment was down by 6,000 jobs in August, following July losses of 5,000. The construction industry lost 2,000 jobs, following July losses of 5,000 jobs. Meanwhile, manufacturing jobs were flat in August, after gaining 5,000 in the previous month. Service-providing employment rose by 183,000 jobs in August, fewer than July’s 199,000 jobs.... Mark Zandi, chief economist of Moody’s Analytics, said, “The American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment.” This was close to the consensus forecast for 175,000 private sector jobs added in the ADP report.  The BLS report for August will be released Friday, and the consensus is for 175,000 non-farm payroll jobs added in August.

ADP: US Job Growth Edges Lower To A Moderate Pace In August - US private-sector payrolls increased by a moderate 177,000 in August, according to the ADP Employment Report. Although the increase is below July’s upwardly revised increase of 194,000, the expansion is strong enough to support the view that the US economy is still on track to post stronger growth in the third quarter and repair some of the damage from the weakness in this year’s first half. “Job growth in August was stable and consistent with levels from previous months as consumer conditions improve,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. Mark Zandi, chief economist of Moody’s Analytics, which produces the data with ADP, added that “the American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment.” Today’s update follows news earlier in the week that private-sector wage growth and consumer confidence have improved recently. Note, however, that ADP’s estimate of job growth in August is below the 12-month average–+192,000–for monthly changes. Also, the year-over-year increase for payrolls dipped to 1.92% last month, which is close to the slowest annual gain in three years. ADP’s numbers still point to a growing labor market in the near term, but today’s update reminds that the trend continues to decelerate. Economists are looking for a comparable rise in private payrolls for August in Friday’s official jobs report from the government.’s consensus forecast calls for an increase of 175,000 in workers at US companies via the Labor Dept.’s estimate for last month. If the projection holds, private payrolls will advance by 1.95%, slightly faster than the annual gains in the previous three months but still near a three-year low.

August 2016 ADP Job Growth Is 177,000 - At Expectations: ADP reported non-farm private jobs growth at 177,000. The rate of growth continues in a downtrend. The rate of the decelerating year-over-year trend of jobs growth is slowing. ADP is showing relatively strong jobs growth for the USA's weak economy. Job growth is likely putting a positive tailwind on economic growth which is likely to begin to appear in the third quarter. The growth this month is much more than Econintersect forecasted was based on economic potential.
  • The market expected from Bloomberg / Econoday 145,000 to 190,000 (consensus 150,000) versus the 175,000 reported. These numbers are all seasonally adjusted;
  • In Econintersect's August 2016 economic forecast released in late July, we estimated non-farm private payroll growth at 100,000 (based on economic potential) and 150,000 (fudged based on current overrun of economic potential);
  • This month, ADP's analysis is that small and medium sized business created 60 % of all jobs;
  • Manufacturing jobs unchanged.
  • All of the jobs growth came from the service sector as goods producing sector contracted;
  • July report (last month), which reported job gains of 179,000 was revised to 194,000;
  • The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 - it is now 1.92% (lower than last month's revised 1.96%)

ADP changed their methodology starting with their October 2012 report, and ADP's real time estimates are currently worse than the BLS. Per Mark Zandi, chief economist of Moody's Analytics: The American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment. Per Ahu Yildirmaz, VP and head of the ADP Research Institute. "Job growth in August was stable and consistent with levels from previous months as consumer conditions improve. Continued strong growth in service-providing jobs is offset by weakness in goods-producing areas. Jobs growth of 150,000 or more is calculated by Econintersect to the minimum jobs growth to support population growth (see caveats below). The graph below shows ADP employment gains by month.

 U.S. nonfarm payrolls rise less than expected; wage growth moderates | Reuters: U.S. employment growth slowed more than expected in August after two straight months of robust gains and wage gains moderated, which could effectively rule out an interest rate increase from the Federal Reserve this month. Nonfarm payrolls rose by 151,000 jobs last month after an upwardly revised 275,000 increase in July, with hiring in manufacturing and construction sectors declining, the Labor Department said on Friday. The unemployment rate was unchanged at 4.9 percent as more people entered the labor market. The report comes on the heels of news on Thursday that the manufacturing sector contracted in August, which had already cast doubts on an interest rate hike at the Fed's Sept. 20-21 policy meeting. "This mixed jobs report puts the Fed in a tricky situation. It's not all around strong enough to assure a September interest rate hike. But it's solid enough to engender a heated policy discussion," said Mohamed el-Erian, chief economic adviser at Allianz, in Newport Beach, California. Economists polled by Reuters had forecast payrolls rising 180,000 last month and the unemployment rate slipping one-tenth of a percentage point to 4.8 percent. Last month's jobs gains, however, could still be sufficient to push the Fed to raise interest rates in December. The rise in payrolls reinforces views that the economy has regained speed after almost stalling in the first half of the year. Rate hike probabilities for both the September and December meetings rose after remarks last Friday by Fed Chair Janet Yellen that the case for raising rates had strengthened in recent months. Following the report, financial markets were pricing in a 21 percent chance of a rate hike this month and a 58.6 percent probability in December, according to the CME Fedwatch tool.

August Employment Report: 151,000 Jobs, 4.9% Unemployment Rate - From the BLSTotal nonfarm payroll employment increased by 151,000 in August, and the unemployment rate remained at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in several service-providing industries.... The change in total nonfarm payroll employment for June was revised down from +292,000 to +271,000, and the change for July was revised up from +255,000 to +275,000. With these revisions, employment gains in June and July combined were 1,000 less than previously reported....In August, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $25.73. Over the year, average hourly earnings have risen by 2.4 percent.  The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 151 thousand in August (private payrolls increased 126 thousand). Payrolls for June and July were revised down by a combined 1 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In August, the year-over-year change was 2.45 million jobs. A solid gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate was unchanged in August at 62.8%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio was unchanged at 59.7% (black line).

August Jobs Report – The Numbers - WSJ:  The U.S. economy continued to create jobs at a steady pace in August, the Labor Department said Friday. The month’s jobs report is the last before Federal Reserve officials hold their policy meeting Sept. 20-21. Here are the details. Employers added 151,000 jobs in August. Job growth was essentially unchanged in July and June as revisions in both directions more or less evened out. Employers added 275,000 jobs in July, up from the initially estimated 255,000. But they added fewer jobs in June than originally estimated, 271,000, down from 292,000. Over the past three months, job growth has averaged about 232,000 a month. In 2015, monthly job growth averaged 229,000.  Average hourly earnings rose 2.4% in the year through August, a slight slowdown from July’s increase of 2.6%. Annual wage growth averaged 2.3% in 2015, and has matched or been higher than that each month so far this year. But inflation has still been missing the Fed’s 2% target. From July, average hourly earnings rose 3 cents to $25.73.  The jobless rate held steady at 4.9% in August, its third straight month at that level. Hiring was robust enough to absorb new entrants into the labor market, keeping the overall unemployment rate stable.  A broader measure of unemployment held steady in August from 9.7% in July. This measure reflects jobless workers, those stuck in part-time jobs, and those too discouraged to look for work. The measure stood at 10.3% in August 2015, and in June had fallen to 9.6%, its lowest measure since 2008.  The share of Americans in jobs or actively looking for a job—the labor-force participation rate—held steady in August at 62.8%. It has hovered between 62.4% and 63% for more than two years, down from around 66% before the recession. Many of those leaving the labor force are older workers, but participation has also fallen among working-age men.

 Job Growth Slows In August - Dean Baker: The Labor Department reported that the economy created 151,000 new jobs in August — slightly less than generally expected. The unemployment rate was unchanged at 4.9 percent and the employment-to-population ratio (EPOP) was also unchanged. ... While the overall pace of job growth is still reasonably healthy even with the slowdown, a disconcerting item is a decline in the duration of the average workweek. This stood 34.3 hours in August, down from 34.4 hours in July and 34.6 hours in August of 2015. The drop was large enough to lead to a decline of 0.2 percent in the index of aggregate weekly hours, in spite of the growth in employment. This downward trend could indicate slower hiring in the future. It also seems to contradict the common assertion in the business press that employers are having difficulty finding qualified workers. If this were true, they would be pushing the workers they have to work longer hours. Wage growth also shows no evidence of accelerating. The average hourly wage increased by 2.4 percent over the last year. Over the last three months, compared with the prior three months, the average hourly wage increased at a 2.5 percent annual rate. On the household side, the news was mostly positive. There was an increase in the percentage of unemployment due to voluntary quits to 11.3 percent. Although this is the highest level for the recovery, it’s a full percentage point below the pre-recession peak and almost 4.0 percentage points below the peak reached in 2000. All the duration measures of unemployment fell in the month. With the mean duration of unemployment spells dropping by 0.5 weeks to 27.6 weeks and the median duration falling by 0.4 weeks to 11.2 weeks. And there was a rise in the percentage of black teens with jobs to 23.3 percent, an increase of 2.7 percentage points from the July figure and a new high for the recovery. There was an increase of 113,000 in the number of people involuntarily working part-time, although this figure is still down by 428,000 from the year ago level. The number choosing to work part-time dropped in August, but is still up by 751,000 from last year’s level. ... While the overall EPOP was unchanged in August, the EPOP for prime age workers (ages 25–54) edged down by 0.2 percentage points to 77.8 percent. This puts it 2.5 percentage points below its pre-recession peak and more than four full percentage points below the 2000 peak. On the whole the August report suggests a moderately healthy labor market, but one that is not reaching any constraints. With the EPOP still well below pre-recession levels, there are still many potential workers who would like jobs. Similarly, the recent drop in hours suggests that firms are not straining to find workers as does the data showing wage growth is maintaining a moderate pace.

August Employment not august (4 graphs) Employment from the establishment survey reported by the BLS increased 151,000, nearly all of which was in the private service sectors, increasing 150,000. The goods producing sector decreased 24,000, roughly offset by government employment, up 25,000. Manufacturing employment has shown considerable weakness since 2015, while the service sector has continued to show strength. Education and health services along with leisure and hospitality posted the largest gains of the subsectors. Revisions were pretty much a wash: down 21,000 for June and up 20,000 for July.  Average weekly hours fell to 34.3 after six straight months at 34.4. Labor force participation and the employment population ration were essentially unchanged. The household survey wasn’t encouraging either. Employment, according to the household survey, increased only 97,000 and the unemployment rate ticked up slightly from 4.88% to 4.92%. The number of unemployed persons increased as did those not in the labor force. The number of people working part-time for economic reasons increased for the second straight month, but the number of people marginally attached to the labor force trickled down.  The problem the markets now face is that this report only increases uncertainty. The FOMC has been suggesting of late they seem to be favoring a rate increase sooner rather than later. Over the past three months employment increases have average 232,000 jobs a month but the most recent numbers are softer. If this had been a stronger report a rate increase would have certainly been likely this year. It may still be but it is likely that the Fed will wait for more indications. The CPI for July was unchanged and for the previous year up only 0.8.  If the economy keeps going sideways the Fed has a quandary: clearly they would like to get on more normal path, but the sluggish economy and global uncertainty have forced tepid policy responses until the storm quiets.

August 2016 BLS Jobs Growth Was Just OK (Not Good Or Bad): The BLS job growth was ok, not excellent. The unadjusted data was slightly below par for times of economic expansion - but not terrible. Analyst Opinion of the BLS Employment Situation To sum this report up - it is treading water. There was really nothing good or nothing really terrible - although both construction and manufacturing declined. The year-over-year rate of growth was unchanged from last month. The average hours worked continues to decline pointing to economic slowing. The rate of growth for employment was unchanged this month (red line on graph below). This is a year-over-year analysis which has no seasonality issues.

  • The unadjusted jobs increase month-over-month well below average for times of economic expansion.
  • Economic intuitive sectors of employment were mixed.
  • This month's report internals (comparing household to establishment data sets) was fairly consistent with the household survey showing seasonally adjusted employment improving 97,000 vs the headline establishment number of growing 151,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey added 176,000 people to the workforce.
  • The NFIB statement on jobs growth this month is at the end of this post.

A summary of the employment situation:

  • BLS reported: 151K (non-farm) and 126K (non-farm private). Unemployment rate was unchanged at 4.9 %.
  • ADP reported: 177 K (non-farm private)
  • In Econintersect's August 2016 economic forecast released in late July, we estimated non-farm private payroll growth at 100,000 (based on economic potential) and 150,000 (fudged based on current overrun of economic potential);
  • The market expected (from Bloomberg):

The August Jobs Report in 15 Charts – WSJ -  Employers added 151,000 jobs in August and the unemployment rate held steady at 4.9%, but the average weekly hours worked by private-sector employees dropped, curbing paychecks.  Over the past three months, hiring is running near its highest level of the year. Through August this year, the economy has added nearly 182,000 jobs per month on average, down from nearly 219,000 last year or 238,000 two years ago. One caveat: August’s initial estimate of payroll growth has tended to see upward revisions in recent years. In the last 16 years, the initial estimate of August payroll growth has been revised up 13 times by an average 38,500 jobs in those months. This trend didn’t hold last year, when August’s initial estimate of 173,000 jobs was revised down. Hourly earnings for employees on private nonfarm payrolls were up around 2.4% from a year earlier, a shade weaker than annual earnings growth in recent months. Average weekly earnings took a big tumble from a year ago because hours worked ticked down. The standard measure of unemployment, at 4.9% in August, only counts people who are working or actively looking for work. Broader measures of underemployment include discouraged and marginally attached workers who would like to work but have given up their job search. The broadest unemployment gauge also includes part-time workers who would prefer full-time work, and this measure was unchanged at 9.7% last month. There’s substantial variation in unemployment rates by educational background, with lower jobless rates for workers with more education. Still, unemployment rates for each group have fallen considerably over the last five years. The unemployment rate also varies considerably by race and gender, though the rates for each group are nearing the lowest points recorded during the last expansion eight years ago. Before a plunge in oil prices two years ago that led to cutbacks in energy-sector hiring, employers were increasing payrolls by around 2.2% from a year earlier, the highest level since 2000. Since then, payroll expansion has moderated to around 1.7%.  The share of Americans in the labor force, or those over the age of 16 who are working or looking for work, was unchanged at 62.8% last month. The share of Americans who were employed was also unchanged, at 59.7%. Employment and labor-force participation rates are higher for people between 25 and 54 years old because they haven’t yet retired and are less likely to be in school. The share of unemployed people who are exiting the labor force has been steadily declining and has now fallen to its lowest share since 2001, a sign of less labor slack. Meantime, the share of people who weren’t in the labor force and found a job had been trending up in recent years, though it peaked in March. The median spell of unemployment has fallen sharply from its 2010 highs but is still quite high by historical standards. Looking at the change in the unemployment rate by the duration of workers’ jobless spells shows that levels of short-term unemployment are below 2007 but long-term unemployment has been stubborn. It’s still above where it was before the recession. Compared with December 2007, when the last recession began, the number of new part-time positions is still above the level of full-time positions, but the gap has nearly been closed. Almost all of more than 10 million jobs added since the recession officially ended in mid-2009 have been full-time positions.

Manufacturing Job Loss:  The Consequences of Malign Neglect of the Dollar and Chinese Overcapacity - Today’s Jobs Report from the BLS showed that the U.S. manufacturing sector lost 14,000 jobs in August and has now lost 57,000 jobs since January of this year.  This job loss is, in part, a consequence of the sharp rise of the dollar in 2014 and 2015, which has gained nearly 20 percent on a broad, trade-weighted basis, as shown below.  The rising dollar has reduced the cost of imports, increased the cost of U.S. exports resulting in growing trade deficits.  Growing exports support U.S. employment, but growing imports cost U.S. jobs, so the manufacturing decline was entirely predictable from the expected increase in the U.S. trade deficit, which responds to changes in the dollar with a lag of one to two years. Yet the U.S. government continues to do nothing about destructive exchange rate movements, whether they are caused by intentional currency manipulation or more recent, market-driven misalignments. Data for the U.S. trade deficit in July were also released this morning.  The trade deficit in manufactured products (Exhibit 1S) increased 3.1 percent, year to date, relative to the same period last year, despite a decline in the overall U.S. trade deficit.  U.S. imports of petroleum products declined sharply in this period, while the trade deficit in non-petroleum goods (which is dominated by trade in manufactures) increased sharply. The single largest cause of the growing manufacturing trade deficit is malign neglect of currency manipulation over the past 20 years by the U.S. government. China, which has been the most important currency manipulator over the past two decades, was responsible for nearly two thirds (61.3 percent) of the U.S. trade deficit in manufactured goods in 2015.  The trade deficit with China increased in July.  China has also distorted trade by generating massive amounts of excess production capacity in a wide range of industries, including steel, aluminium, glass, paper and renewable energy products. China’s capacity growth has been fueled by illegal subsidies and other unfair trade practices.  A new report from Duke University explores the impacts of overcapacity in China’s steel industry. As the U.S. prepares for G-20 prepares for its summit meeting in Hangzhou, China, it is imperative that leaders prepare to confront China about its unfair trade and the massive amount of excess capacity which is distorting global trade not just in these industries, but in sectors that use these primary commodities to produce a wide range of downstream products such as electrical appliances, machine tools, autos and auto parts.  The United States also must come to terms with its sustained failure to address the currency manipulation, and more recently developed problems of currency misalignment, which I will address in a subsequent post.

The Most Troubling News For The Fed In Today's Jobs Report --While the Fed will surely be displeased that after two ~275K prints in a row, the US labor market stalled again by nearly 50%, with August payrolls rising only by 151K, what Yellen will be most focused on is not the number of jobs, but rather the wage growth, or more specifically the lack thereof. As we noted earlier, on an average hourly basis, in August wages rose only by 0.1%, below the 0.2% Wall Street hoped for, and the lowest monthly increase since February. As usual, however, hourly wages gave only half the story, because the US economy is a product of aggregate hours and wages, and it was here that a major problem emerged. As the chart below shows, when looking at the largest private sector grouping of US payrolls, the total production and non-supervisory workers which amount to roughly 83% of the entire workforce, the aggregate hours worked rose just 1.1% over the past 12 month, the lowest increase since July 2010. And the flipside to this was that average weekly earnings for all employees not only declined from $884.08 to $882.54 over the past month (with weekly earnings for production and non-supervisory workers likewise declining from $727.92 to $727.10), but that on an annual basis,the 1.5% increase was the worst print in 32 months. This report confirms what we showed several days ago, namely that the bulk of wage growth has gone to low-paid workers, however now that the tailwind of state minimum wage hikes has passed, the overall wage growth is sliding once again.

Looking under the hood of today’s jobs report -- EPI Blog by Elise Gould - Today’s jobs report came in somewhat underwhelming. This morning, I compared payroll employment growth to weak tea and the labor market saw little to no improvement in other key measures. Yesterday, I urged readers to look under the hood of the headline jobs day numbers and see how well the economy is treating workers across various demographic groups. Today, I’m going to take one statistic from today’s report and see how various groups have fared. According to the Bureau of Labor Statistics, the official unemployment rate is 4.9 percent. Let’s just remember for a moment that the unemployment rate only counts people actively looking for work, taken as a share of the labor force. So, this leaves out the estimated 2.2 million workers who we expect will return or join the labor force as job opportunities improve. With these missing workers, the unemployment rate would be 6.2 percent. It also leaves out workers who want to work full-time but could only find part-time work or those who might have looked in the last year, but not in the last month. Adding these in, the underemployment rate would be 9.7 percent. Even with those caveats, I must admit the official unemployment rate is still quite a useful measure. And, along with nominal wage growth, it’s a key measure the Federal Reserve watches when deciding how to act on interest rates. At 4.9 percent, the unemployment rate is 0.3 percentage points higher than it was in 2007, before the recession began, and 0.9 percentage points higher than the last time the economy was at full employment (2000). In fact, for five months in 2000, the unemployment rate was below 4.0 percent, hitting a low of 3.8 percent in April 2000. Examined another way, the unemployment rate is 1.1 times higher today than in 2007 and 1.2 times higher than in 2000.

Employment Comments: A Decent Report by Bill Mcbride - The headline jobs number was decent.  Job growth averaged 232,000 over the last three months, and both the participation rate and employment-population ratio were unchanged.  Wages increased slightly. In August, the year-over-year change was 2.45 million jobs - a solid gain.This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees. Nominal wage growth was at 2.4% YoY in August. This series is noisy, however overall wage growth is trending up. Note: CPI has been running around 2%, so there has been real wage growth. Employment-Population Ratio, 25 to 54 years old Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate increased in August to 81.3%, and the 25 to 54 employment population ratio decreased to 77.7%. The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s. The number of persons working part time for economic reasons increased slightly in August. This level suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 9.7% in August. This graph shows the number of workers unemployed for 27 weeks or more. According to the BLS, there are 2.006 million workers who have been unemployed for more than 26 weeks and still want a job. This was down slightly from 2.020 million in July. This is generally trending down, but is still high.

 Donald Trump Says the ‘Outflow of Jobs’ to Mexico Is ‘Tremendous.’ How Big Is It? -  Donald Trump said trade has caused a “tremendous” exodus of American jobs. But it’s really more of a trickle, economists say. The Republican presidential nominee, visiting Mexico, said the North American Free Trade Agreement has benefited Mexico more than the U.S. “We must take action to stem the tremendous outflow of jobs from our country,” Mr. Trump said Wednesday after meeting Mexico’s president. But trade is a two-way street, and a 2014 study published by the Peterson Institute for International Economics estimated that while imports from Mexico have displaced 203,000 jobs a year, the two-way trade has also supported 188,000 jobs due to U.S. exports headed south. So that’s a net 15,000 jobs lost annually, a tiny fraction of U.S. employment, according to the 2014 study by Gary Hufbauer, Cathleen Cimino and Tyler Moran. Some economists, pointing to the $61 billion U.S. trade deficit with Mexico, say Nafta is responsible for a higher number of job losses. But pretty much all would agree that imports from China, where the trade deficit measured a whopping $367 billion last year, are a bigger problem for the U.S. economy. “Trade with Mexico has no measurable impact on U.S. unemployment or U.S. wages, unlike trade with China,” Mr. Hufbauer said Wednesday.The job leakage Hufbauer estimates is tiny compared with the dire warnings of 1992 U.S. presidential candidate Ross Perot, who predicted a “giant sucking sound” of jobs going to Mexico, or the claims by former President Bill Clinton and other Nafta supporters that the deal would create hundreds of thousands of new jobs a year.

7 Out Of 10 Millennials Are "Disengaged" From Meaningful Employment -- Gallup recently released what it described as the "most robust and comprehensive study of the millennial generation" combining more that 30 separate studies involving more than 1 million respondents.  In summary, the report found Millennials to be disengaged, aloof and completely incapable of prioritizing their own workload all while requiring constant pats on the back from management.  Well, we could have told you that (and we have on many occasions) without doing any research at all. The study, conducted by Brandon Rigoni and Bailey Nelson, found only 29% of millennials to be "engaged" at work with 60% being open to alternative employment.  The report, How Millennials Want to Work and Live, revealed that only 29% of millennials are engaged at work, with the remaining 71% either not engaged or actively disengaged. What's more, six in 10 millennials say they're open to different job opportunities, and only 50% plan to be with their company one year from now. This low engagement is troubling, as Gallup's latest meta-analysis shows that business units in the top quartile of employee engagement are 17% more productive, suffer 70% fewer safety incidents, experience 41% less absenteeism, have 10% better customer ratings and are 21% more profitable compared with business units in the bottom quartile. Apparently millennials are also incapable of prioritizing tasks at work.  Only 54% of millennials felt they knew how to prioritize work responsibilities versus 71% from other generations.

 New work on the benefits of full employment - Jared Bernstein - We’re not there (at full employment) yet, to be clear. I presented this paper last week at a conference–still a draft, but you’ll get the gist. And here’s an interview on the findings, conducted by an excellent interviewer who asked really hard questions. Much of this will be familiar to denizens of these parts, but there’s a few new wrinkles. For example, while I’ve long documented the fact that tight job markets disproportionately helps the less well-off, I’ve done so largely through analysis of the building block of labor income: the hourly wage. But here, I use new data to examine the impact of full employment on annual hours of work. The benefit gradient is similar, as you’ll see. I then map that onto to the annual earnings of affected workers and find pretty dramatic results, like the one you see below.

Consequences of Workers’ Diverging Locations by Skill - Over the past three decades, the wage gap between workers with college degrees and those without has nearly doubled. In 1980, college graduates earned 38 percent more than non-college workers. By 2011, the ratio had risen to 73 percent. At the same time, workers have become increasingly spatially segregated by education. Cities which had a large share of college graduates in 1980 increasingly attracted larger shares of college educated workers from 1980 to 2000, while less educated cities in 1980 gained few college grads. The increasingly highly educated cities also experienced higher wage growth for both low- and high-skill workers and substantially larger increases in housing costs. The increase in spatial sorting of college and non-college workers into very different cities calls into question whether the large increases in wage inequality over the past three decades truly represents a similar increase in inequality in economic well-being. Since college graduates are paying much higher housing costs than lower skill workers, it is possible that these high local prices dilute the real amount of consumption college workers’ received from their high wages. For example, in 2013 the median studio in San Francisco sold for $863,000, while the median 4 bedroom house could be purchased in Las Vegas for only $220,100. On the other hand, college workers chose to live in expensive cities. They were free to locate in the more affordable locations elected by high school graduates, but instead decided to pay the higher local prices. In exchange for high housing prices, high skill cities not only offer inhabitants access to high wage labor markets, but also offer an array of more desirable amenities. Indeed, cities which increased their shares of college graduates from 1980 to 2000 also gained more restaurants and bars per capita, improved their air quality, and lowered their crime rates. If the economic value of living in a high amenity city more than compensates college graduates for the high housing prices, the growth in wage inequality wound understate the increase in economic well-being inequality. While the primary driver of the increased skill segregation was due to changes in the labor demands of industries located in different cities, Diamond finds that cities which attracted a higher share of college graduates also became more desirable places to live. Increases in a city’s share of college graduates causes increases in the quality and variety of the local retail market including increases in the density of clothing stores, bar, restaurants, and movie theaters. College share increases also lead to declines in property crime rates and pollution levels, as well as increases in school quality.

Where the Energy Sector’s Pain Still Drives Up Unemployment - Two years of slumping oil prices are continuing to take a toll on once-booming U.S. cities from the Gulf Coast to the Rocky Mountains. The Labor Department on Wednesday reported that 11 metropolitan areas had unemployment rates in July that were at least a percentage point higher compared with a year earlier. Seven were in just four energy-producing states: Louisiana, Oklahoma, Texas and Wyoming. They included Casper, Wyo., where the unemployment rate jumped 2.5 percentage points over the year to 7.3% in July. In Odessa, Texas, joblessness rose to 6.8% from 5.1%. The unemployment rate jumped to 7.2% in Houma-Thibodaux, La., from 5.8% a year earlier. And in Tulsa, Okla., unemployment was 5.3% in July, up from 4.3%. The metro-area data were not adjusted for seasonal variations. A slump in energy and other commodity prices, including the long slide in oil prices since mid-2014, has hammered the domestic energy industry, which continues to shed jobs despite tentative signs in recent months that crude prices may be stabilizing. Mining payrolls across the U.S. fell for the 22nd consecutive month in July and were down 26% from their peak in September 2014, a total loss of more than 220,000 positions, according to Labor Department data. That has squeezed energy-rich state economies and cities across the oil patch even as many areas of the country enjoy low or falling unemployment and steady job gains. The U.S. unemployment rate in July was 4.9%, its 10th straight month at or below 5%. Unemployment rates declined in July from a year earlier in 279 metro areas, versus just 87 where joblessness was up on the year. Metro-area unemployment rates in July ranged from a low of 1.9% in Sioux Falls, S.D., to a high of 24.3% in Yuma, Ariz. Four of the five metro areas with unemployment above 10% last month were in California: El Centro, Visalia-Porterville, Bakersfield and Merced.

How Shrinking Occupations Could Explain Rising Economic Anxiety -- The occupations most likely to shrink over the next decade may help explain why older, white American men are signaling greater economic anxiety: They’re most likely to hold those disappearing jobs. Economist Jed Kolko analyzed Labor Department projections and Census Bureau demographic data and found white men, older adults and the less educated are all more likely to be employed in work that’s expected to decline over the next decade. The analysis shows these jobs have neither the highest unemployment rates, nor the lowest incomes, which may help explain why economic anxiety remains high among those who aren’t necessarily the worst off in today’s labor market. Strong support for Donald Trump among the white working class has produced a steady diet of analyses for what might fuel his rise. A Gallup survey last month suggested his supporters are more easily identified by measures of racial isolation and cultural anxiety than by their personal economic well-being. The Gallup survey and others have examined concerns over declining standards of living, including rising mortality and health issues. Mr. Kolko found that 15.3% of white men who are 55 or older and who have a high school diploma or didn’t finish high school have jobs that are projected to shrink. That’s well above the national average of 10.7%. Older Americans are more likely to have fading jobs, even though they have lower unemployment rates and higher incomes than younger working-age adults.

 Is The Rebound In US Private-Sector Wage Growth Sustainable? - Consumer confidence bounced to its highest level in nearly a year, according to yesterday’s update from the Conference Board. Boosted by optimism on the outlook for the labor market, the index follows news on Monday that year-over-year private-sector wage growth in July strengthened for the second month in a row, rising 4.3%–the fastest annual pace since January. Consumers’ assessment of both current business and labor market conditions was considerably more favorable than last month,” said Lynn Franco, the Conference Board’s director of economic indicators. “Short-term expectations regarding business and employment conditions, as well as personal income prospects, also improved, suggesting the possibility of a moderate pick-up in growth in the coming months.”  It’s encouraging to find that the firmer mood in the consumer sector aligns with stronger year-on-year wage growth in June and July. It’s unclear if the acceleration is sustainable, but for the moment the macro trend appears headed for a boost as the engine of consumer spending enjoys additional support from fatter wallets on Main Street. Taken together, the numbers suggest that the soft US economic trend in the first half of the year is poised to speed up in the second half. A pair of estimates of third-quarter GDP growth from two Federal Reserve banks certainly fall in line with an upbeat outlook at the moment. The New York Fed’s nowcast (as of Aug. 26) anticipates US economic output will expand by 2.8% while the Atlanta Fed’s estimate calls for a 3.5% rise in GDP (seasonally adjusted annual rate), based on the bank’s Aug. 29 update. In both cases, real growth is expected to pick up substantially vs. the weak advances in Q1 and Q2 (0.8% and 1.2%, respectively).

Looking at the latest wage data by education level  --Earlier this week, I analyzed the latest wage data by percentile, which shows that inequality has grown since the last business cycle peak in 2007. Today, I’m going to discuss the latest wage data by education groups. The main takeaways are four-fold. First, women are consistently paid less than men across all education groups. Second, wages have increased more for those with a college or advanced degree than for those with lower levels of education, both in the past year and since 2007. Third, the increase in the college premium since 2007 is dwarfed by the growth in wage inequality generally. And fourth, much of the increase in wages in the last few years has been driven by historically low inflation, as opposed to strong or accelerating nominal wage growth. The table below shows first half (FH) average wages for 2007, 2015, and 2016 by highest level of education attainment and by gender. You can see that at every level of education, men are paid more than women—illustrating the difficulty of women to educate their way out of the gender wage gap. In fact, the gap grows with increasing levels of education. One particular striking finding is that men with just a bachelor’s degree are paid more, on average, than women with an advanced degree.

 Jost on Justice: “Yellow-Dog” Arbitration Clauses Headed to High Court?: Federal labor law makes it illegal for an employer to require a would-be employee to promise not to join a union if hired. These agreements, known as yellow-dog contracts, were a common weapon for anti-union employers in the late 19th and early 20th centuries, but Congress declared them illegal in 1932 in the Norris-LaGuardia Act. Today, they are an historical relic and the term is all but unused. The National Labor Relations Act (NLRA), enacted in 1935, fortifies the prohibition by specifying in section 7 that employees have the right “to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The act’s section 8 makes it an “unfair labor practice” for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights” guaranteed in section 7. - The National Labor Relations Board (NLRB), the agency charged with enforcing the law, ruled in 2012 that the act’s protection for “concerted activities” also makes it an unfair labor practice for an employer to prevent employees from joining together in class actions against the employer. But many employers are now including in employment contracts clauses that require any disputes to be resolved through arbitration and only individually, not combined with other employees in class actions. Business groups are arguing strongly that the NLRB got it wrong because the Federal Arbitration Act (FAA), enacted in 1925, makes arbitration agreements enforceable and that law trumps the NLRA. Federal appeals courts have split on the issue, a split deepened by a ruling by the Ninth U.S. Circuit Court of Appeals last week [Aug. 22]. With five appeals courts now divided 3-2 on the question, an issue affecting blue- and white-collar workers alike nationwide seems all but certain to reach the Supreme Court, perhaps as early as the new term set to open in October.

Union decline lowers wages of nonunion workers: The overlooked reason why wages are stuck and inequality is growing - Executive summary: Pay for private-sector workers has barely budged over the past three and a half decades. In fact, for men in the private sector who lack a college degree and do not belong to a labor union, real wages today are substantially lower than they were in the late 1970s.  In the debates over the causes of wage stagnation, the decline in union power has not received nearly as much attention as globalization, technological change, and the slowdown in Americans’ educational attainment. Unions, especially in industries and regions where they are strong, help boost the wages of all workers by establishing pay and benefit standards that many nonunion firms adopt. But this union boost to nonunion pay has weakened as the share of private-sector workers in a union has fallen from 1 in 3 in the 1950s to about 1 in 20 today. While we avoid strict causal claims about wage determination, the analytical approaches summarized in this report enable us to assess the independent effects of union decline on wages and lend confidence to our core contention that private-sector union decline since the late 1970s has contributed to substantial wage losses among workers who do not belong to a union. This is especially true for men. And most hurt by the decades-long decline in the nation’s labor movement are those nonunion men who did not complete college, or go beyond high school—groups with the largest erosion of union membership over the last few decades.

The decline in unions has hurt nonunion workers too – EPI - Between 1979 and 2013, the share of private sector workers in a union has fallen from about 34 percent to 11 percent among men, and from 16 percent to 6 percent among women. The decline in unions has not only hurt workers who would be in those unions, but it has hurt nonunion workers’ wages as well.  This decline in union density has eroded wages for nonunion workers at every level of education and experience, costing billions in lost wages. For the 32.9 million full-time nonunion private sector women and 40.2 million full-time private sector men, there is a $133 billion loss in annual wages because of weakened unions. Unions keep wages high for nonunion workers for several reasons: union agreements set wage standards and a strong union presence prompts managers to keep wages high in order to prevent workers from organizing or their employees from leaving. Moreover, unions set industry-wide norms, influencing what is seen as a “moral economy.”Working class men have felt the decline in unionization the hardest. Specifically, nonunion men lacking a college degree would have earned 8 percent, or $3,016 annually, more in 2013 if unions had remained as strong as they were in 1979. The effects of union decline on the wages of nonunion women are not as substantial because women were not as heavily represented in unionized private sector jobs. However, women’s wages would be 2 to 3 percent higher if unions had stayed at their 1979 levels. Union decline has exacerbated wage inequality in the United States by dampening the pay of nonunion workers as well as by eroding the share of workers directly benefiting from unionization: union erosion can explain a third of the growth of wage inequality among men and one-fifth of the rise of wage inequality among women. For middle-wage men, the impact of the erosion of unions on the wages of both union and nonunion workers is likely the largest single factor underlying wage stagnation and wage inequality.

 How to Be So Dumb That The IT Guy Is Forced to Spy on You: You can get so lazy that your bosses start to wonder just what the hell you do all day. “I had to set up logging on a developer who was being watched because his productivity and output were very low,” says Paul. “Through captured third-party IM and email traffic, as well as application activity on the person’s computer, it was discovered that he was spending 80 percent of his time doing another job for another company while at his desk in the office of our company. He lost at least one of his jobs that day.” You can fuck up a system admin’s network. “If a file server I administer suddenly starts filling up, I will find out why,” says Paul. “Often it’s a person saving personal videos or music to the system. Usually this is a video of Junior’s soccer match, but it’s not always that bland. In these cases I’m not trying to call anyone out or get them in any trouble, but my systems have to perform to a standard, and when I find out why they are not a person’s activity might come to light.” You can be really bad at looking at pornography. “Someone was caught with porn on their computer,” says Don. “They went to IT for another problem, and the IT person was not snooping but the porn was really obvious, like right on the desktop. The co-worker was obligated to report it, and the person was warned. They asked IT again for something, and it was seen again, and the person was fired.”Or you can be committing actual crimes. “In one case fraud was suspected and employees of a call center were found to be working together to lift one-time-use codes that could be used to get cash from customers’ accounts at locations that accepted our payment method,” says Paul. “They were fairly sneaky about it and the real proof came only through screenshots of both computers while coded messages were sent back and forth and each performed a different task in the scheme. Investigations started after several clients noticed small amounts of money missing and the transactions all happened near our office at about lunchtime.” Still, the real giveaway is often just your behavior on the job — and not necessarily what you’re doing online. “The main reason I get involved is when there is already a suspicion that something is happening,” says Paul. “This most often comes from non-technical sources such as attitude or personality.”

Why A Record Number Of College Grads Are Working Minimum Wage Jobs - Over the past year we have repeatedly demonstrated that the bulk of the job additions has been focused on the lowest-paying occupations. Now, according to a new study by Bank of America, we find that these lowest paying sector have also accounted for the bulk of wage growth in the past year. As BofA's Emanuella Enenajor notes, wage growth in low-pay sectors outpacing all others. "If you’ve tuned into CEO earnings calls recently, you’d know that a common theme is wage pressure, especially in low-pay sectors such as restaurants. CEOs cite the need to attract quality hires, a tightening labor market, and the push from higher minimum wages. A key driver for this increase is that a number of states have raised the minimum wage this year, including California and New York. BofA estimates that this has provided a modest boost to wages, year to date. The BLS does not publish detailed industry-level data by state and earnings buckets. Here is the logic behind the calculation: We use a back-of-the envelope approach for this calculation. First, we estimate 1) the share of low-pay workers impacted by state-level minimum wage hikes. Ideally, we would look for the percentage of low-pay workers earning less than $9.38/hr, as states raising the minimum wage in 2016 have, on average, a minimum wage of $9.38/hr this year. Since this level of granularity is not available, we assume the share is somewhere between 30% (the share of low pay workers making less than $8.99/hr) and 50% (the share of low pay workers making less than $9.99). We assume the mid-point of 40% as our baseline. Then we calculate 2) the percentage of US employees that were located in states seeing a minimum wage increase in 2016 (about 30%). We assume the national distribution mirrors the distribution for low-pay workers. We multiply 1) by 2) to estimate the share of low-pay workers affected by state-level minimum wage increases. This simplified exercise suggests that of the 3.4% yoy increase in low-pay wages so far this year (equivalent to 46 cents), roughly 8 cents (0.6 ppts) is due to the minimum wage increase. This explains about half of the outperformance of low-pay wages versus high-pay wages. Table 2 shows sensitivity around this estimate. Given the assumptions we have had to make, our baseline estimate and the sensitivities are merely illustrative.1 We can conclude that minimum wage gains have had some part in raising low-pay wages, but are not likely the full story.

Rising wage inequality continues to be a defining feature of the U.S. labor market --It’s well documented and widely understood that wage inequality has grown dramatically over the last four decades as productivity and compensation growth have become delinked. Despite an expanding and increasingly productive economy, wages have stagnated for the vast majority. Looking at the most recent data—through the first half of 2016—we see that wage inequality has continued to grow, with top earners faring far better than those in the middle or bottom of the wage scale. First, the data paints a striking picture of growing wage inequality since the last business cycle peak in 2007. Second, average wage growth overall is slow, and any significant real wage growth continues to be driven by low (and below target) inflation—not meaningful acceleration in nominal wage growth. Last, strong payroll employment growth the last couple of months suggests positive future trends for not only wage growth, but also declining unemployment and rising labor force participation. The figure below shows the disparate growth across the wage scale from 2007 to 2016 (using the most recent data, for the first six months of 2016, and comparing to wages at each decile and at the 95th percentile to those of the comparable period in 2007). I’m comparing the first half (FH) of both years to maintain the same seasonality in the data. Plus, it gives us a glimpse of what’s happened through the first half of this year. Except for the lowest wages—at the 10th percentile—what you see is a clear increase in growth as one moves up the wage distribution, from negative growth at the 20th percentile (-2.8 percent) to the fastest growth at the 95th percentile (10.4 percent). At the median, real wages grew a total of only 0.8 percent over the nine-year period. So, not only did the labor market since 2007 perpetuate the wage stagnation and inequality of the previous three decades, it has actually exacerbated it.

Today’s Inequality Could Easily Become Tomorrow’s Catastrophe - Robert Shiller: Economic inequality is already a concern, but it could become a nightmare in the decades ahead, and I fear that we are not well equipped to deal with it.  Truly extreme gaps in income and wealth could arise from many causes. Consider just a few: Innovations in robotics and artificial intelligence, which are already making many jobs uncompetitive, could lead us into a world in which basic work with decent pay becomes impossible to find. An environmental disaster like global warming, pollution or disease could sharply reduce the ability of people of ordinary means to live in specific regions or entire countries.Future wars using ever more highly destructive technology, including chemical, biological, radiological or nuclear weapons, could devastate vast populations. And it’s not out of the question that dire political changes, like the rise of racist or otherwise exclusionary social structures, could have terribly damaging consequences for less privileged people.Of course, I dearly hope none of these things ever happen. But even if they are unlikely, as part of our progress to a better world, we should be thinking now of how we might address them.The current presidential campaigns in the United States have not really touched on long-range issues like these. The campaigns have instead been focused primarily on short-term concerns, and on issues facing people of middle income instead of those in extreme poverty. The private sector isn’t helping much, either. It has not gone very far in developing insurance or hedging markets to protect against these risks. That raises an important question: Can we depend on the benevolence of society to compensate and care for those who would lose out if dire events actually happened?

America’s wars take uneven toll, study finds - In today's wars, Americans who die or are wounded in battle are disproportionately coming from poorer parts of the country, according to a new study released this week.  By analyzing over 500,000 American combat casualties from World War II through Iraq and Afghanistan, University of Minnesota Law Professor Francis Shen and Boston University Political Scientist Douglas Kriner found growing socioeconomic inequality in military sacrifice. The study, "Invisible Inequality: The Two Americas of Military Sacrifice," appears in the most recent issue of the Memphis Law Review, and was posted this week on the Social Science Research Network. Kriner and Shen point to "Two Americas" of military sacrifice which constitute invisible inequality because the issue is routinely overlooked by scholars, policymakers, and the public. The study uses a variety of data and statistical tools to show that there are social, legal, and political consequences of this inequality. Focusing on mental health, for instance, the study suggests that soldiers returning home to weaker social support structures are at greater risk of developing mental disorders. Moreover, the study explores how inequalities in sacrifice exacerbate political inequality. Those communities with the weakest voice in Washington are called on to bear a disproportionate burden when the country goes to war.

Latest Guccifer Leak Reveals What Democrats Really Think Of Black Lives Matter -- The hacker known as "Guccifer 2.0" recently uploaded new material to his website which he claims to have received courtesy of Nancy Pelosi's PC.  The new release includes several internal memos from DCCC staff as well as talking points on various topics. Among the most interesting of the new disclosures is a memo from Troy Perry with talking points on how candidates and campaign staff should address various topics related to the Black Lives Matter movement.  The memo notes that "presidential candidates have struggled to respond to tactics of the Black Lives Matter movement"  and refers to the group as a "radical movement to end "anti-black racism."  Perry also warns not to use "trigger" phrases like "all lives matter" or "black on black crime."  The memo goes on to offer the following "Background" and "Tactics" for "best practices" when dealing with Black Lives Matters members: “This document should not be emailed or handed to anyone outside of the building.  Please only give campaign staff these best practices in meetings or over the phone.” "Be a Partner & Lead From Behind.  BLM needs partners to achieve their agenda and they want to be a part of the conversation." “However, BLM activists don’t want their movement co-opted by the Democrat Party.  They are leary of politicians who hijack their message to win campaigns.”“Do not say ‘all lives matter’ nor mention ‘black on black crime’.  Such phrases are “viewed as red herring attacks,” and such a response “will garner additional media scrutiny and only anger BLM activists.” noting that “This is the worst response.”

   Obama Admits 10,000 Syrian Refugees: Top Destinations Are Michigan And California -- Yesterday, the White House announced that the US had met President Obama’s goal of admitting 10,000 Syrian refugees into the country; it did so ahead of schedule.  One year ago Obama had sought a sixfold increase in the number of Syrian refugees provided safe haven in the United States. After a slow start, the administration was able to hit the goal about a month early and just a few weeks before Obama convenes a summit on refugees during the 71st session of the United Nations General Assembly. He would have been hard-pressed to make the case for other countries to do more with the U.S. failing to reach a goal that amounts to about 2% of the 480,000 Syrian refugees in need of resettlement. Millions more Syrians have fled to neighboring states such as Jordan, Turkey and Lebanon and to countries in Europe since the civil war broke out in 2011. Over 1 million Syrian refugees made their way to Germany, where the resultant social shock, and surge in violent terrorist attacks, have led to a plunge in Angela Merkel's approval rating. That, however, has not deterred the US from seeking to admit thousands of refugees.

Obama Appoints Social Security Critic to Fix Puerto Rico’s Budget - Andrew Biggs, an American Enterprise Institute resident scholar and architect of conservative efforts to cut and privatize Social Security, has been named by President Obama to a seven-member fiscal oversight board for the debt-ridden U.S. territory of Puerto Rico. That board, which will work out restructuring for over $70 billion in debt, has widespread authority to institute additional austerity on the island’s citizens, including potential reductions in public pensions. And Biggs appears to be the only member of the board that has significant experience with social insurance. Under the Puerto Rico Oversight, Management, and Economic Stability Act signed into law in June, the fiscal oversight board will be effectively in charge of the island’s finances, usurping its democratically elected government. The oversight board is tasked with balancing Puerto Rico’s budget and pursuing all avenues to pay off its massive debt, including cuts to the island’s education, police, and health care systems. It can sell off Puerto Rican assets, lower the island’s minimum wage, order layoffs, and enforce a ban on public employee strikes. Only as a last resort can the island obtain court approval for a debt restructuring agreement, and negotiate with creditors, which include several “vulture funds” that scooped up Puerto Rican debt at a discount in the hopes of a big payday.

Most Welfare Dollars Don’t Go Directly To Poor People Anymore - Twenty years after President Bill Clinton fulfilled his vow to “end welfare as we know it,” it’s fair to say: mission accomplished. The old U.S. welfare system is dead. Whether the system that replaced it is better for the poorest Americans remains the subject of fierce debate. The 1996 reform didn’t result in a reduction in total spending on welfare, now known as Temporary Assistance for Needy Families. Since 1998, the first year for which we have complete data, total TANF spending — both from federal block grants as well as required state matching funds — has remained essentially flat, after adjusting for inflation,1 according to data from the Center on Budget and Policy Priorities, a left-leaning think tank that is critical of welfare reform. Per-person spending has fallen, however: In 2014 there were about 12 million more people below the poverty level than in 1998, according to the Census Bureau. The U.S. population has grown nearly 20 percent during that time. Perhaps the more significant change, though, is in how that money is being spent. Welfare reform replaced the old, federally run cash assistance program with a system of state-administered block grants. Under TANF, states can spend welfare money on virtually any program aimed at one of four broad purposes: (1) assistance to needy families with children; (2) promoting job preparation and work; (3) preventing out-of-wedlock pregnancies; and (4) encouraging the formation of two-parent families. Some states have interpreted those purposes — especially the last two categories — “very, very loosely,” said LaDonna Pavetti, a researcher at the Center on Budget and Policy Priorities. After-school programs to reduce teen pregnancy, for example, can be funded through TANF block grants. The result has been a dramatic shift of resources away from cash assistance and toward spending on other programs.

DoJ Says Jail for Not Making Bail is Unconstitutional - naked capitalism - Jerri-Lynn here. The Department of Justice (DoJ) has stepped up to address one of the more egregious ways the criminal justice system discriminates against poor people who have been arrested. In a friend-of-the court brief filed before the U.S. Court of Appeals for the Eleventh Circuit earlier this month, the DoJ averred “that a bail scheme that mandates payment of fixed amounts to obtain pretrial release, without meaningful consideration of an individual’s indigence and alternatives that would serve the City’s interests, violates the Fourteenth Amendment.” In the overall context of the DoJ’s track record on criminal justice and other issues during the Obama administration, it’s worth examining the details to see how significant the move really is. This Real News Network interview with University of Maryland law professor Doug Colbert delves into details. It’s worth noting that the position the DoJ has taken here is relatively costless to the agency. The Bail Reform Act of 1966 changed federal law and abolished bail conditions that discriminated against poor people who had been arrested. Before that act was passed, defendants in federal court were routinely jailed for failure to make bail, without regard for their indigence. The DoJ’s brief concerns the bail practices of the city of Calhoun, Georgia. Yet it is up to state legislatures to change state laws and procedures. As Colbert notes in the interview, to do so would require challenging the interests of the lucrative bail bond industry and their legislative supporters.

Military Insiders and War Profiteers Will Be Reviewing Private Prisons for Homeland Security - naked capitalism Jerri-Lynn here. The Department of Justice received considerable plaudits in August when it announced a decision not to renew contracts with private prison companies. At the time, a Marshall Project analysis made it clear that significance of that decision was overstated, as it only affected about 15% of inmates held in private prisons. The Department of Homeland Security (DHS) holds roughly 50% more prisoners in private facilities than does the DoJ, and the combined figure for states is about three times the DHS figure.  The DoJ’s decision followed a report by its Inspector General to examine how the DoJ’s Bureau of Prisons monitors the facilities. Warning: the report’s analysis of the appalling conditions in prisons operated by private companies does not make for easy reading. The DoS’s decision has led some states, and now the DHS, to respond. The DHS on Monday announced the launch of a review of its use of for-profit immigrant detention enters. Despite its polemical tone, this AlterNet piece is well-supported and provides considerable raw material for assessing just one example of the conflicts of interest that have became the norm in the making of American public policy– and calls into question just how objective this review will be.  I particularly applaud the author’s decision to include in her piece the full membership of the Advisory Council that will decide whether the DHS should follow the DoJ and various states and phase-out its reliance on private operators. Members of the defense, security, and police establishments are well-represented on this body, but there is not a single individual or organization included that advocates for the people who might find themselves in these detention facilities. I would not have believed how one-sided the membership was without seeing for myself the list of the council’s membership.

Leaked Catalogue Reveals a Vast Array of Military Spy Gear Offered to U.S. Police - A confidential, 120-page catalogue of spy equipment, originating from British defense firm Cobham and circulated to U.S. law enforcement, touts gear that can intercept wireless calls and text messages, locate people via their mobile phones, and jam cellular communications in a particular area. The catalogue was obtained by The Intercept as part of a large trove of documents originating within the Florida Department of Law Enforcement, where spokesperson Molly Best confirmed Cobham wares have been purchased but did not provide further information. The document provides a rare look at the wide range of electronic surveillance tactics used by police and militaries in the U.S. and abroad, offering equipment ranging from black boxes that can monitor an entire town’s cellular signals to microphones hidden in lighters and cameras hidden in trashcans. Markings date it to 2014. Cobham, recently cited among several major British firms exporting surveillance technology to oppressive regimes, has counted police in the United States among its clients, Cobham spokesperson Greg Caires confirmed. The company spun off its “Tactical Communications and Surveillance” business into “Domo Tactical Communications” earlier this year, presumably shifting many of those clients to the new company. Caires declined to comment further on the catalogue obtained by The Intercept or confirm its authenticity, but said it “looked authentic” to him. “By design, these devices are indiscriminate and operate across a wide area where many people may be present,” said Richard Tynan, a technologist at Privacy International, of the gear in the Cobham catalogue. Such “indiscriminate surveillance systems that are not targeted in any way based on prior suspicion” are “the essence of mass surveillance,” he added

 Chicago Records "Most Violent Month In 20 Years" - With 3 days left in the month of August, the city of Chicago has recorded 84 homicidesmaking it the deadliest month since October 1996 when 85 homicides were committed.  In fact, as the Chicago Tribune points out, YTD through August, Chicago has recorded more homicides than New York City and Los Angeles, combined.  So far Chicago has recorded 487 homicides in 2016 compared to 222 in New York and 176 in Los Angeles.  This staggering data comes despite the fact that Chicago's total population is roughly 20% the size of New York and Los Angeles.  This weekend was one of the most violent of the year in Chicago and one which claimed the life of Dwyane Wade's cousin, Nykea Aldridge.  Aldridge was reported to be pushing her baby in a stroller in the 6300 block of South Calumet Avenue when two men approached and began shooting at a man walking near her. HeyJackass! has the latest statistics on violent crime in Chicago.  So far through the month of August Chicago has recorded 439 total shootings and 84 total homicides.

Report: Illinois' unpaid bills could reach $14 billion next year (AP) — A credit rating agency estimates Illinois' backlog of unpaid bills could reach a new high of $14 billion by next summer. The Chicago Tribune cites ( a Wednesday report from Moody's Investors Service, which says the temporary budget agreement between Republican Gov. Bruce Rauner and Democrats who run the Legislature is adding to the state's fiscal problems. The report says the central issue is the rollback of the 2011 temporary income tax increase that's dropped revenues. Moody's says expenses jumped 12 percent under the stopgap budget with flat revenues. Without changes, the state could see a backlog of $14 billion by the new fiscal year which starts in July. Rauner said Wednesday that the stopgap is temporary fix that gets the state through the election.

What Life Will Be Like After An Economic Collapse - If you have been waiting for a public announcement or news headline to let you know that an economic collapse has begun, you are in for the surprise of your life. If history in other countries and in Detroit, Michigan is any indication, there won’t be an announcement. An economic collapse tends to sneak up on a city, region, or country gradually over time. In some cases, the arrival of an economic collapse is so gradual that most people living in it aren’t even aware of it at first. Things just get gradually worse, often so gradually that people and families adjust as best they can until one day they actually realize that it’s not just their home or their neighborhood that has been hit so hard financially, it’s everyone. By that time, it’s often too late to take preventative action. In March of 2011, Detroit’s population was reported as having fallen to 713,777, the lowest it had been in a century and a full 25% drop from 2000. In December 2011, the state announced its intention to formally review Detroit’s finances. In May of 2013, almost two years later, the city is deemed “clearly insolvent” and in July of 2013, the state representative filed a Chapter 9 bankruptcy petition for Motor City. Detroit became one of the biggest cities to file bankruptcy in history. So we have only to look at what happened in Detroit, Michigan post-bankruptcy, to get an indication of what might soon be widespread across the United States and what is already widespread in countries like Brazil and Venezuela.

 In St. Louis schools, water fountains are symbols of inequality again — Yellow tape marks the drinking fountains in 30 St. Louis Public Schools as off-limits, denying students even a sip of water. In the wake of the lead-poisoning crisis in Flint, Mich., this summer, officials here tested the water at their schools, many of them decades-old buildings in need of repair. Some, like Mann Elementary and Patrick Henry Downtown Academy, had results bad enough to necessitate an immediate shut-off of the drinking fountains; more than a dozen schools had at least one reading four or five times the readings recorded in Flint homes. The district shipped in bottled water. At other schools, like Gateway Middle, there was at least one test that exceeded the 10-parts-per-billion threshold set by the district, but administrators determined that there was enough clean water available elsewhere in the school to keep most of the taps running. At Gateway, teachers took matters into their own hands and are bringing bottled water in on their own. About 19 minutes away, at Reed Elementary School in Ladue, in the 63124 Zip code that often ranks as one of the wealthiest in the country, the water will be cold and clean. In fact, thanks to a “naming opportunities” initiative, the drinking fountain there might soon find itself inscribed with a generous donor’s name — a reminder to thirsty students that they live in a place where clean water is a privilege. In a region that has been in the national civil rights consciousness since the Aug. 9, 2014, killing of Michael Brown in Ferguson, the water fountain has returned as a metaphor for racial division. In the St. Louis city schools, 82 percent of the students are black, and 85 percent qualify for free lunch. In Ladue, the script is flipped: Only 17 percent of students are black, and 12 percent qualify for free lunch. Last year, the voters in Ladue passed an $85 million bond issue to build new schools and update already first-class facilities. But the district wanted even more money. So the Ladue Education Foundation decided to seek hundreds of thousands more dollars from the region’s deep-pocketed elite by selling naming rights to rooms and hallways, performing arts centers and football stadiums and, yes, water fountains.

Chart of the day: The astronomical rise in college textbook prices vs. consumer prices and recreational books - - The chart above shows in the percentage increases between January 1998 and July 2016 for: a) the overall CPI for all items (+48%), b) the CPI for college textbooks (+181%), and c) the CPI for recreational books (-4.2%). In real terms, college textbook prices have increased by 90% while recreational book prices have fallen by more than 35%. (The increases in the real rates were calculated using the formula: (1 + Nominal Rate) = (1 + Real Rate) (1 + Inflation); and solving for the Real Rate.) The huge divergence in book prices over times — college textbooks getting significantly more expensive while recreational books are getting significantly less expensive — would suggest that the college textbook publishers can’t really blame rising publishing costs for the exponential rise in college textbook prices. Rather, a better explanation would be that the college textbook market is insulated from the normal market forces that would lead to falling, not rising, book prices over time, like the recreational book market. One way the textbook market is insulated from competition and market forces is that the professor, not the student, makes the decision on the textbook for a course, and it’s probably the case that many professors are unaware of the retail cost of the books they assign for their students. And once the professor decides on a textbook, there are no substitutes for the new edition of the book assigned. If a professor assigns Mankiw’s Principles of Economics textbook, students can’t substitute McConnell’s Principles of Economics textbook.

 ITT College Chain Barred From Enrolling Students With U.S. Aid - The New York Times: The federal Department of Education imposed strict new rules on Thursday on one of the nation’s largest for-profit education companies, ITT Educational Services, barring it from enrolling new students who use federal financial aid and ordering it to pay $153 million to the department within 30 days to cover student refunds if its schools close down.  John B. King Jr., the secretary of education, said the department took action to protect both ITT’s students and the taxpayers who are on the hook for losses when students default on their federal aid. “Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds,” Mr. King said in a statement.The action threatens the viability of the beleaguered company, which like most for-profit education entities relies heavily on government financial aid programs for students to fund its operations. As of June 30, according to a regulatory filing, ITT had only $78 million in cash on its balance sheet.An email message requesting comment from an ITT spokeswoman late Thursday night was not immediately returned. ITT operates 137 campuses in 39 states, providing career-oriented programs to 43,000 students at ITT Technical Institute and Daniel Webster College locations. ITT was once a highflying stock, trading above $75 a share in 2012. On Thursday, its shares closed at $1.40.

Crackdown on For-Profit Colleges May Free Students and Trap Taxpayers - The New York Times: The Obama administration’s decision to bar ITT Educational Services, one of the nation’s largest operators of for-profit colleges, from using federal financial aid to enroll new students shuts off the cash spigot to the troubled company. But it also creates a new set of problems.The decision last week was the latest step in the federal government’s crackdown on for-profit schools that have vacuumed up billions of dollars in government grants and loans but failed to deliver on promised training and jobs. Still, the goal of relieving current and former students saddled with onerous debt and a subpar education can be at odds with reducing the cost to taxpayers, who are likely to be stuck with the bill for loan defaults and discharges.“There is a built-in conflict of interest when the gatekeeper and the financier are the same entity,” Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said of the Department of Education.ITT, with about 45,000 enrolled students spread over more than 130 campuses across the country, received an estimated $580 million in federal money last year, according to the Department of Education.The company did not respond to repeated requests for comment, but Mr. Nassirian and other experts who have closely followed the issue said the department’s decision could mean the end of ITT, either through bankruptcy or sale. “It’s a de facto death sentence,” Mr. Nassirian said. “They certainly can’t find students who will pay out of pocket to go to that school, and they don’t have adequate resources to creep along in time to reverse the decision. So I don’t see how they’re going to pull out of this.”

Georgetown To Grant Admission Preference To Slave Descendants --Georgetown University President, John DeGioia, recently announced that the university will give "preference in admissions" to descendants of slaves formerly owned by the Maryland Jesuits as part of the school's effort to "atone" for profiting from the sale of enslaved people.  According to a report of a special "Working Group" of the university, two priests who served as president of the university back in 1838 orchestrated the sale of 272 people to pay off school debts.  The slaves were apparently sent from Maryland to plantations in Louisiana.  Between Georgetown’s founding and 1864, the year slavery was declared unconstitutional in the state of Maryland, the 1838 sale of 272 slaves from the Jesuit plantations stands out for its size and the controversy it garnered. It was not the only, the first, or the last sale of slaves to provide operating revenue for the school, but it was the largest. This mass sale was the product of a complicated calculus on the part of the Jesuit leadership and an extensive controversy within the order. All the factions recognized that the plantations were not producing enough income even to support themselves in the early nineteenth century, and at the same time, the College suffered from mounting debt.  Jesuit authorities in Rome became involved in this dispute. Their initial inclinations were toward some form of emancipation. Following extensive lobbying by American Jesuits, they capitulated to those who argued for sale. They then placed conditions on a sale: that families not be divided, that the continued practice of the Catholic faith by these baptized slaves be ensured, and that the monies raised from the sale be used for endowment, not for operating expenses or the paying down of debt. In the end, none of these conditions was fulfilled.

Stanford is using a new system to keep track of students' gender pronouns - The first day of class usually comes with its inevitable stressors, but Stanford University is trying to ensure that for its nonbinary and gender-nonconforming students, anxiety over having to correct professors about their pronouns isn't one of them. According to the  the Washington Post, this fall the university will use a new program called NameCoach that allows students to record their names and pronouns for faculty and staff.  Though the service was developed by Stanford graduate students mostly with name pronunciation in mind — co-founder Praveen Shanbhag told Stanford's website he'd had his name mispronounced his entire life — the university's administration saw an opportunity to support students who've had their pronouns misused and abused. "We want to encourage a culture of respect on campus, and one of the best ways to convey respect to someone is to get their name right — and to get their pronouns right, too," University Registrar Tom Black told the site.The University of Wisconsin-Milwaukee explains the importance of respecting people's gender pronouns on its LGBT resource center website, writing, "It is a privilege to not have to worry about which pronoun someone is going to use for you based on how they perceive your gender. If you have this privilege, yet fail to respect someone else's gender identity, it is not only disrespectful and hurtful, but also oppressive." Stanford's associate dean Dereca Blackmon said NameCoach helps students who want to be conscious of their peers' pronouns but "still feel unsure how to approach the subject of gender pronouns."

What University Of Chicago Students Think Of Their School’s Campaign Against ‘Safe Spaces’ - This week, the University of Chicago sent a letter to incoming freshman informing them that it does not “support” trigger warnings or “condone” safe spaces. But its own students argue that the letter is simply trying to distract from the real issues they want the university to address. A trigger warning prepares people to read or watch something that may be challenging for them — most typically because they have experienced something traumatic, such as sexual assault. Safe spaces are places where marginalized groups can go to get away from the dominant campus culture for a moment, or where someone who has been traumatized by something can go to heal on their own time. On Thursday, shortly after this news broke, The Wall Street Journal ran an op-ed written by University of Chicago President Robert Zimmer on the importance of free speech. But University of Chicago students themselves told ThinkProgress that they believe the letter is meant to distract from the issues student activists are most concerned about, such as a living wage for campus workers, better services for students with disabilities, and what students say are racist policing practices from university police on the South Side of Chicago. “Dean Ellison has repeatedly refused to meet with student leaders about critical issues, including living wages on campus, accessibility for students with disabilities, and strengthening the university’s sexual assault policy,” Anna Wood, a student and university worker who has engaged in campus activism, wrote in a statement to ThinkProgress. “It’s ironic that during my time at the University of Chicago, administrators have continuously sought to create a comfortable space for themselves free of challenge by avoiding engagement with student leaders about these issues.”

Progressive UND students get social justice-themed housing option:

  • The University of North Dakota (UND) is offering students the chance to live in a specialized housing community dedicated entirely to social justice.
  • The Social Justice Living-Learning Community (LLC) joins four other LLC's: Aviation, Engineering & Mines, Wellness, and Honors.
  • Students in the Social Justice LLC will have the option to room with individuals of any "gender identity" as long as all parties agree to the living arrangement.

The Social Justice Living-Learning Community is “designed for students who are involved in promoting a more inclusive and just society,” and promises to provide such students with opportunities for “creating and leading positive social change.” The Social Justice LLC is “for students who are involved in promoting a more inclusive and just society.”    Tweet This The website for the LLC does not have a specific schedule of events for the semester, but notes that students may engage with guest speakers, film series, book clubs, and service opportunities. Cheryl Terrance, faculty advisor of the UND Ten Percent Society (TPS), a student support group for the “GLBTQQIA community,” told Campus Reform that the LLC was developed by the school’s housing office, but predicted that social justice-oriented student groups such as TPS would likely be involved in programming efforts.

"The New Cheating Economy" - Cheating has become second nature to many students. In studies, more than two-thirds of college students say they’ve cheated on an assignment. As many as half say they’d be willing to purchase one. To them, higher education is just another transaction, less about learning than about obtaining a credential. The market, which includes hundreds of websites and apps, offers a slippery slope of options. Students looking for class notes and sample tests can find years’ worth on, which archives exams from dozens of colleges. And a growing number of companies, including Course Hero and Chegg, offer online tutoring that attempts to stay above the fray (one expert calls such services a "gateway drug"). Many students turn to websites like Yahoo Answers or Reddit to find solutions to homework problems. And every month, hundreds of students put assignments up for bid on and Upwork, where they might get a paper written for the cost of a few lattes. ... Ultius protects its business by keeping those orders private. ... The company’s dealings with one Ph.D. candidate illustrate the increasingly complex work that students are outsourcing, while faculty members remain in the dark. Last year, Ultius contracted with a student who described herself as a "single active duty parent" to help write a concept paper for her doctoral program, records show. The job included revisions requested by the chair of her dissertation committee.

Colorado Professors Kick 'Deniers' Out - "We Will Not, At Any Time, Debate Climate Change" -- Professors Laroche, Haggren and Skahill of the University of Colorado - Colorado Springs will not allow you to invade their man-made climate change "safe space" and if you don't like it then you can get out.  According to The College Fix, that is the response students recently received from the progressive teacher trio after "expressing concern" for their success in a course that refused to debate climate change.  The full email from the teachers is posted below but here are a couple of the highlights: "We have received several emails from students expressing concern for their success in our course given their personal perspectives on climate change." “The point of departure for this course is based on the scientific premise that human induced climate change is valid and occurring. We will not, at any time, debate the science of climate change, nor will the ‘other side’ of the climate change debate be taught or discussed in this course.  Opening up a debate that 98% of climate scientists unequivocally agree to be a non-debate would detract from the central concerns of environment and health addressed in this course.”“… If you believe this premise to be an issue for you, we respectfully ask that you do not take this course, as there are options within the Humanities program for face to face this semester and online next.”

Ruling Pushes Door to Grad-Student Unions ‘Wide Open’ - Many more private universities can expect to see their graduate employees move to form unions in the wake of Tuesday’s National Labor Relations Board decision on such an effort at Columbia University.  The federal labor board’s 3-to-1 ruling resoundingly overturned a 2004 decision involving Brown University. In the Brown ruling, the board asserted that graduate employees should not be allowed to form unions because their doing so would intrude into the educational process. In Tuesday’s decision, the majority held that such a belief "is unsupported by legal authority, by empirical evidence, or by the board’s actual experience." It not only rejected the Brown precedent, but also overturned a 1974 ruling that had declared research assistants at Stanford University ineligible to unionize based on a belief that such research is part of the educational process. The board’s decision in the Columbia case says graduate students employed by a private university are as eligible as any other type of worker to form collective-bargaining units under the National Labor Relations Act. The decision leaves the doors to unionization "wide open" for graduate employees and "pretty much sweeps almost anyone who is a graduate student providing some service for stipend into the mix,"

 Corruption at CUNY Jacobin - The New York Times reported Monday: The City University of New York is investigating whether a recent $500,000 donation intended to bolster the humanities and arts at its flagship school may have been improperly diverted. The inquiry was prompted by senior faculty members at the school, the City College of New York, who learned that an account that should have contained roughly $600,000, thanks to the donation, had just $76. Faculty members asked City College officials for an explanation, but were met with “silence, delay and deflection” before appealing directly the university’s chancellor, James B. Milliken. Mr. Milliken then asked Frederick P. Schaffer, the university’s general counsel and senior vice chancellor for legal affairs, to look into the “the expenditure of monies donated,” according to documents obtained by The New York Times. This is part of a followup to a piece the Times ran last spring, which I blogged about, and which claimed: Documents obtained by The Times indicated that the college’s 21st Century Foundation paid for some of Ms. Coico’s personal expenses, such as fruit baskets, housekeeping services and rugs, when she took office in 2010. The foundation was then reimbursed for more than $150,000 from CUNY’s Research Foundation. That has raised eyebrows among governance experts, because such funds are typically earmarked for research. It’s unclear what the $600,000 went to, and who made the decision. Hence the investigation, which involves federal prosecutors. But at a minimum, it seems clear that the money was used for purposes it was not earmarked for. I used to think that corruption was just one of those do-gooder good-government-type concerns, a trope neoliberal IMF officials wielded in order to force capitalism down the throat of developing countries. After years of hearing about stuff like this at CUNY, and in some cases seeing much worse, I’ve come to realize just how corrosive and politically debilitating corruption is. It’s like a fungus or a parasite. It attaches itself to a host, a body that is full of possibility and promise, a body that contains so much of what we hope for, and it feeds off that body till it dies.

Taxpayers forced to pay $421 million more for teacher pensions -- The Illinois Teachers’ Retirement System, or TRS, has voted to lower the fund’s future investment return assumption to 7 percent from 7.5 percent. Because the fund relies heavily on its investments to meet its retirement obligations, taxpayers, by law, are expected to make up any shortfalls in investment income. The changed assumptions mean taxpayers will pay an additional $421 million toward pensions in 2017 alone. The announcement comes a little more than two years after TRS last cut its expected rate of return. The fund dropped the rate to 7.5 percent from 8 percent in June 2014. The State Employees Retirement System, or SERS, followed suit in 2016, dropping its own investment return assumption to 7 percent.  Those changes have already added hundreds of millions to the contributions taxpayers have to make to the state pension systems. Yearly pension costs now consume more than 25 percent of the state’s general fund budget and are crowding out spending on social services, higher education and nearly every other core government service. But the funds’ projected lower rates of return aren’t just about the increased costs to taxpayers. It’s much more than that. It’s proof that Illinois’ pension math has never worked. Not for taxpayers, not for Illinoisans dependent on core government services, and not for pensioners, whose retirement income depends on politicians’ reckless promises – promises the state could never afford to keep.

What Aetna’s Withdrawal Means for Obamacare -   Few companies are as unpopular as insurance companies, and no tears were shed for the insurance giant Aetna when, a couple of weeks ago, it announced that it had lost more than four hundred million dollars on Obamacare policies since the Obamacare exchanges were set up, in 2014, and was going to pull out of most of them. The news, which followed similar announcements by United Healthcare and Humana, was greeted with talk of “whining” insurers who “put profits before patients’ health” and are “willing to deny care to make a few extra dollars.” But the recriminations are misplaced. Aetna’s decision reflects an awkward reality: the jerry-rigged, politically compromised nature of Obamacare has made the program unstable, and unable to live up to its lofty promises.It’s not that Obamacare has failed. As Larry Levitt, a health-care analyst at the Kaiser Family Foundation, told me, “The main goal of the law was to reduce the number of uninsured people, and twenty million more people are covered today because of it. It’s hard to call that a failure.” The reforms that Obamacare put in place have guaranteed access to insurance for people with preëxisting conditions, and have done away with caps on how much insurance companies will spend. Access to health care is less precarious than it used to be.Still, we’re a long way from the future that Barack Obama envisaged when, in 2009, addressing the American Medical Association, he called for “comprehensive reform that covers everyone” and provides “affordable health insurance to every single American.” Some thirty million Americans remain uninsured. Participants in the A.C.A. marketplaces are less numerous, and sicker, than anticipated: 8.3 million fewer people enrolled through the exchanges this year than the Congressional Budget Office had projected. As a result, insurers in much of the country are fleeing the marketplaces. Kaiser estimates that between twenty and twenty-five per cent of U.S. counties may have only one insurer offering coverage in 2017; there’s already a county in Arizona with no Obamacare insurer at all.

Health insurers' pullback threatens to create monopolies | American Pharmacists Association: Almost a third of U.S. counties look likely to have just a single insurer offering health plans on the Affordable Care Act's (ACA) exchanges next year, according to a new analysis, an industry pullback that adds to the challenges facing the law. The new study by the Kaiser Family Foundation suggests there could be just one option for coverage in 31% of counties in 2017, and there might be only two in another 31%. That would give exchange customers in large swaths of the United States far less choice than they had this year, when 7% of counties had one insurer and 29% had two. Companies including UnitedHealth Group, Humana, and Aetna Inc. have cited their losses in withdrawing from ACA marketplaces, as have smaller insurers that have been retreating, or even shutting down. The insurers that remain are in some cases seeking sharp premium increases for next year, trying to get back in the black amid higher-than-expected costs. The marketplaces were supposed to hold down prices and expand choice by fostering competition among insurers. Leemore Dafny, a professor at Harvard Business School, says that having a small number of insurers is "likely to lead to a very pricey exchange." Dafny says federal subsidies will blunt the effect of premium increases for many consumers.

Barack Obama’s healthcare problems turn critical - At the heart of Barack Obama’s vision for US healthcare reform were online marketplaces in which Americans would buy low-cost health coverage from thriving insurers. In Pinal County, Arizona, a semi-rural district outside Phoenix, it has not gone according to plan. After three big insurers including Aetna said they would abandon so-called Obamacare exchanges next year, Pinal County faces the prospect of becoming the first place where not a single company wants to sell insurance on its exchange.Jackie Shore, a nurse who helps people navigate the system, says she is already receiving calls from worried patients in the county, home to 400,000 people. “They’re in bad shape financially as it is and now they might have even more limited options,” she says. “It’s really going to become a crisis.” Pinal County is an extreme case, but it reflects deep-seated problems dogging Mr Obama’s reforms, known as the Affordable Care Act. They are threatening to undo a signature achievement of his presidency as the clock ticks down on his final five months. America’s Health Insurance Plans, a trade group for the many unhappy US insurers, complains that the marketplaces are “unstable”. Julie Mix McPeak, Tennessee’s insurance regulator, said last week that her state’s Obamacare exchange was “very near collapse”. Echoing the enmity of most Republicans, Donald Trump says he wants to repeal and replace the healthcare law. With the exchange system now teetering, one Republican aide on Capitol Hill says “the law’s opponents sense there is blood in the water”.

Obamacare Marketplaces Are in Trouble. What Can Be Done? - The New York Times -- It has been a hard couple of weeks for Obamacare. The law’s online marketplaces — where people were supposed to be able to easily shop for health insurance — have been suffering from high-profile defections and double-digit premium increases.  Critics of Obamacare have pointed to the recent problems as proof the market is not working, while even the law’s staunchest defenders are arguing that the marketplaces need some fixes. Here are four key challenges to the program and a survey of some possible solutions. The insurance co-ops created by the law have mostly gone belly-up. UnitedHealth bowed out of most states where it offered individual plans on the exchanges. Aetna pulled out from 11 states. And smaller carriers, like the start-up Oscar Health, which has been struggling, have reduced their footprint. Three years in, many established insurers say they are seeing their losses from selling individual plans deepen. Many of the nonprofit Blue Cross plans and other well-regarded insurers, like Geisinger Health, are having trouble. There is something of a herd mentality taking place — if all my competitors are leaving, maybe I should, too. Competition, at least in theory, helps keep premiums low and service high. That’s the whole point of having a market for health insurance. But 17 percent of people eligible for this market might have no choice of carrier next year.  If the market looks as if it’s growing and stable, some insurers might come back. Both President Obama and Hillary Clinton have also revived the idea of the so-called public option, which would be a government-run plan that would either compete with or be a substitute for a plan offered by a private insurer. It’s politically controversial and hard to make work in practice.

The History of ObamaCare, 2013-2016 - Lambert Strether - A compendium of ObamaCare posts at Naked Capitalism (with talking points).

 Why A Single-Payer Healthcare System Is Inevitable – Robert Reich - The problem isn’t Obamacare per se. It lies in the structure of private markets for health insurance – which creates powerful incentives to avoid sick people and attract healthy ones. Obamacare is just making this structural problem more obvious. In a nutshell, the more sick people and the fewer healthy people a private for-profit insurer attracts, the less competitive that insurer becomes relative to other insurers that don’t attract as high a percentage of the sick but a higher percentage of the healthy. Eventually, insurers that take in too many sick and too few healthy people are driven out of business. If insurers had no idea who’d be sick and who’d be healthy when they sign up for insurance (and keep them insured at the same price even after they become sick), this wouldn’t be a problem. But they do know – and they’re developing more and more sophisticated ways of finding out. Health insurers spend lots of time, effort, and money trying to attract people who have high odds of staying healthy (the young and the fit) while doing whatever they can to fend off those who have high odds of getting sick (the older, infirm, and the unfit). As a result we end up with the most bizarre health-insurance system imaginable: One ever better designed to avoid sick people. If this weren’t enough to convince rational people to do what most other advanced nations have done – create a single-payer system that insures everyone, funded by taxpayers – consider that America’s giant health insurers are now busily consolidating into ever-larger behemoths.

Don't Be Scared of a Health-Insurance Public Option - Noah Smith - One of the big debates in health care right now is whether to create a public option for health insurance. Most observers of Obamacare agree that the big problem is private insurers pulling out of health-care exchanges. That leaves smaller states with only one or two insurers participating, which kills competition in insurance markets and raises costs. Although there are many intermediate fixes available, some are suggesting bringing back an idea that didn’t make it into Obamacare -- a public option, with government selling insurance to anyone who wants to buy it. Yale political scientist Jacob Hacker writes: Obamacare could use improvements — and right now, the most critical of them is to add a “public option,” available in all parts of the country, that would allow Americans buying coverage through the Obamacare "exchanges" to enroll in a public insurance plan modeled after Medicare. A public option would increase coverage and create greater insurance competition. Presidential candidate Hillary Clinton and President Barack Obama have both come out in favor of a public option, though as long as Republicans control Congress the odds of its adoption are remote. But regardless of its odds of adoption, what would the economics of it be?  Like many others on both the left and right, I see the public option as a back-door route to full nationalization of most of the U.S. health-care system. The reason is that Medicare is capable of providing the same quality of care to most customers at a lower price than any private insurer. Part of this is because the government can just subsidize Medicare if it wants -- no private company can compete on price with a government service that doesn't need to make a profit. But even without any subsidies, Medicare can probably undercut private services through a variety of natural advantages. It can use its leverage as a very big purchaser to negotiate lower prices with providers. It has also lower administrative costs and doesn’t have to spend money on marketing.

 Health Care Is a Right, Not a Business  - Financial columnist Megan McArdle recently wrote a column entitled “Healthcare Is a Business, Not a Right.” She was responding to a tweet from financial writer Helaine Olen: 25. The health of Americans should not be a profit center. Health care is a right. Full stop. — Helaine Olen (@helaineolen) August 17, 2016 Health care is a business, says McArdle, but most of us aren’t tough-minded enough to admit it. Even if you ask a conservative, she writes, “there is a good chance you’ll get a rant about greedy insurers nickel-and-diming hardworking consumers when they’re sick.” “Almost everybody feels that there is something fundamentally wrong about making money off someone else’s illness,” McArdle laments. It’s a straw-man argument. Nobody I know thinks there’s something “fundamentally wrong” with doctors or nurses earning a living, or pharmacies turning a profit. Doctors, nurses and corner pharmacists are iconic figures in American folklore. McArdle misrepresents her adversary. Olen’s tweet begins with the number “25,” which McArdle omits, meaning it’s the 25th in a series of tweets. The full series makes it clear that Olen is talking specifically about health insurance. Olen’s “full stop,” which McArdle mocks, seems intended to signal the end of her twitter essay. But then, you can’t make a straw man without breaking some straws.

Hospitals to cut costs by denying surgery to smokers and the obese - The decision by an NHS body to restrict obese patients’ access to elective surgery until they lose weight is comparable with racial or religious discrimination, a surgeon has said. The Vale of York clinical commissioning group will make people wait for up to a year for treatment for non-life-threatening conditions such as hip and knee replacements if their body mass index is 30 or higher. The group said it had taken the decision because it was the “best way of achieving maximum value from the limited resources available”. Shaw Somers, a bariatric surgeon from Portsmouth, said the move was a logical step and could save money, but amounted to discrimination because obesity was an illness. “They [the patients] are trying to lose weight in the vast majority of cases and to deny them treatment that they need on the basis of their weight, without then offering them effective help to help them lose weight is rather like discriminating [against] a segment of the population on the basis of their colour or religious persuasion,” he told BBC Radio 4’s Today programme. “Just saying you can’t have surgery and there is no access to alternative treatments really doesn’t help anyone.”Chris Hopson, the head of NHS Providers – which represents acute care, ambulance and community services – said the move amounted to “rationing care to save money”.

The EpiPen scandal runs deeper than most of us realize - It has been two years since Gilead Sciences Inc. rolled out its $1,000-a-pill hepatitis C drug Sovaldi, priced at $84,000 for a course of treatment and met with disbelief from patients, insurers and health care professionals. After an 18-month investigation the Senate Finance Committee concluded prices did not reflect Gilead’s development costs and that the drug maker cared about “revenue” not “affordability and accessibility.” The committee also found that Sovaldi and a related pill, Harvoni, cost taxpayers $5 billion in 2014. It’s been one year since Valeant Pharmaceuticals International Inc. hiked the price of a once-daily form of Wellbutrin, a 30-year-old antidepressant, to $1,400 a month despite the existence of a $30 generic and refused to lower prices on the millions hospitals pay for its life-saving heart medicines. And it has been only a few months since a smirking Martin Shkreli, former Turing Pharmaceuticals CEO, gave a figurative finger to Congress by refusing questions about why his company raised the price of the life-saving drug Daraprim, crucial for AIDS patients, from $13.50 a tablet to $750 per tablet. Now, in the latest extortion pricing from Big Pharma, the Pharma company Mylan has jacked the price of its EpiPen, an emergency allergy treatment that saves lives, to $600 up from the $100 it only recently cost. Even as patients, health providers and former Mylan spokesperson Sarah Jessica Parker expressed outrage, the Pharma company announced it would supply financial assistance for poorer people. “Financial assistance” for low-income patients is a PR ruse that Pharma uses to dodge the accusation that it is killing people who cannot afford its drugs. It is a bald-faced example of “cost shifting” in which taxpayers and people with private health insurance involuntarily cover Mylan’s “generosity”—and the drug giant still gets its obscene, extortion pricing. When drug prices begin to cost four digits a month—think Abilify or Humira—Pharma always rolls out its we-have-a-heart price assistance and coupon ruse.

The EpiPen Scandal Is Worse Than You Think: What You’re Not Being Told - The autoinjector known as the EpiPen provides injections of epinephrine in cases of serious or even life-threatening allergy attacks. It is derived from another product known as the Mark I NAAK ComboPen, a device created for a monopoly: the U.S. military. The device was designed by Sheldon Kaplan for Survival Technology, Inc., a company with along history of working with the Pentagon. Once the ComboPen was created, it was sent to the U.S. military to treat soldiers who had been exposed to nerve agents.  In 2007, Mylan “purchased the generic drugs division of Germany’s Merck KGaA for $6.7 billion,” acquiring the EpiPen brand of autoinjectors. Under Merck, the devices cost $7 each, which resulted in just $200 million in gains each year, a mere 5 percent of Merck’s revenue at the time. But Bresch saw potential in this simple plastic device and focused on how to make the newly purchased brand something that could be widely used. For her dream to come true, she needed the assistance of experts in the monopoly business. For the past seven years, Bresch has been “[turning] to Washington for help. Along with patient groups, Mylan pushed for federal legislation encouraging states to stock epinephrine devices in schools.”  In 2010, when the FDA launched new federal guidelines related to epinephrine prescriptions, Mylan stopped selling single pens, switching to twin-packs. Bloomberg reports that, at the time, “35 percent of prescriptions were for single EpiPens,” but as the new rules were implemented, Mylan “changed label rules to allow the devices to be marketed to anyone at risk.” While the guidelines targeted persons who had severe allergic reactions only, Bresch saw the rule changes as “big events that we’ve started to capitalize on,” she said in October of 2011. After a seven-year-old died due to an allergic reaction to peanuts at a Virginia school, Congress passed a law pressuring states to ensure its schools had epinephrine devices on hand at all times. The year this bill passed, Mylan spent over $1 million in lobbying alone. Now,Bloomberg reports, “47 states require or encourage schools to stock the devices.”

Why Mylan's Alleged Solution to Its EpiPen Price-Gouging Scandal Is a Scam  The pharmaceutical giant Mylan has a public uproar on its hands over its 500 percent price increase for a life-saving device known as EpiPen, which delivers emergency shots of the hormone epinephrine to treat potentially deadly anaphylaxis. In response to the Martin Shkreli-style PR disaster, the company announced Thursday it has devised a supposed solution to the prohibitively high costs of the essential medicine. According to a statement from the corporation, the company plans to “further enhance access to EpiPen” by establishing a discount card and patient assistant system. Here's how it's described: The company is reducing the patient cost of EpiPen® Auto-Injector through the use of a savings card which will cover up to $300 for their EpiPen 2-Pak®. For patients who were previously paying the full amount of the company's list price for EpiPen®, this effectively reduces their out-of-pocket cost exposure by 50%. Mylan also is doubling the eligibility for its patient assistance program, which will eliminate out-of-pocket costs for uninsured and under-insured patients and families as well.   However, there is a key problem. The reform will not change the base-level cost of EpiPen for consumers. Since Mylan acquired EpiPen from Merck KGaA in 2007, it has hiked the price from $93.88 to $608.61. Under the company’s new plan, the dramatic price increase will not be reversed. The high price is exacerbated by the fact that EpiPens generally have to be replaced annually, due to expiration.

The U.S. Is Now Eating and Wasting Twice as Much Food as It Did in 1975 - Americans ate an average of 1,999 calories per day in 1975. That’s according to the USDA, which released updated data this month that says we’re now up to 2,481. That increase has come with soaring rates of cardiovascular disease and diabetes, the fiscal cost of which is inordinate. The greater threat to our health as a population, though, may be the fact that the total U.S. food supply (the amount available, both produced and imported) is now 4,000 calories per person per day, also according to the USDA. This means that close to half of that food supply is going to waste. At the same time, none of these numbers is growing as quickly as the total number of people. Between 1975 and today, the American population increased from 213 million to 319 million. So not only are we individually increasing in mass, but our numbers are soaring. The combined result is that over the past four decades, the amount of food being produced in order to feed the U.S. population (including what goes to waste) has nearly doubled. Agriculture is a major source of greenhouse gas emissions—not simply by ways of the methane emitted by cattle, but through the deforestation of land necessary to grow the feed for the animals, and the actual process of growing that feed. Barring a radical cultural shift away from such abundance or a re-conception of what we consider to be food, this growth does not seem to be environmentally sustainable in any humane way. Gains made by the common approaches to environmental consciousness (organic farming, local sourcing, et cetera) seem to be chipping at the periphery of the problem. I don’t have a great solution, but I also don’t want to end on that note, so here’s a more upbeat look at the future of protein we did recently:

Berkeley "soda tax" reduced sugar-sweetened beverage consumption and increased water consumption -- In the American Journal of Public Health this month, Jennifer Falbe and colleagues found that the penny-per-ounce Berkeley soda tax succeeded in reducing sugar-sweetened beverage (SSB) consumption. The study asked respondents about soda intake, in Berkeley and in comparison cities of northern California (Oakland and San Francisco, which did not have a new tax), before and after the new Berkeley tax was implemented in March 2015. The findings were remarkable. SSB consumption fell 21% in Berkeley and rose 4% in the comparison cities during the same period.  The SSBs include caloric soda, of course, but also some kinds of other sweetened drinks. However, for various reasons (including sound nutrition reasons plus perhaps political reasons), the tax did not affect milk drinks or 100% fruit juice. Therefore, it is important to understand what other beverages people substituted for soda. The study does not answer all my questions on this point, but it did find that water consumption increased in Berkeley at the same time that SSB consumption fell. Water consumption increased 63% in Berkeley, significantly more than the increase in the comparison cities during the same period. This was reassuring. A good way to standardize estimates of tax effects is to report an "elasticity" -- the percentage change in consumption for each 1% change in price. A typical elasticity estimate for soda is about -1.2, meaning that the price increase in Berkeley (about 8%) would have been expected to generate a consumption decline of about 10%. The authors took care to confirm that the estimated consumption decline of 21% was significantly different from zero, which is the standard statistical way of making sure the estimates were not a random statistical fluke, but they cannot really be sure the true impact is exactly 21% rather than 10%.

Surprisingly Little Evidence for the Accepted Wisdom About Teeth - NYT - A couple of weeks ago, many of you were shocked to learn that the evidence supporting flossing daily was as thin as, well, dental floss. That’s just the beginning. As my colleague Austin Frakt pointed out recently, for adults without apparent dental problems, there’s little evidence to support the use of yearly dental X-rays. This still doesn’t prevent many dentists from recommending them for everyone. With respect to flossing, this shouldn’t have been news either. A systematic review in 2011 concluded that, in adults, toothbrushing with flossing versus toothbrushing alone most likely reduced gingivitis, or inflammation of the gums. But there was really weak evidence that it reduced plaque in the short term. There was no evidence that it reduced cavities. That’s pretty much what we learned recently.  What about everything else? It turns out there’s a whole journal dedicated to the idea that we could use more rigor in dental recommendations. Evidence-Based Dentistry either publishes systematic reviews or summarizes reviews from other organizations, like the Cochrane Collaboration. The good news is that brushing appears to work. But it’s important to know that it’s brushing with fluoride toothpaste that matters, not the brushing alone. Doing that doesn’t just prevent gingivitis and plaque formation; it also prevents cavities, which is the outcome that we care most about.

Years of genomics research is riddled with errors thanks to a bunch of botched Excel spreadsheets -- For many people, working with error-ridden spreadsheets is a way of life. This takes on added meaning for genomics researchers, who study the building blocks of life. It turns out that their work, too, is rife with dodgy spreadsheets. A new paper has revealed the vast extent of errors in published genomics research, which is down to an unfortunate quirk of Microsoft Excel. A trio of scientists in Australia scanned 7,500 Excel files with gene lists accompanying 3,600 papers in 18 journals over a 10-year period. One-fifth of the files had easily identified errors, which is “quite striking and a little bit embarrassing,” says Mark Ziemann of the Baker IDI medical research institute in Melbourne, one of the paper’s co-authors. What happened? By default, Excel and other popular spreadsheet applications convert some gene symbols to dates and numbers. For example, instead of writing out “Membrane-Associated Ring Finger (C3HC4) 1, E3 Ubiquitin Protein Ligase,” researchers have dubbed the gene MARCH1. Excel converts this into a date—03/01/2016, say—because that’s probably what the majority of spreadsheet users mean when they type it into a cell. Similarly, gene identifiers like “2310009E13” are converted to exponential numbers (2.31E+19). In both cases, the conversions strip out valuable information about the genes in question. The conversion snafu only affects around two dozen genes, out of some 30,000 in the human genome, Ziemann says. “It’s still annoying,” he adds. For scientists who use these data files as a starting point for other studies, the two-dozen renamed genes won’t be included in their analysis. (The paper’s authors created a script that will screen spreadsheets for common renaming errors.) Although heavy analysis tends to be done with more sophisticated software packages like Perl, Python, and R, the common way to shuttle these gene lists between labs and bioinformatics services is via spreadsheets. “It’s just not suited for genomics research,” Ziemann says.

Risky alone, deadly together - While death rates are falling for blacks and Hispanics in middle age, whites are dying prematurely in growing numbers, particularly white women. One reason: a big increase in overdoses, primarily from opioids, but also from anti-anxiety drugs, which are often prescribed in tandem. Between 1999 and 2014, the number of middle-aged white women dying annually from opiate overdoses shot up 400 percent, according to a Washington Post analysis of data from the Centers for Disease Control and Prevention. Anti-anxiety drugs known as benzodiazepines contributed to a growing share of the 54,000 deaths over that period, reaching a third in the last several years, The Post found, though spotty reporting in death records makes it likely that the combination is even more widespread. Both drugs depress the central nervous system, temporarily easing pain and anxiety while suppressing respiration, heart rate and the gag reflex. Alcohol has the same effect, and combining any of these can be fatal. “They act like a dimmer switch on the central nervous system,” said Rear Admiral Susan Blumenthal, former U.S. assistant surgeon general and an expert on women’s health issues. “When taken in combination, a person’s breathing and heart will slow down, and can ultimately stop. People can go to sleep and never wake up.” White women are more likely than women of other races to be prescribed opiates, and far more likely to be prescribed both opiates and anti-anxiety drugs, according to a Post analysis of middle-aged participants in the latest National Health and Nutrition Examination Survey. White women prescribed opiates are five times as likely as white men to be given that drug combination — helping to explain why white women may be at special risk.

Recent Surge In Inner-City Heroin Overdoses "Unlike Anything We've Seen Before" --For the past week, the the city of Cincinnati has been battling an unprecedented spike in heroin overdoses that has left police and emergency responders drained.  Per the Cincinnati Enquirer, in a "normal" week, police and healthcare officials indicate that Cincinnati encounters roughly 25-30 heroin-related overdoses.  That said, within the past 6 days that number has spiked by over 5.5x as 174 overdose cases have been reported by local emergency rooms. Given the sudden spike in overdoses, local police authorities speculate that the heroin supply has likely been cut with a potent painkiller called fentanyl or the mega-potent animal opioid Carfentanil.  Carfentanil, an analgesic for large animals including elephants, is about 10,000x stronger than morphine and was discovered in July in the region's heroin stream.  Police are still working to find the source of the deadly heroin supply. Per Cincinnati Enquirer: “These people are intentionally putting in drugs they know can kill someone,” Synan told WCPO. “The benefit for them is if the user survives, it is such a powerful high for them, they tend to come back. … If one or two people die, they could care less. They know the supply is so big right now that if you lose some customers, in their eyes, there’s always more in line.”

The Lancet: Mass imprisonment of drug users driving global epidemics of HIV, hepatitis, and tuberculosis | EurekAlert! Science News: The War on Drugs, mass incarceration of drug users, and the failure to provide proven harm reduction and treatment strategies has led to high levels of HIV, tuberculosis, and hepatitis B and C infection among prisoners--far higher than in the general population. With an estimated 30 million people passing in and out of prisons every year, prisoners will be key to controlling HIV and tuberculosis epidemics worldwide, according to a major six-part Series on HIV and related infections in prisoners, published in The Lancet and being presented at the International AIDS Conference in Durban, South Africa. "Prisons can act as incubators of tuberculosis, hepatitis C, and HIV and the high level of mobility between prison and the community means that the health of prisoners should be a major public-health concern. Yet, screening and treatment for infectious diseases are rarely made available to inmates, and only around 10% of people who use drugs worldwide are being reached by treatment programmes",Worldwide, between 56% and 90% of people who inject drugs will be incarcerated at some point. In parts of Europe, over a third of inmates inject drugs (38%), in Australia (55%) it is more than half. This is in stark contrast with injecting drug use the general population (0.3% in EU and 0.2% in Australia). Data presented in the Series show that with growing numbers of injecting drug users in prison, the prevalence of infectious diseases has also increased (Paper 1 and Paper 3, table 1). For example:
  • Levels of HIV infection are 20 times higher among prisoners in western Europe than the civilian population (4.2% vs 0.2%), and around three times higher among prisoners in eastern and southern Africa (15.6% vs 4.7%) and north America (1.3% vs. 0.3%).
  • While most prisoners are men, women and girls are the fastest growing imprisoned group worldwide, and in most regions of the world, levels of HV infection are higher in female inmates than male prisoners including eastern Europe and central Asia (22% vs 8.5%).
  • High rates of hepatitis C are also seen among prisoners, with 1 in 6 inmates in parts of Europe and the USA carrying hepatitis C virus.
  • Prevalence of active tuberculosis is higher in prisons than the general population in all settings. One study demonstrated that prevalence was 40 times higher in one prison in Brazil than the general population.

No Soap: FDA Finally Acts on Antibacterials -  Health advocates have been saying for years that consumers shouldn’t use antibacterial soaps. Yet manufacturers have continued to put antibacterial agents into liquid soaps, to the extent that for a while it was hard to find products on store shelves that didn’t contain them. Now the Food & Drug Administration has finally gotten the message. The FDA today issued a final rule prohibiting use of some common antibacterial agents in soaps and body washes, as well as a consumer update entitled, “Antibacterial Soap? You Can Skip It—Use Plain Soap and Water.” It’s good news that the FDA has taken this step. The bad news is that it took the agency almost 40 years to do it, and in the meantime these products became entrenched in the marketplace, and Americans were exposed to them in massive quantities. So what’s the big deal about antibacterial soaps? First, the antibacterial agents used (often substances called triclosan or triclocarban) may not be safe for long-term use in human beings: The physiological effects of long-term exposure to large amounts of these substances, to which consumers are exposed from a multitude of sources, are unknown. Second, their effectiveness is highly questionable: There’s little reason to think they are any better than regular soap and water at protecting people against infection or disease. Third, and most troubling, there’s a lot of reason to think that the widespread use of these antibacterial agents may contribute to the development of resistant “superbugs.” Although these products are available on the same shelf in the supermarket as old-fashioned soap, for FDA regulatory purposes they are classified as over-the-counter (OTC) drugs, and they can be marketed only if they are “generally recognized as safe and effective” (GRAS/GRAE).  The rule issued today finds that antibacterial soaps are not GRAS/GRAE and will effectively halt their sale after a one-year phase-in period.

 Millions at risk as deadly fungal infections acquire drug resistance  --Scientists have warned that potentially deadly fungal infections are acquiring resistance to many of the medicines currently used to combat them. More than a million people die of fungal infections every year, including about 7,000 in the UK, and deaths are likely to increase as resistance continues to rise. Researchers say the widespread use of fungicides on crops is one of the main causes of the rise in fungal resistance, which mirrors the rise of resistance to antibiotics used to treat bacterial infections in humans. “There are close parallels between bacterial and fungal resistance, though the problems we face with the latter are particularly worrying,” said Prof Adilia Warris, a co-director of the newly opened Centre for Medical Mycology at Aberdeen University. “There are more than 20 different classes of antibacterial agents. By contrast, there are only four classes of anti-fungal agents. Our armoury for dealing with deadly fungi is much smaller than the one we have for dealing with bacteria. “We cannot afford to lose the few drugs we have – particularly as very little funding is being made available for research into fungi and fungal infections.” Fungi cause a range of illnesses – such as thrush, athlete’s foot and dandruff – that can be treated relatively easily. Other illnesses have more serious consequences. Individuals who are receiving bone marrow transplants and who are immune-suppressed can die of aspergillus and candida fungi infections, for example. Another example of their grim potential was highlighted last week when doctors reported that a bagpipe player had died because deadly fungi had infected his pipes.

Chemicals banned decades ago linked to increased autism risk today: Chemicals used in certain pesticides and as insulating material banned in the 1970s may still be haunting us, according to new research that suggests links between higher levels of exposure during pregnancy and significantly increased odds of autism spectrum disorder in children.According to the research, children born after being exposed to the highest levels of certain compounds of the chemicals, called organochlorine chemicals, during their mother's pregnancy were roughly 80 percent more likely to be diagnosed with autism when compared to individuals with the very lowest levels of these chemicals. That also includes those who were completely unexposed. Although production of organochlorine chemicals was banned in the United States in 1977, these compounds can remain in the environment and become absorbed in the fat of animals that humans eat, leading to exposure. With that in mind, Kristen Lyall, ScD, assistant professor in Drexel University's A.J. Drexel Autism Institute, and her collaborators, decided to look at organochlorine chemicals during pregnancy since they can cross through the placenta and affect the fetus' neurodevelopment. "There's a fair amount of research examining exposure to these chemicals during pregnancy in association with other outcomes, like birth weight—but little research on autism, specifically," Lyall said. "To examine the role of environmental exposures in risk of autism, it is important that samples are collected during time frames with evidence for susceptibility for autism—termed 'critical windows' in neurodevelopment. Fetal development is one of those critical windows." Their paper describing this study was titled, "Prenatal Organochlorine Chemicals and Autism," and published in Environmental Health Perspectives.

British government to confirm ban on ‘microbeads’ water pollutant - The Government is set to announce a ban on the water pollutant known as “microbeads” after a long campaign by environmentalists. Microbeads are solid plastic particles. They are found in some toothpastes, body scrubs and other cosmetics and give products a “speckled” appearance. The beads serve an aesthetic purpose but some manufacturers also claim they can help with exfoliation or cleaning.The solid plastic particles however do not biodegrade and so can cause environmental damage when washed down the drain. The beads are not filtered out by water treatment plants and it has been suggested that they can carry toxins once they themselves become contaminated. Aquatic creatures have also been known to mistake the particles for food. In May, Environment Minister George Eustice said the Government supported a ban on the substances, signaling a change in approach from previous a previous commitment to a voluntary phase-out. He however stopped short of a timetable for the ban. The Independent now however understands that the Government will announce a ban at the weekend. Such a ban would likely come into force in 2017. A Government consultation on how broad the ban should be is expected next week.

Lead poisoning in the US: ‘A silent epidemic’ - The Flint water crisis that unfolded in 2015 outraged the public as well as federal officials. But at that time, Cleveland had almost three times the amount of children suffering from lead poisoning.  Across the country, the main source of lead poisoning is lead paint in older homes. When the paint starts peeling and chipping away, it can put lead dust into the air and soil. Cleveland, like many older US cities, has tens of thousands of homes that are potential lead hazards.  Starting in the autumn of 2015, the city's local paper, The Cleveland Plain Dealer, published an investigative series on the devastating effects lead has had on Cleveland's children and the failure of the city to prevent children from getting poisoned. Public records showed years of mismanagement and chronic understaffing. The series pointed out that at least 10,000 children had suffered lead poisoning in the past five years. African-American and Latino-majority neighbourhoods were hardest hit.  Standing in front of a room of community members in southeast Cleveland, Robin Brown recalled the day more than 15 years ago that she received a call from the family doctor. She was told to bring her daughter to the hospital immediately - the doctor's office had just received her child's test results. "I could look at my daughter and see no illness. But at any second, she could have gone into that coma, she could've gone into seizures, or she could've dropped dead at any second," Brown says. She would later find out that her daughter had dangerous levels of lead in her blood, an amount Brown refers to as an "emergency state". Brown has organised a gathering of residents at a local community centre and anyone in the room can see and hear the urgency in her voice when she talks about the issue. Since her child was diagnosed, Brown has been trying to bring attention to the dangers of lead poisoning. She says many people - especially in low-income neighbourhoods where older, lead-painted homes are prevalent - know little about the issue.

Black Lead Matters, by Paul Krugman - Donald Trump is still claiming that “inner-city crime is reaching record levels,” promising to save African-Americans from the “slaughter.”  Yet some things are, of course, far from fine in our cities, and there is a lot we should be doing to help black communities. We could, for example, stop pumping lead into their children’s blood. You may think that I’m talking about the water crisis in Flint, Mich., which justifiably caused national outrage early this year, only to fade from the headlines. But Flint was just an extreme example of a much bigger problem. And it’s a problem that should be part of our political debate: Like it or not, poisoning kids is a partisan issue. To be sure, there’s a lot less lead poisoning in today’s America than there was back in what Trump supporters regard as the good old days. Indeed, some analysts believe that declining lead pollution has been an important factor in declining crime. But I’ve just been reading a new study by a team of economists and health experts confirming the growing consensus that even low levels of lead in children’s bloodstreams have significant adverse effects on cognitive performance. And lead exposure is still strongly correlated with growing up in a disadvantaged household. But how can this be going on in a country that claims to believe in equality of opportunity? Just in case it’s not obvious: Children who are being poisoned by their environment don’t have the same opportunities as children who aren’t.

Inaction on Zika is a public health crisis: As the virus spreads, Congress pinches pennies - Survey after survey has confirmed that a majority of Americans hold members of Congress in contempt for being self-serving and more concerned with raising campaign cash from their lobbyist paymasters than acting in the public interest. We have no better example of this than Congress’ adjournment this summer without reaching a deal on $1.1 billion in critical funding to fight the spread of the mosquito-carried Zika virus. What we have here is another example of a callous disregard for women’s health and, ironically, for the unborn children that millions of them are carrying, even as the Zika virus spreads. Republicans love the unborn as an abstract concept. But when it comes to the flesh and blood of actual fetuses and the money it costs to keep them healthy, not so much. For most people the Zika virus is not dangerous. It’s likely to bring mild symptoms that may include fever, rash, joint pain, conjunctivitis, headaches and muscle pain. Most people who get it won’t need to be hospitalized and will get better without complications. But for pregnant women, or women of childbearing years, the CDC warns that a Zika infection can result in “microcephaly and other severe fetal brain defects … Including eye defects, hearing loss, and impaired growth.” Experts concede there’s much about Zika they still do not fully understand. There is no vaccine at this point. For months, before Congress skipped town for its summer vacation, public health officials were doing their best to sound the alarm of what was at stake.

Florida finds first local mosquitoes with Zika virus | Reuters: Florida officials on Thursday said they have trapped the first mosquitoes that tested positive for the Zika virus in the Miami area, further confirming reports of local U.S. transmission of the illness that can cause severe birth defects. Three mosquito samples tested positive from a small area in Miami Beach where increased trapping and intensified mosquito control measures are being implemented, the Florida Department of Agriculture and Consumer Services said. The Florida Department of Health has said there have so far been 49 cases of Zika in people believed to have contracted the virus in a small area of Miami, but until now, the department had not found infected mosquitoes. "This find is disappointing, but not surprising," Commissioner of Agriculture Adam Putnam said in a statement. "Miami-Dade County, the City of Miami Beach, and state and federal partners will continue to work aggressively to prevent the spread of Zika," Putnam added. The Zika-positive mosquitoes were found in surveillance traps in Miami Beach. Florida Governor Rick Scott on Thursday called on the state department of health (DOH) to step up Zika prevention efforts. "I have directed DOH to aggressively expand testing and outreach efforts in the areas around the traps that caught the positive mosquitoes," Scott said in a statement. "They will continue to go door-to-door to educate residents on how to best protect their families and homes from mosquitoes."

Hurricane Hermine will complicate Florida's Zika fight -... (Reuters) - Hurricane Hermine, set to cause flooding and damage when it hits Florida overnight, will make it harder for the state to fight Zika, a mosquito-borne virus shown to cause birth defects, experts in infectious diseases and mosquitoes said on Thursday. Forecasters are warning of potentially life-threatening storm surges and as much as 20 inches of rain. Governor Rick Scott declared a state of emergency in most of Florida's 67 counties ahead of the first hurricane to strike the state in more than a decade. Once Hermine passes, the remaining water "will provide all kinds of breeding sites for the mosquitoes," that can spread Zika said Dr. William Schaffner, a professor of Infectious Diseases at the Vanderbilt University School of Medicine in Nashville. The hurricane is also likely to disrupt mosquito abatement activities as state authorities prioritize other emergency efforts. On Thursday, Florida officials said they had trapped the first mosquitoes shown to have the Zika virus after weeks of searching. Schaffner said the finding showed there is a substantial amount of Zika in circulation. "Emergency responders will be focused on things other than mosquito abatement." Florida is the first state in the continental United States to confirm local Zika transmission, with 47 cases of infection so far, raising concerns among pregnant women and threatening the state's multibillion-dollar tourism industry. Zika can cause the rare birth defect microcephaly, marked by abnormally small heads and underdeveloped brains, when pregnant women are infected. Brazil has confirmed more than 1,800 cases of microcephaly since last fall. Earlier this week, Scott and other state officials have stressed the need to dump standing water and take other steps to eliminate breeding areas. High winds from the hurricane will also make aerial spraying with pesticides impossible, disrupting a key effort by the state to keep mosquito populations under control, "If it's raining or if the winds are above five to 10 miles per hour, aerial spraying is out,"

Zika: Two billion at risk in Africa and Asia, study says - BBC News: More than two billion people could be at risk from Zika virus outbreaks in parts of Africa and Asia, according to scientists writing in The Lancet Infectious Diseases. Populations in India, Indonesia and Nigeria are some of the most vulnerable to transmission, the researchers said. They used data on air traveller numbers to help model their predictions. However, they acknowledge that immunity to the virus could already exist in some areas and could reduce the risk. The research team, from the London School of Hygiene and Tropical Medicine, Oxford University and the University of Toronto, Canada, said "vast numbers" of people were living in environments where it would be hard to prevent, detect and respond to the virus. They looked at factors such as the numbers of people who travelled from Zika-affected areas in South America to Africa and Asia, the presence of mosquitoes that can pass on the virus, and the climate in the regions to assess which countries could be most at risk from an outbreak. In their study, the researchers suggest that the Philippines, Vietnam, Pakistan and Bangladesh could be particularly vulnerable to a Zika outbreak because of their limited health resources. Dr Kamran Khan, study author from St Michael's Hospital in Toronto, said: "The impact on populations will also depend heavily on the country's ability to diagnose and respond to a possible outbreak." And he added: "Our findings could offer valuable information to support time-sensitive public health decision-making at local, national, and international levels."

‘Like it’s been nuked’: Millions of bees dead after South Carolina sprays for Zika mosquitoes -- On Sunday morning, the South Carolina honey bees began to die in massive numbers. Death came suddenly to Dorchester County, S.C. Stressed insects tried to flee their nests, only to surrender in little clumps at hive entrances. The dead worker bees littering the farms suggested that colony collapse disorder was not the culprit — in that odd phenomenon, workers vanish as though raptured, leaving a living queen and young bees behind. Instead, the dead heaps signaled the killer was less mysterious, but no less devastating. The pattern matched acute pesticide poisoning. By one estimate, at a single apiary — Flowertown Bee Farm and Supply, in Summerville — 46 hives died on the spot, totaling about 2.5 million bees. Walking through the farm, one Summerville woman wrote on Facebook, was “like visiting a cemetery, pure sadness.”  A Clemson University scientist collected soil samples from Flowertown on Tuesday, according to WCBD-TV, to further investigate the cause of death. But to the bee farmers, the reason is already clear. Their bees had been poisoned by Dorchester’s own insecticide efforts, casualties in the war on disease-carrying mosquitoes. On Sunday morning, parts of Dorchester County were sprayed with Naled, a common insecticide that kills mosquitoes on contact.”  It marked a departure from Dorchester County’s usual ground-based efforts. For the first time, an airplane dispensed Naled in a fine mist, raining insect death from above between 6:30 a.m. and 8:30 a.m. Sunday. The county says it provided plenty of warning, spreading word about the pesticide plane via a newspaper announcement Friday and a Facebook post Saturday.

 Cancer lawsuits against Monsanto over RoundUp (glyphosate) herbicide weed killer are gaining steam -- Cancer lawsuits against Monsanto over the company's glyphosate-based weedkiller, Roundup, are gaining steam. On Wednesday, a motion was filed with the U.S. Judicial Panel on Multidistrict Litigation to create a coordinated docket for 21 pending federal cases that involve the exact same product, the same active ingredient and the same injury, the legal news site Harris Martin Publishing writes. The plaintiffs—represented by personal injury lawyers Aimee H. Wagstaff and David J. Wool of the Colorado law firm Andrus Wagstaff, P.C.—allege that exposure to glyphosate caused them to develop non-Hodgkin's lymphoma. As Harris Martin reported (via Sustainable Pulse), the plaintiffs want to unite the cases in one court either before judge Nancy J. Rosenstengel or judge David R. Herndon of the U.S. District Court for the Southern District of Illinois.  Glyphosate is the most widely applied pesticide worldwide. About 2.6 billion pounds of it was sprayed on U.S. agricultural land between 1992 and 2012, according to the U.S. Geological Survey. The World Health Organization's International Agency for Research on Cancer (IARC) classified glyphosate as "probably carcinogenic to humans" last year. Just last week, an Illinois woman filed a lawsuit against Monsanto in the U.S. District Court for the Southern District of Illinois alleging Roundup caused her to develop non-Hodgkin lymphoma, according to the Madison County Record.  Greenwald has helped at least 10 plaintiffs file lawsuits against Monsanto. She said all of these cases are focused on exposure to Roundup and diagnosis of non-Hodgkin's Lymphoma.The agritech giant has vehemently denied the cancer claims of its blockbuster product and has demanded a retraction of the IARC report.

Monsanto's newest evil -- dicamba-drift destroying non-GMO crops and fruit trees. Illegal Herbicide Use on GMO Crops Causing Massive Damage to Fruit, Vegetable and Soybean Farms --Last year, Kade McBroom launched a non-GMO soybean processing plant in Malden, Missouri, and was optimistic about the potential to serve the fast-growing non-GMO market. But now McBroom sees a potential threat to his new business from herbicide drift sprayed on genetically modified crops. This past spring, Monsanto Co. started selling GM Roundup Ready Xtend soybean and cotton seeds to farmers in Missouri and several other states. The seeds are genetically engineered to withstand sprays of glyphosate and dicamba herbicides. The problem is that the Xtend dicamba herbicide designed to go with the seeds has not yet been approved by the U.S. Environmental Protection Agency (EPA), leading many farmers to spray their GMO soybeans and cotton with older formulas of dicamba—illegally. While Monsanto's GMO crops can tolerate sprays of dicamba, other crops can't. As a result, dicamba, which is known to convert from a liquid to a gas and spread for miles, is damaging tens of thousands of acres of "non-target" crops in southern Missouri and nine other states, mostly in the South. An estimated 200,000 acres are affected in Missouri alone, though the EPA puts that number at 40,000. Non-GMO and even GMO, soybeans that aren't dicamba resistant are damaged as well as peaches, tomatoes, watermelon, cantaloupe and other crops. "Farmers are so mad," said McBroom, who has spoken with several farmers in his area about the problem. "I'm assuming there will be lawsuits." Two farmers who grow non-GMO soybeans for Malden Specialty Soy told McBroom that they may be forced to grow dicamba tolerant GMO soybeans to protect their farms from dicamba drift.

Monsanto, temptation and some 'adolescent' farmers  - Monsanto has done the equivalent of giving a teenage boy the keys to the family car and then telling him that he can't drive it. We know what comes next. The way this has manifested itself is widespread damage to soybeans, peaches and other crops from drifting herbicide. The problem has gotten so bad that the U.S. Environmental Protection Agency (EPA) has issued an advisory reminding farmers that the offending herbicide, dicamba, is not yet approved for spraying on dicamba-resistant soybeans and cotton (produced by Monsanto). That approval is under review, but only for a special dicamba formulation from Monsanto which supposedly reduces drift.In the meantime, state agricultural officials in Arkansas have become so alarmed they've banned dicamba for use on row crops.  As weeds have evolved to resist glyphosate--the generic name for Roundup--Monsanto realized that it would have to engineer its crops to resist another herbicide or lose business.  Because new agricultural chemicals must be reviewed for approval through a lengthy and costly process, Monsanto decided to add resistance to the old, already approved herbicide dicamba which has been in use since the 1960s. Dicamba is good at killing certain kinds of plants, the kind that farmers don't want in their fields. But it can also harm crops. Here is an explanation from the directions for using Banvel, a brand of dicamba: BANVEL may cause injury to desirable trees and plants, particularly beans, cotton, flowers, fruit trees, grapes, ornamentals, peas, potatoes, soybeans, sunflowers, tobacco, tomatoes, and other broadleaf plants when contacting their roots, stems or foliage. The trouble is, dicamba can drift and affect crops on other farmers' property. The next thing you need to know is that Monsanto began selling its dicamba-resistant soybean and cotton seeds last year. It told farmers that the special dicamba formulation which the company designed to minimize dicamba drift would, however, be unavailable since the EPA had yet to approve it.Some farmers decided not to wait for that special formulation and have used other dicamba products illegally which are prone to drift and with predictable results. (The kid, the car get the analogy.) The mess has cast a cloud over the farming community and supporters of the latest generation of herbicide-resistant crops.

Controversial pesticides threaten not just bees, but butterflies, too - Most of the furor surrounding neonicotinoids, the world’s most widely-used pesticides, focuses on the harms they cause to bees. Yet these chemicals may also pose a threat—presently little-appreciated but possibly grave—to butterflies. In a study published in the journal Biology Letters, researchers led by biologist Matthew Forister of the University of Nevada tracked butterfly populations across four decades in three Northern California counties. Butterflies there face many challenges, including climate change, drought, and habitat loss to agriculture and urban sprawl. Yet even with those factors accounted for, neonicotinoids seem to pose a unique threat: the researchers found that declines in butterfly health and reproductive success accelerated dramatically after the pesticides entered widespread use in the mid-1990s. There are caveats to the study, stress the researchers. “The evidence is correlational,” cautions study co-author Art Shapiro, an ecologist at the University of California, Davis, who started monitoring the region’s butterflies in 1972. “That’s not the same thing as proving causation.” If not definitive, though, the findings do dovetail with similar results from a long-term, large-scale study of butterfly populations in Great Britain. They also fit with what’s known about the toxicity of neonicotinoids to insects and the chemicals’ ubiquitous environmental presence due to runoff from agricultural fields and urban landscaping. There might not be fire, but there’s certainly a lot of smoke.

Biofuels may be good for the climate — but they could be bad for bees, research says --New research has added to the growing list of challenges facing the nation’s pollinators. A study, published this week in Proceedings of the National Academy of Sciences, suggests that agricultural changes in the Northern Great Plains — particularly the expansion of corn and soybean cropland — could be putting a strain on honeybee colonies by infringing on grasslands and other types of land cover more suitable for pollinators to forage on.  The study finds that from at least 2006 to 2014, corn and soybean cropland has been increasing in parts of the Dakotas where beekeepers already house their colonies. This could be a problem, the researchers suggest, because beekeepers typically try to avoid these types of crops when selecting sites for their apiaries.   “The paper…takes a bee-centric view of these land-use changes and how it affects habitat suitability for supporting commercial honeybees.”     A growing national interest in the production of biofuels — renewable fuels made from plant matter or other organic materials — has sparked a recent uptick in the planting of crops that can be used for that purpose. Corn and soybeans are both common ingredients.   The use of biofuels has been touted as one method of cutting down on greenhouse gas emissions in the transportation sector. The Environmental Protection Agency already requires refiners to mix a certain amount of renewable fuel, mainly corn-based ethanol, into the gasoline they produce. And some companies are beginning to produce biofuels for use in boats and planes, as well. Increased subsidies and the growing market for biofuels have likely helped contribute to the rise in corn and soybean cultivation in the Northern Great Plains, the researchers note — an expansion that can come at the cost of grasslands and wetlands.  The new study grew out of an interest in investigating the effects his type of agricultural expansion might have on the ecosystem, compared to what is produced by the natural environment in the region. Plant pollination, carried out by bees and other insects, is estimated to have an economic value of $15 billion a year, and the Northern Great Plains serve as a hub for commercial beekeeping, supporting up to 40 percent of the nation’s honeybee colonies. 

 How Big Alcohol Is About to Get Rich Off California Weed – POLITICO -- Under the new regulations, licensed distributors were given control over measurement, taxing and testing for all medical marijuana before it can move to the retailer. The rules are modeled on the system that emerged at the end of Prohibition to wrest control from mobsters and their illegal liquor empires. States required wholesalers to bring alcohol from the manufacturer to the retailer, a system that has proven fantastically lucrative for distribution companies. Some of those players are now poised to make millions of dollars as the middlemen in California’s burgeoning medical marijuana market. The familiar alcohol distribution model gives comfort to California law enforcement and state regulators who still view marijuana growers with suspicion, even 20 years after medical marijuana was legalized. But it runs counter to the 22 other states that have legalized marijuana in some form where cultivators sell their wares directly to retailers. “We made some challenging compromises and the distributor model was by far the most challenging,” acknowledges Allen, who found himself allied with interests like law enforcement he and his family once considered enemies. “But it was the foundation for what we’ve done.”

Northeast Farmers Grapple With Worst Drought In More Than A Decade : The Salt : NPR: The Northeast has more than 175,000 farms that produce more than $21 billion a year in food, hay and flowers, according to the U.S. Department of Agriculture. But this year, many fields are bone dry — and that has many farmers thinking about how to manage their land, their animals and the water that is there.If you're a farmer with an irrigation system, your crops could be just fine — or not."We couldn't work the land — we were so busy trying to put out irrigation pipe," says farmer Mike Wissemann of Sunderland, Mass. His motto: Irrigation is irritation. Pumps break. Hoses kink.Warner Farm, which Wissemann runs with his family, is right on the Connecticut River. But he says that river water can't be his primary irrigation source. To feed one thirsty field, another field has to go without."We depend on getting second crops in," he says, "and we were unable to do probably 2 or 3 acres of sweet corn we would've done, another planting of summer [zucchini]" – usually an overabundant crop.Warner Farm sits in a part of the Connecticut River valley where soil holds water pretty well, because it is rich with silty clay left over from glacial times. Still, Wissemann thinks his 10th-generation farm lost tens of thousands of dollars this year

Coffee Production May Drop 50 Percent Thanks To Climate Change --Published late last week, the Climate Institute report says a hotter climate and altered rainfall are colluding to cut the worldwide area suitable for coffee in half by 2050. That would be catastrophic for some 120 million people in more than 70 countries — mostly developing nations — that depend on the coffee trade. It would also affect billions of consumers worldwide, who together drink about 2.25 billion cups of coffee every day, according to the report, which warns of rising prices. The ecology is also projected to suffer, as coffee production may be forced to move away from the equator, and further up mountains and forests. Rising temperatures could make Mexican coffee unviable sooner than 2050, while Nicaragua will lose most of its coffee zone by 2050, according to the report. Brazil, the world’s largest coffee grower, is set to experience “substantial losses,” the report notes. Already, Brazil’s coffee-growing areas are facing a growing number of heat waves, as cold extremes declined between 1960 and 2011. Abrupt changes in weather patterns poses a significant problem for Arabica beans, which account for 75 percent of the world’s coffee production and require rainy and dry seasons to be well defined. Robusta, the other type of coffee bean, is more tolerant to warming, yet the report notes both types of crop seem incapable of weathering even the mild climate change scenarios evaluated.

Changing climate hitting one of the nation's cutest animals hard, study finds: A small plant-eating relative of the rabbit, the American pika, is disappearing from parts of the western U.S. as a result of climate change, according to a new study from the U.S. Geological Survey (USGS) and partners. The American pika is a small herbivore that lives in rocky slopes in mountain ranges in the American West. The USGS study, published in The Journal of Mammalogy, found that there was evidence of "widespread reduction in pika range in three mountainous regions including the Great Basin, southern Utah and north-eastern California." Pikas are seen as being an "indicator species" -- an animal that can give an early warning to scientists of changes in an ecosystem's biological condition, the USGS said. "It is certainly clear that changes we have observed in pika distribution are primarily governed by climate, given that nearly all of our climate-related predictions have been borne out," Erik Beever, USGS research ecologist and lead author of the study, said in a news release. "However, we are still refining our understanding of the exact combination of direct and indirect pathways by which climate is bringing about change," Beever added.

Meet the ‘mouse-bunny’ that could vanish from the US - Looking a bit like a mighty-eared mouse, the American pika (Ochotona princeps) is a wee member of the rabbit family that lives in the mountains of the western United States and southwestern Canada. The pika’s other names – rock rabbit, piping hare, hay-maker, mouse-hare, whistling hare, and cony – all attest to the undeniable Beatrix-Potter charm of this alpine mammal. But sadly, we may be losing the American pika as it is disappearing from much of its mountain habitat in the U.S. While researchers have been noting the pika’s slow decline, a new study now confirms the decline and suggests that rising temperatures are a driving factor. Part of the problem is that what makes the pika so cute is also leading to its undoing. Even though they rub rocks with their cheeks, and sing and whistle and squeak, and according to the IUCN Red List, “spend much of the day sitting still, observing their surroundings” – their cutest attribute may be their irresistible puff of fur. Even the soles of their feet are covered in fur, all except the tips of their toes. "It has this characteristic of essentially being a big fur ball, which is a really great strategy if you live on the top of a snowy cold mountain and want to stay active in those temperatures," says Mark C. Urban from the University of Connecticut, comparing the pika’s dilemma to wearing a fur coat on a warm summer day. "Humans can take off that fur coat, but the American pika can't." Living high in the cool mountains makes the pika isolated, as the valleys below are too warm for them to successfully migrate to new territory. As The New York Times reports, "the thick coats that help the pika survive winter can roast them if temperatures rise above 77F degrees for as little as six hours." As things warms up, the pikas can really only move higher up the mountain. Scientists have long believed that creatures in isolated ecosystems would be the first to go as the climate changes, Urban says. The new research strengthens the theory, he adds.

US takes key step to implement sage grouse conservation plan - (AP) — Federal land managers have issued new guidelines that will help determine what restrictions are imposed on oil and gas drilling, livestock grazing and other activities in the West to protect the greater sage grouse. The guidelines released Thursday are part of a broader effort to save the distinctive bird without resorting to the Endangered Species Act, which could bring down tougher restrictions. Conservationists and industry groups are watching closely because the guidelines will influence how vigorously the government implements a sage grouse protection plan announced last year. Among other things, the guidelines tell federal employees when and how to apply the new rules. The guidelines cover about 95,000 square miles of federal land. Greater sage grouse live in 11 Western states. About 200,000 to 500,000 remain, down from the species peak population of about 16 million.

Africa's elephants rapidly declining: study -  The number of savanna elephants in Africa is dramatically declining and the majestic animals are in danger of being wiped out, largely due to poaching, the results of a three-year aerial survey have revealed.The continent's savanna elephant population plunged by about 30 percent from 2007 to 2014, and is declining at about 8 percent a year, according to the Great Elephant Census, published on Wednesday. "If we can't save the African elephant, what is the hope of conserving the rest of Africa's wildlife?" elephant ecologist Mike Chase, the lead researcher, said in a statement. The aerial survey covered 18 countries using dozens of airplanes to fly the equivalent of going to the Moon and partway back.The study, which was funded by Microsoft co-founder and philanthropist Paul Allen, estimated the population of savanna elephants at 352,271.Overall, researchers spotted about 12 carcasses for every 100 live elephants, indicating poaching at a high enough level to cause population decline.

Tasmanian devils are evolving rapidly to fight their deadly cancer -- For the past 20 years, an infectious cancer has been killing wild Tasmanian devils, creating a massive challenge for conservationists.   But new research, published today in Nature Communications, suggests that devils are evolving rapidly in response to their highly lethal transmissible cancer and that they could ultimately save themselves.  Cancer is usually a disease that arises and dies with its host.   In vertebrates, only two known types – Canine Transmissible Venereal Cancer in dogs and Devil Facial Tumour Disease (DFTD) – have taken the extraordinary evolutionary step of becoming transmissible. These cancers can grow not just within their host but can spread to other individuals. Because the cancer cells are all descendants of one mutant cell, the cancer is effectively immortal.  To grow in the new host, the tumour cell must evade detection and rejection by the immune system. Both the devil and dog transmissible cancers have sophisticated mechanisms for hiding from the host’s immune system. Our research suggests that the devil is nevertheless evolving resistance to the disease.  Since it was first detected in northeastern Tasmania in the mid-1990s, DFTD has spread slowly southward and westward. It will reach all parts of Tasmania within a few years; only the far northwest coast and parts of the southwest are still disease-free.   Devil populations have declined by at least 80%, and by more than 90% in some areas within six years of local disease outbreak.   DFTD kills most devils at sexual maturity. Before the disease arrived, most devils produced three litters over their lifetime. Most now raise only one.  The cascading effects of the loss of Tasmania’s top predator on the rest of the ecosystem could lead to loss of further species. Already, feral cats have increased activity and small mammals on which cats prey have declined.

 Maps Show Humans’ Growing Impact on the Planet: The impact humans have on the environment has grown substantially in the last 16 years—so much so that a new study concludes three-quarters of Earth’s land surface is under pressure from human activity. But the research also shows that humanity’s footprint on the planet hasn’t grown as fast as the overall population, and that may give conservationists cause for hope. The study, published Tuesday in the journal Nature Communications, is based on analysis of satellite imagery and other data from 1993 and 2009. Researchers sought to rigorously map our impact on the global environment—called the human footprint—and how it has changed. They found that while the human footprint has not grown in direct proportion to population or the economy, some of the most intense pressure is being felt in places with the highest diversity of plant and animal life. It’s become clear that humans are modifying the planet on a very large geological scale, says the study’s lead author, forest conservation scientist Oscar Venter of the University of Northern British Columbia. “We thought the timing was right to get a better understanding of where the last wild places on the planet are and how those places have contracted over the last two decades and how the footprint has expanded into them,” he says.  The new study is part of a growing research trend that capitalizes on improvements in satellite technology to map and monitor human activities such as deforestation, oil drilling, and movement of refugees. A recent study in Science used satellite data to map poverty. And as sensors become more sensitive, resolution improves. That, combined with more comprehensive satellite coverage, means scientists are able to map how all of these things change on finer and shorter scales, which is what Venter’s team did with the human footprint.

World population to hit 10bn by mid-century – forecast - Human numbers are predicted to grow by 33% in the next 33 years – and that is worrying news for a world already struggling to deal with the impacts of climate change.  By 2050, there could be 9.9 billion people alive on the planet, and the global total is expected to hit 10 bn by 2053, according to the latest calculations by the Population Reference Bureau (PRB), a private not-for-profit organisation based in the US. By 2050, the population of Africa will reach 2.5 billion, which was roughly the population of the entire globe at the close of the Second World War in 1945. The number of people on the two American continents will rise by just 233 million to 1.2bn, and Asia will gain 900 million to reach 5.3bn, but Europe’s population will fall from 740 million to 728 million. “Despite declines in fertility rates around the world, we expect population gains to remain strong enough to take us toward a global population of 10bn,” says Jeffrey Jordan, president of the PRB.

How First Nations have enhanced the forest over 13,000 years of habitation - While most human occupation harms the landscape, new research shows that British Columbia's coastal First Nations have made the forest thrive. There seems to be few places in the world where the persistent march of human development hasn’t resulted in habitat destruction to some extent. We come, we see, we conquer. Trees and ecosytems? Pshaw. According to the United Nations Environment Programme (UNEP), we are losing about 77 square miles (200 square kilometres) of forest each day thanks to decisions that the land should be used for something else. But in the coastal areas of British Columbia where First Nations have lived for millennia, this is decidedly not the case. And in fact, 13,000 years of repeated occupation has had the opposite effect; temperate rainforest productivity has been enhanced, not hampered, according to a new research. "It's incredible that in a time when so much research is showing us the negative legacies people leave behind, here is the opposite story," says study leader Andrew Trant, a professor in the Faculty of Environment at the University of Waterloo. "These forests are thriving from the relationship with coastal First Nations. For more than 13,000 years --500 generations -- people have been transforming this landscape. So this area that at first glance seems pristine and wild is actually highly modified and enhanced as a result of human behaviour."

 Nasa: Earth is warming at a pace 'unprecedented in 1,000 years' -- The planet is warming at a pace not experienced within the past 1,000 years, at least, making it “very unlikely” that the world will stay within a crucial temperature limit agreed by nations just last year, according to Nasa’s top climate scientist. This year has already seen scorching heat around the world, with the average global temperature peaking at 1.38C above levels experienced in the 19th century, perilously close to the 1.5C limit agreed in the landmark Paris climate accord. July was the warmest month since modern record keeping began in 1880, with each month since October 2015 setting a new high mark for heat. But Nasa said that records of temperature that go back far further, taken via analysis of ice cores and sediments, suggest that the warming of recent decades is out of step with any period over the past millennium.“In the last 30 years we’ve really moved into exceptional territory,” Gavin Schmidt, director of Nasa’s Goddard Institute for Space Studies, said. “It’s unprecedented in 1,000 years. There’s no period that has the trend seen in the 20th century in terms of the inclination (of temperatures).” “Maintaining temperatures below the 1.5C guardrail requires significant and very rapid cuts in carbon dioxide emissions or co-ordinated geo-engineering. That is very unlikely. We are not even yet making emissions cuts commensurate with keeping warming below 2C.” Schmidt repeated his previous prediction that there is a 99% chance that 2016 will be the warmest year on record, with around 20% of the heat attributed to a strong El Niño climatic event. Last year is currently the warmest year on record, itself beating a landmark set in 2014. “It’s the long-term trend we have to worry about though and there’s no evidence it’s going away and lots of reasons to think it’s here to stay,” Schmidt said. “There’s no pause or hiatus in temperature increase. People who think this is over are viewing the world through rose-tinted spectacles. This is a chronic problem for society for the next 100 years.”

Report Shows Whopping $8.8 Trillion Climate Tab Being Left for Next Generation -- "We do not inherit the Earth from our ancestors, we borrow it from our children," is an oft-quoted proverb, frequently used to explain the importance of environmental preservation. Unsaid, however, is how much it will impact the next generation if the Earth is bequeathed in a lesser state. Environmental campaigners NextGen Climate and public policy group Demos published a new study that attempts to quantify the true cost of not addressing climate change to the millennial generation and their children. The Price Tag of Being Young: Climate Change and Millennials' Economic Future (pdf) compares some of the high costs millennials will face in the "new inequality economy"—such as student debt, child care costs, stagnant wages, as well as financial and job insecurity—against the fiscal impacts of unmitigated global warming. "The fact is," the report states, "unchecked climate change will impose heavy costs on millennials and subsequent generations, both directly in the form of reduced incomes and wealth, and indirectly through likely higher tax bills as extreme weather, rising sea levels, drought, heat-related health problems, and many other climate change-related problems take their toll on our society." The impacts from climate costs alone, the report finds, are "comparable to Great Depression-era losses." The study employs a model developed by researchers from Stanford University and University of California at Berkeley that measures the effects of rising temperatures on long-term economic growth and national productivity drawing on 50 years of data from 166 countries.

Governor declares emergency in 20 Washington counties hit by wildfires | The Seattle Times: Several wildfires continued to burn in Eastern Washington on Tuesday, and Gov. Jay Inslee declared a state of emergency for 20 counties. Firefighters appeared to be gaining the upper hand against wildfires burning in the Spokane region, although heavy smoke blanketed the state’s second-largest city. Inslee visited a fire-command center on the Spokane County Fairgrounds on Tuesday morning and blamed tree diseases and rising temperatures caused by climate change for the state’s recent spate of record wildfire seasons. Inslee says diseased trees and climate change have created “explosive conditions” in forests.In his emergency proclamation, Inslee noted hot and windy weather was forecast for the next seven days. He said a lack of resources could hamper firefighting efforts. Inslee’s proclamation directed state agencies to do everything reasonably possible to assist local governments in responding to and recovering from the fires. It also called for staff at the State Emergency Operations Center to coordinate state firefighting efforts, and allowed the use of the Washington National Guard if needed. The proclamation covers Adams, Asotin, Benton, Chelan, Columbia, Douglas, Ferry, Franklin, Garfield, Grant, Kittitas, Klickitat, Lincoln, Okanogan, Pend Oreille, Spokane, Stevens, Yakima, Walla Walla and Whitman counties.

Idaho Wildfire Grows Quickly, Could Keep Burning Until October - The blaze, known as the Pioneer Fire, has been burning for several weeks, but hot, dry weather this week caused the wildfire to get much larger.  Scott Graf of Boise State Public Radio reports for NPR's Newscast Unit: "The fire grew by 45-square-miles in one day early this week. It grew by another 25 yesterday, but not a single home has been lost to the fire — a testament to the rugged, remote area where it's burned since mid-July.  "A cold front will bring some fall-like weather to the region this weekend, and fire managers say that should help slow the fire. But they say it will take fall rains and potentially even snow to extinguish the fire — something not likely to happen [in western Idaho] until October." Idaho wildfire officials say the Pioneer Fire was 58 percent contained on Wednesday. There are more than 1,100 people working to contain the fire, which is burning through backcountry forest, and currently doesn't threaten any buildings. As of Wednesday, nine helicopters, 44 fire engines, four bulldozers and 24 water trucks were assigned to help fight the fire. Large parts of the Boise National Forest have been closed to visitors, and fire officials warn people not to camp north of the blaze. There are no mandatory evacuation orders — the fire is burning in an uninhabited area — but summer cabins nearby are under Level 1 and Level 2 evacuation warnings, which means people staying there should get ready to leave in case the fire grows in their direction. 

 Like Tens of Millions of Matchsticks, California’s Dead Trees Stand Ready to Burn - The New York Times: — At the height of California’s fierce wildfire season, the Sierra Nevada and North Coast forests are choked with tens of millions of dead and dying trees, from gnarly oaks to elegant pines that are turning leafy chapels into tinderboxes of highly combustible debris.Ground crews wielding chain saws, axes and wood chippers are braving the intense summer heat in the Sierra’s lower elevations, where most of the pine trees have died. The devastation and danger are greatest in the central and southern Sierra Nevada, where the estimated number of dead trees since 2010 is a staggering 66 million.Scientists say rarely is one culprit to blame for the escalation in the state’s tree deaths, and the resulting fire hazard. Rather, destruction on such a broad scale is nearly always the result of a complex convergence of threats to forest ecosystems.Chief among them is a severe, sustained drought in the Sierra Nevada that is stressing trees and disabling their natural defenses. Climate change is raising temperatures, making for warmer winters. No longer kept in check by winter’s freeze, bark beetle populations are growing. Separately, a nonnative, potent plant pathogen is thriving in the moist areas of the North Coast, introduced to California soil by global trade. Opportunistic fungi are standing by, ready to finish the kill.Factor in human shortcomings — poor or absent forest management, a failure to clear out ignitable dead wood, the darker temptation of arson, unchecked carelessness — and you have a lethal recipe.

Infographic: Climate change will likely lead to more explosive fires in Southern California  -- Southern California is home to some of the most diverse plant communities in the world, from coastal sage scrub and oak woodlands to conifer forests and inland chaparral. But where biologists see ecological niches, fire officials see fuel sources for wildfire. Many climate models predict that greenhouse gasses will create a hotter, drier future for California over the next century. And that will likely amp up the potential for big blazes on these varying landscapes, creating new challenges for firefighters. One plant community already feeling the heat is the high-elevation pine woodlands in places like Mount Baldy, Idyllwild and Big Bear. "Here we have a lot of Jeffery pines and a lot of White firs," Paris Krause pointed out on a recent hike through the piney peaks of the San Bernardino Mountains. She's a contract botanist with the U.S. Forest Service, hired to study the aftermath of 2015's Lake Fire near Big Bear. Thanks to extremely dry conditions, that fire quickly spread across 48 miles, reducing entire hillsides of pines into charred trunks. "There are a few needles left on trees, like this tree in front of us has four needles at the very peak," she said. Even with the needles, that tree and scores around it are dead. Krause said the fire was so intense it likely baked any seeds resting in the ground, making it hard for new trees to come back. That opens the door for another plant community to move in.

California moves to add methane limits to climate agenda (AP) — California Democrats are taking further steps to advance the state’s ambitious climate-change agenda, agreeing to regulate methane emissions from landfills and dairy farms for the first time and approving $900 million in spending on environmental programs. The approval came in the final hours of the two-year legislative session Wednesday following a flurry of negotiations involving Gov. Jerry Brown, Democratic legislative leaders and the affected industries. It was approved just a week after Democrats voted to extend California’s landmark climate change law, the most aggressive in the nation, by another 10 years, solidifying the state’s reputation as an environmental leader through at least 2030. That move, pushed by Brown and environmentalists, came amid fierce opposition from oil companies and other business interests. The legislation, which now heads to the Democratic governor’s desk, would require steep reductions in a variety of climate-changing gases known as short-lived climate pollutants, including methane, HFC gases used in aerosols and air conditioners and soot, known as black carbon. While these pollutants live in the atmosphere for relatively short periods, they have an outsized impact on climate change, according to legislative researchers.

Legislation like no udder -- California is regulating cow fartsThe legislation, which now heads to the Democratic governor's desk, would require steep reductions in a variety of climate-changing gases known as short-lived climate pollutants, including methane, HFC gases used in aerosols and air conditionnts and soot, known as black carbon. While these pollutants live in the atmosphere for relatively short periods, they have an outsized impact on climate change, according to legislative researchers. "With this bill we prove again that California doesn't shy away from tackling major climate change legislation. We lead," said Sen. Ricardo Lara, D-Bell Gardens, who wrote the bill and brokered the compromise with the dairy industry. The compromise package, tied to $50 million in methane emissions funding, would set a requirement that dairies and livestock producers reduce methane emissions from manure to 40 percent below their 2013 levels by 2030. It allows for the regulation of cow flatulence — another source of methane emissions — if experts determine that technology exists to reduce it. California would also be pushed to significantly increase composting in order to reduce organic waste, which emits greenhouse gases when it breaks down in landfills. SB1383 sets a goal of reducing the flow of food products to landfills by 50 percent within four years.

India Ganges floods 'break previous records' - BBC News: The monsoon floods in India's Ganges river this year have broken previous records, officials have told the BBC. They said water levels reached unprecedented levels at four locations in northern India. The highest record was in Patna, the state capital of Bihar where flood waters reached 50.52m (166ft) on 26 August, up from 50.27m in 1994. Floods across India this year have killed more than 150 people and displaced thousands. "We have also recorded unprecedented flood levels at Hathidah and Bhagalpur of Bihar state and Balliya of Uttar Pradesh," chief of India's Central Water Commission GS Jha said. "In all these four places, the floods crossed the previous highest flood level and they all were unprecedented." Bihar is one of the worst flood-hit states in India with at least 150 deaths and nearly half a million people evacuated. Neighbouring Uttar Pradesh has also been severely affected by floods in the Ganges.The third largest river in the world flows through these north Indian states meeting its tributaries before emptying into the Bay of Bengal. The Indian Meteorological Department, however, has recorded deficient rainfall in these states past week and average rains since the monsoon started in June. Some experts have blamed the silt the river carries for the floods. The Ganges is one of the highest sediment load carrying rivers. The silt deposition is said to have raised the river's bed-level causing it to break embankments and flood the adjoining human settlements and farmlands.

California poised to expand pollution of potential drinking water reserves - As the western United States struggles with chronic water shortages and a changing climate, scientists are warning that if vast underground stores of fresh water that California and other states rely on are not carefully conserved, they too may soon run dry. Heeding this warning, California passed new laws in late 2014 that for the first time require the state to account for its groundwater resources and measure how much water is being used. Yet California's natural resources agency, with the oversight and consent of the federal government, also runs a shadow program that allows many of its aquifers to be pumped full of toxic waste. Now the state — which relied on aquifers for at least 60 percent of its total water supply over the past three years — is taking steps to expand that program, possibly sacrificing portions of dozens more groundwater reserves. In some cases, regulators are considering whether to legalize pollution already taking place at a number of sites, based on arguments that the water that will be lost was too dirty to drink or too difficult to access at an affordable price. Officials also may allow the borders of some pollution areas to be extended, jeopardizing new, previously unspoiled parts of the state's water supply. The proposed expansion would affect some of the parts of California hardest hit by drought, from the state's agriculturally rich central valley to wine country and oil-drilling fields along the Salinas River. Some have questioned the wisdom of such moves in light of the state's long-term thirst for more water supplies. "Once [the state] exempts the water, it's basically polluted forever. It's a terrible idea,"

3 Tropical Storms Threaten U.S. for First Time in Recorded History - For the first time in recorded history, three tropical storm systems are threatening the U.S. simultaneously and a fourth could quickly join the ranks.Two back-to-back storms—currently Hurricanes Madeline and Lester—could hit Hawaii's Big Island this week, while two others are forecast to impact North Carolina and Florida's Gulf Coast. If either storm makes landfall on the Big Island as a hurricane, it would be the first since record-keeping began.As Jeff Masters put it from WunderBlog: National Hurricane Center has issued a Hurricane Watch for the Florida Gulf Coast from the Anclote River to Indian Pass, and a Tropical Storm Watch for the Florida Gulf Coast west of Indian Pass to the Walton/Bay County line. You'd wouldn't guess from Tropical Depression Nine's appearance on satellite imagery, though, that the storm could become a hurricane by Thursday. TD 9 struggled with dry air and wind shear all day Tuesday, and a NOAA hurricane hunter aircraft on Tuesday afternoon found that top sustained winds had remained near 35 mph, and the central pressure had remained constant at 1004 mb. TD 9 continued to bring heavy rains to western Cuba during the day Tuesday, though; Santa Lucia in Pinar Del Rio province reported a 36-hour rainfall total of 317.4 mm (12.50") ending at 8 a.m. EDT. Additional heavy rains of 3 - 5" are likely over western Cuba before TD 9 finally pulls away on Wednesday.  More News: Mashable, Gizmodo, AP, NBC News, CNN, Washington Post, Reuters, CNBC, Tampa Bay Times, USA Today

No-name storm dumped three times as much rain in Louisiana as Hurricane Katrina - The Louisiana flood has taken at least 13 lives and damaged 40,000 homes. This multibillion-dollar disaster is a devastating example of the damage water can do and proves that a hurricane is not required to leave behind a flooding catastrophe. This unnamed storm produced three times as much rain in Louisiana as Hurricane Katrina. The multi-day rainfall totals, shown both in the map above and in the list below, are stunning — many in the 20-30 inch range.Some areas of Louisiana saw more rain from this event in three days than Los Angeles has in the last several years. What makes the rainfall output most remarkable is that it didn’t originate from tropical storm or depression, but just a weak area of low pressure that tapped into a unusually deep tropical moisture stream — fueled by warmer-than-normal ocean waters. Ryan Maue, a meteorologist for WeatherBell Analytics, computed that the no-name storm deposited the equivalent of 7.1 trillion gallons of water on Louisiana. “Enough water fell that it could fill Lake Pontchartrain about four times,” he said. Hurricane Katrina, by comparison, only left behind about 2.3 trillion gallons of rainwater in the state. (It produced a lot more rain in Mississippi, about 4.26 trillion gallons). The flooding in Louisiana from Katrina was mostly caused by storm surge, the tsunami-like swell from the Gulf of Mexico, which caused levees and flood walls to fail, not freshwater rain.

 Poisonous Algae Blooms Threaten People, Ecosystems Across U.S. -- Serious algae outbreaks have hit more than 20 states this summer. Organisms are shutting down beaches in Florida, sickening swimmers in Utah and threatening ecosystems in California. The blooms are a normal part of summer, but the frequency, size and toxicity this year are worse than ever. And water managers are rattled. "Everyone's on edge with the cyanobacteria," says Bev Anderson, a scientist with the California Water Resources Control Board. Emails reporting outbreaks of cyanobacteria — or blue-green algae — fill Anderson's inbox every morning. The algae is showing up in lakes and big reservoirs like Shasta Lake and Lake Oroville. In some places, it looks like someone poured a giant can of green paint into the water. And the smell can be rank. Anderson says California has posted danger signs at at least 30 lakes and reservoirs. But what's most alarming are the toxin levels, which Anderson says are "crazy." Twenty micrograms per liter would be worrisome. Current readings are as high as 150,000 micrograms per liter. As for the threat the algae outbreaks pose, water districts carefully screen for toxins in drinking water. It's boaters and swimmers who are most at risk. On a recent day, Dave Holmes watches with disgust as his white speedboat and blue kayak bob in mucky green water. Down the street, another Discovery Bay resident regrets diving into the water in mid-July. Wade Hensley ended up in the hospital because his body went numb from the waist down. It's still numb.  And they can't pinpoint exactly what it is," Hensley says. But, county health officials did find microcystin — one of several toxins produced by algae — in Discovery Bay. More typical symptoms are dizziness, rashes, fever and vomiting.

Tropical Storm Madeline sent CO2 below 400 ppm - Tropical Storm Madeline brought the classic impacts of heavy rains, high surf and gusty winds to Hawaii’s Big Island on Wednesday night and early Thursday. But it also brought a rather unexpected impact: carbon dioxide levels dipped below 400 parts per million (ppm) at the Mauna Loa Observatory.  The Scripps Institute of Oceanography, which monitors carbon dioxide at the observatory, chronicled the dip in a blog post. The drop is notable because scientists hadn’t expected carbon dioxide to drop below that threshold at the top of Mauna Loa in our lifetimes. But there’s also the irony that it was caused by a storm that was likely in part fueled by warming waters related to climate change.  “A working hypothesis is that the low values are caused by the hurricane bringing in air from much further north, where we do expect to see sub-400 ppm values,” Ralph Keeling, the director of the Mauna Loa program at the Scripps Institution of Oceanography, said in the blog post. “Earlier this summer, we also saw values that were unseasonably low when a hurricane was looming.”  The Mauna Loa Observatory is a the gold standard of carbon dioxide measurements on the planet. The national landmark Keeling Curve is the iconic graph that shows the quickening rise of carbon dioxide in our atmosphere as human activities continue to produce more carbon pollution. The graph also has a seasonal seesaw thanks to plants in the northern hemisphere sucking up carbon dioxide in the summer and then releasing it after they die in the fall.

 Nearly 1.9 Million Homes In The United States Would Be Flooded If The Seas Rose Six Feet.: Despite record-warm years and some crops already reacting to unusual shifts in the weather, climate change for many people remains an issue for the future. That future came a little closer this year, when scientists studying Antarctic ice loss reported that if carbon emissions continue unabated, sea levels could rise six feet this century - significantly higher than previous predictions of a two-foot rise by the year 2100. If the oceans rose six feet today, 1.87 million homes in the United States valued at $882 billion would be flooded by sea water, according to a Zillow Research analysis using data from the National Oceanic and Atmospheric Administration (NOAA). Roughly half of them - 934,411 homes, worth $413 million - are in Florida. Doug Aschenbach, a retiree from Ohio who lives in a Fort Lauderdale high-rise, figures it would take fewer than six feet of water to have a significant impact in his area. Indeed, Zillow's analysis shows Fort Lauderdale is the U.S. city that would have the most homes under water - more than 38,000 - if the ocean rose six feet. Aschenbach is heartened that these predictions are for decades into the future. "As long as city officials and others are thinking about them now, I view that as a good sign, because it will happen so gradually that there could be solutions to prevent a catastrophe."

Critical Reefs Destroyed in Poachers' Quest for World's Biggest Clams -- Gigas clams can grow up to nearly four feet (1.2 meters) long and weigh 500 pounds (227 kilograms), and they play a significant part in keeping the South China Sea’s shallow-water reef habitats alive and well. They provide a home for seaweeds, sea sponges, snails, and slugs, and protection for young fish. They also fill a valuable role as filter feeders, cleaning the water of pollutants as they ingest algae or plankton. Giant clams have taken a hit in recent decades, and they’re considered vulnerable to extinction. During the 1970s much of the Asia-Pacific region was picked clean of giant clams for their meat, which was prized in China as a supposed aphrodisiac. Then came the aquarium trade in the 1980s. Now there’s a new problem: Giant clams are in vogue in China for carvings, jewelry, and other ornaments—as status symbols for the wealthy and as protective charms in Chinese Buddhism. Meanwhile reefs in the South China Sea—some of the most biodiverse on Earth—are under assault: More than 60 square miles (160 square kilometers) of reefs, nearly 10 percent of the total, have fallen victim to the ongoing dispute in the South China Sea. Gomez estimates that this reef destruction means that the South China Sea region faces $5.7 billion a year in potential economic loss. Fishing supports millions of people in the countries ringing the South China Sea, and they’re responsible for more than 10 percent of the world’s fish catch. As reefs disappear, so do fishermen’s livelihoods. In an effort to extend its reach, China has built more than 3,200 acres (1,300 hectares) of new land in the Spratly Islands by smothering shallow reefs with sand to create new land and dredging to create deeper ports.  But giant clam poaching is destroying reefs more extensively and indiscriminately than island building. Poachers face few consequences, and the degradation has garnered little attention on the international stage.

Global temperatures are out of control - Global average temperatures this year have been scorching. The world has already experienced a peak temperature that is dangerously close to the 1.5 degree Celsius limit the international community agreed to in last year’s landmark Paris climate accord. And, we’re seeing warming at a pace the world hasn’t experienced in the past 1,000 years, NASA’s top climate scientist warns. The record temperatures seem to be steering the world into dire circumstances. Even keeping temperatures below a 2 degree Celsius hike seems improbable at this point, according to a report published Tuesday. “In the last 30 years we’ve really moved into exceptional territory,” Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies, told the Guardian. “It’s unprecedented in 1,000 years."July was the warmest recorded month in the over 130 years that humans have been tracking global temperatures. Each month has set a new record since October 2015. Accounting for other methods of temperature measurement — like analysis of ice cores and sediment — the current trend is unprecedented in the past millennium.  “Maintaining temperatures below the 1.5 degree Celsius guardrail requires significant and very rapid cuts in carbon dioxide emissions or co-ordinated geo-engineering,” Schmidt said. “That is very unlikely.”

Siberia might as well be where the world begins to end -- Already a bleak place, the northern Russian region is looking much bleaker of late. It is warming at twice the rate as the rest of the world, with sometimes deadly, sometimes bizarre consequences.

  • 1. Massive sinkholes. As the frozen ground warms up, dozens of craters have formed, including one mile-long, 300-foot-deep sinkhole. Researchers are afraid to get close to the craters for fear of methane geysers shooting off.
  • 2. Methane unleashed. We don’t want to watch methane literally bubble up from under the grass. And we certainly don’t want the billions of tons of carbon stored in Arctic permafrost — which contains more than twice what’s in the atmosphere today — to be unleashed. Some scientists fear that alone could raise global temperatures by 0.7 degrees Celsius.
  • 3. Smallpox, anthrax, and who knows what else. Warming temperatures have resurrected centuries-old anthrax spores that were dormant in Siberian permafrost, sickening 72 nomadic herders and killing one child. Experts predict that smallpox could also make a comeback as frozen burial grounds thaw.

Legend has it that “Siberia” comes from an indigenous word for “sleeping land.” Now, that land is waking up with fury.

Despite major melt, Arctic sea ice will miss record low - As the sun begins its seasonal descent in the Arctic sky and temperatures drop, the summer melt of sea ice is slowing down. In the next few weeks, the span of the Arctic Ocean covered by ice will reach its annual low. But despite beginning the summer at unprecedentedly low levels, this year’s minimum won’t break the stunning record of 2012, experts say, thanks to cloudy weather that slowed the rate of melt.  Depending on how the weather plays out over the next few weeks, that minimum is likely to fall somewhere between second and fifth place, they estimate — still a remarkably low level that shows how precipitously sea ice has declined in recent decades. The area of the Arctic Ocean covered by sea ice naturally waxes and wanes with the seasons, reaching its peak at the end of winter and its nadir at the end of summer, usually in mid-September. But the steady increase in heat-trapping greenhouse gases in the Earth’s atmosphere has fueled an intense warming of the Arctic region; temperatures there are rising at twice the rate as the global average. That has caused a dramatic melting of the sea ice that floats atop the frigid ocean waters. Since the beginning of satellite records in 1979, the winter peak has declined by 3.2 percent per decade, while the summer minimum has declined by 13.7 percent per decade.

There is a third pole on earth, and it’s melting quickly -- When we think of the world’s polar regions, only two usually spring to mind – the North and South. However, there is a region to the south of China and the north of India that is known as the “Third Pole”. That’s because it is the third largest area of frozen water on the planet. Although much smaller than its north and south counterparts, it is still enormous, covering 100,000 square kilometres with some 46,000 glaciers. Scientists conducting research in the area have warned of disturbing global warming trends, and how, if they continue, they could affect the lives of 1.3 billion people. What happens to ice in the polar regions is taken as clear evidence of climate change. When the ice melts, we know that the planet is warming up. The Earth’s north and south extremities are crucial for regulating the climate, and at the same time are particularly sensitive to global warming. The Third Pole, because it is high above sea level, is also sensitive to changes in temperatures. It also powers life for many thousands of miles. It is estimated that the water that flows from the Third Pole supports 120 million people directly through irrigation systems, and a total of 1.3 billion indirectly through river basins in China, India, Nepal, Pakistan, Bangladesh and Afghanistan. That’s nearly one fifth of the world’s population. It is remote – the region encompasses the Himalaya-Hindu Kush mountain ranges and the Tibetan Plateau – but 10 of Asia’s largest rivers begin here, including the Yellow river and Yangtze river in China, the Irrawaddy river in Myanmar, the Ganges, which flows through India and Bangladesh, and the trans-boundary Mekong river.

Watch bubbling Alaska lakes catch on fire -- Some Arctic lakes are starting to look like witches' cauldrons. The above video shows an increasingly common site in northern latitudes. As global warming heats these areas up, the frozen ground is melting. And when permafrost turns from solid ground to looser mud, it releases gases that have been trapped inside. Much of the gas is methane, which is produced by microbes that feed on prehistoric biological matter laid down before the last Ice Age. The methane bubbles up to the surface, sometimes gently and at other times violently.  As the land softens, it can also slide and sink, sometimes causing damage on the surface to vegetation (see: drunken trees), or breaking buildings, pipelines, or roads. It can also cause depressions that fill with rainwater, which are called thermokarst lakes. Scientists with the University of Alaska Fairbanks (UAF) and NASA’s Arctic Boreal Vulnerability Experiment (ABoVE) are measuring the release of methane from the melting Arctic, as the above video shows. The scientists measure bubbles from lakes, and even occasionally set the gas on fire to get a better sense of its composition (methane is flammable; see more photos of this).  The team combines these ground-based observations with satellite data to get a better sense of the effect this additional methane may be having on our atmosphere.It's an important issue, because methane acts as a greenhouse gas, trapping more heat closer to the Earth. In fact, one molecule of methane is 25 times more powerful at trapping heat than a molecule of carbon dioxide (we hear so much more about carbon dioxide because there is a lot more of it in the atmosphere, but scientists think methane has an important role to play in climate).

The Anthropocene is here: scientists: The human impact on Earth's chemistry and climate has cut short the 11,700-year-old geological epoch known as the Holocene and ushered in a new one, scientists said Monday. The Anthropocene, or "new age of man," would start from the mid-20th century if their recommendation—submitted Monday to the International Geological Congress in Cape Town, South Africa—is adopted. That approval process is likely to take at least two years and requires ratification by three other academic bodies. But after seven years of deliberation, the 35-strong Working Group has unanimously recognised the Anthropocene as a reality, and voted 30-to-three (with two abstentions) for the transition to be officially registered. "Our working model is that the optimal boundary is the mid-20th century,"  "If adopted—and we're a long way from that—the Holocene would finish and the Anthropocene would formally be held to have begun." Scientists refer to the period starting from 1950 as the "Great Acceleration", and a glance at graphs tracking a number of chemical and socio-economic changes make it obvious why.Concentrations in the air of carbon dioxide, methane and stratospheric ozone; surface temperatures, ocean acidification, marine fish harvesting, and tropical forest loss; population growth, construction of large dams, international tourism—all of them take off from about mid-century.

All That Plastic In The Ocean Is Going To Leave Behind Fossils -- For nearly two decades, scientists have suggested that the world entered the Anthropocene, an epoch defined by human meddling, sometime in the 20th century. A group of scientists at the International Geological Congress in Cape Town, South Africa, on Monday formally proposed recognizing the period that began around 1950 as a new epoch. The move underscores the extent to which humans as a species have already polluted the natural world, and the pace at which it continues to worsen. “Being able to pinpoint an interval of time is saying something about how we have had an incredible impact on the environment of our planet,” Colin Waters, principal geologist at the British Geological Survey and secretary of the Working Group on the Anthropocene, told The Guardian, which published a meaty report on the geologists’ argument. “The concept of the Anthropocene manages to pull all these ideas of environmental change together.” Nuclear bomb tests, which began in 1945, may serve as the clearest marker of the beginning of the Anthropocene. The end of Late Cretaceous Period about 66 million years ago is marked in the Earth’s rock layers by a spike in metal iridium, dispersed by the meteorite scientists believe collided with the planet and wiped out dinosaurs. Radioactive material spread by atomic explosions could serve as a similar benchmark for the new epoch. Over the next three years, the Working Group on the Anthropocene plans to study layers of rock to determine when the present Holocene Epoch ended, and whether enough radioactive material, plastics and other signs of humanity have accumulated to mark the beginning of the Anthropocene. The 66 years since 1950 are a mere blip in the geological timetable, meaning such evidence may still be relatively scarce. The rapid acceleration of humanity’s impact on the planet, however, makes it worth examining.

Pope urges Christians to save planet from 'debris, desolation and filth' | Reuters: Pope Francis called on Thursday for concerted action against environmental degradation and climate change, renewing a fierce attack on consumerism and financial greed which, he said, were threatening the planet. A year after publishing the first papal document dedicated to the environment, the pope urged Christians to make the defense of nature a core part of their faith, adding it to the seven "works of mercy" they are meant to perform. "God gave us a bountiful garden, but we have turned it into a polluted wasteland of debris, desolation and filth," Francis said in a document released to coincide with the World Day of Prayer for the Care of Creation. Born in Argentina, Francis is the first pope from a developing nation and has placed environmental causes at the heart of his papacy, denouncing what he sees as a throwaway consumer culture and rampant, market-driven economies. "Economics and politics, society and culture cannot be dominated by thinking only of the short term and immediate financial or electoral gains," Francis said, suggesting more ambitious action might be needed to curb climate change.

Arctic sea ice is vanishing far faster than anyone thought possible: Arctic sea ice is melting at a rate far faster than anyone thought, and it is already wildly, and perhaps permanently, changing the region, and the planet. Historically, sea ice forms every winter across the top of the planet, and covers much of the Arctic Ocean. Every summer, the ice melts a bit and retreats, only to repeat the cycle again. But since the 1980s, the ice has been retreating further and further overall, contributing to changes to ecosystems, and erosion so severe it is biting off chunks of coastlines in Alaska, Canada and elsewhere. It even is exacerbating the warming trend in the Arctic. As 2016 continues apace to be one of the warmest years on record, Arctic sea ice levels appear to be among the lowest on record, said Tom Wagner, program manager for NASA's cryosphere research — a name given to the study of frozen regions of the planet. "It doesn't look like the ice is healing or growing back." "By some accounts we have lost more than two-thirds of the ice that used to be back in the 1980s," Wagner said. "This looks to be a very, very long-term trend and we are only going to be losing more ice. This matters because the "health" of the ice is considered a general indicator of what is going on in the Earth's total climate system. "This is not something that will affect humanity in the far off future," Wagner said, "loss of this ice is already wildly changing the Arctic," and rippling outward to the rest of the planet. For example, sea level rise is exacerbating the warming trend in the Arctic, indirectly contributing to phenomena such permafrost thaw, land ice melting and sea level rise. As the ice recedes, the ocean releases more heat into the atmosphere, and the dark ocean absorbs more sunlight. This causes more warming in the region, and leads to phenomena such as permafrost thaw, another process that is contributing to further warming. It also melts more land ice, further raising sea levels.

By Mid-Century, More Antarctic Snowfall May Partially Offset Sea-Level Rise - When Antarctica's air temperature rises, moisture in the atmosphere increases. That should mean more snowfall on the frozen continent. So why hasn’t that trend become evident in Antarctica's surface mass balance as climate models predict?  In a new study, scientists used historical records and climate simulations to examine that question. They found that the effect of rising temperatures on snowfall has so far been overshadowed by Antarctica’s large natural climate variability, which comes from random, chaotic variations in the weather. By mid-century, however, as temperatures continue to rise, the study shows how the effect of human-induced warming on Antarctica's net snow accumulation should emerge above the noise.  The expectation of more snowfall is something of a silver lining as temperatures rise. Global warming is already increasing sea level through melting ice and thermal expansion. The increase in snowfall over Antarctica could help reduce the amount of global sea-level rise by 51 to 79 millimeters, or about 2 to 3 inches, by the year 2100, according to the study. That would be a small but important benefit: the Intergovernmental Panel on Climate Change estimates global sea-level rise will be at least 10 times that by 2100 under the same high-emissions scenario used in the new study. “Increased snowfall over Antarctica is the sole process connected to global warming that is thought to have a significant mitigating effect on global sea-level rise,” said lead author Michael Previdi, a Lamont Associate Research Professor at Columbia University’s Lamont-Doherty Earth Observatory. “While the magnitude of this effect is uncertain, it is likely that the balance of different processes determining Antarctica’s net contribution to global sea-level rise will be decidedly different in the future than it has been in the recent past.”

Our energy grid is incredibly vulnerable to climate change - From rancid food to emergency-room nightmares, communities take a punch when the lights go out. The nation’s aging power grid leaves us very susceptible to such risks. And the growing intensity of floods and storms on account of climate change make things even worse. We hear a lot about how energy policy will affect climate impacts. Less appreciated, but equally important, are the ways that climate impacts will affect energy policy.  Consider:

  • Extreme weather events juiced up by global warming will knock out power plants and transmission systems across the continent.
  • Rising seas and higher tides will swamp some of our most important power plants and substations on the coasts.
  • Higher temperatures will slow high-voltage transmission speeds and increase outages related to sagging power lines. (And because more air conditioners will be blowing, electricity demand will jump at the same time.)
  • Water shortages and warming rivers will suppress production at thermal power plants and hydroelectric dams in many parts of the country.

As officials at the Department of Energy have noted, this is a very big deal. New York City lost one-third of its generating capacity when Superstorm Sandy tore through its waterfront gas plants. Alabamans lost millions of dollars when the Brown’s Ferry nuclear plant was forced to shut down because its cooling water was too hot to discharge into the state’s steamy rivers. And keep in mind that the Northeast blackout of 2003—the largest outage ever to affect North America—was triggered when a sagging power line shorted out one hot August afternoon.

This Mojave Desert solar plant kills 6,000 birds a year. Here’s why that won’t change any time soon - — A macabre fireworks show unfolds each day along I-15 west of Las Vegas, as birds fly into concentrated beams of sunlight and are instantly incinerated, leaving wisps of white smoke against the blue desert sky. Workers at the Ivanpah Solar Plant have a name for the spectacle: “Streamers.”And the image-conscious owners of the 390-megawatt plant say they are trying everything they can think of to stop the slaughter.  Federal biologists say about 6,000 birds die from collisions or immolation annually while chasing flying insects around the facility’s three 40-story towers, which catch sunlight from five square miles of garage-door-size mirrors to drive the plant’s power-producing turbines. In addition, coyotes eat dozens of road runners trapped along the outside of a perimeter fence that was designed to prevent federally threatened desert tortoises from wandering onto the property. David Knox, a spokesman for NRG Energy Inc., said the Ivanpah team has been testing an ever-changing combination of tactics to minimize bird deaths and injuries since it began sending power to the grid in 2014. He acknowledged, however, that the results have been “modest.” So far, plant workers have replaced flood lights with LED bulbs, which attract fewer insects and birds that eat them. They have rearranged the mirrors to reduce birds’ window of exposure. They have fitted each tower with machines that emit a nonlethal avian respiratory irritant derived from grape juice concentrate, a method typically used to keep birds from congregating on agricultural fields and commercial centers. And they have attached anti-perching spikes to the towers’ frames, along with devices that broadcast digital recordings of loud, high-pitched shrieking noises. “We know these deterrents are effective in general commercial use,” Knox said. “Are they as effective in a solar energy plant? We’re trying to figure that out.”

Planned wind-power line in doubt after court ruling -  A proposed high-voltage line meant to move power from Great Plains wind farms west of here into Chicago and points east has hit a major roadblock in the form of a court decision overturning state approval of it. But the developers, along with the Illinois Commerce Commission, aren't giving up. They promise to appeal the Illinois Appeals Court ruling to the Illinois Supreme Court. The appeals court sided with landowners along the Rock Island Clean Line's proposed path as well as Commonwealth Edison. Those joined in filing a suit, claiming the ICC was wrong under state law to grant the Texas-based firm proposing to construct the $1.8 billion, 500-mile line crossing most of Iowa and part of Illinois a “certificate of public convenience and necessity”—a designation conferred on necessary utility projects that usually involve acquisition of private land. A three-judge panel in Ottawa agreed unanimously, saying the developer didn't qualify as a "utility" under state law and that it hadn't met the test that the public would have beneficial use of the project. The developer, Clean Line Energy Partners, said it thinks the court was wrong and will appeal. The Rock Island project has been in the works for four years, grinding through the arduous regulatory process both at the federal level and in Illinois and Iowa. It's different than most high-voltage lines in that its developers aren't asking regulators to force captive ratepayers to pay higher electricity rates to finance the project. Instead, Rock Island is a "merchant" line and will be a success only if it signs up enough wind farm developers to pay it to move their output from low-population parts of the Dakotas, Minnesota, Kansas and Iowa to population centers like Chicago and the mid-Atlantic.

 Why Is Large-Scale Wind Power So Hard To Build? - The Bureau of Land Management faces a problem and wants to shake up the rules around wind farm approvals. The problem is straight-forward on its face, but difficult to reconcile logically: Why are so few new large-scale wind projects being built? Despite the fact that nearly everyone – environmentalists, government regulators, and business interests –wants to build more wind farms, precious few are making it over the goal line. Since 2009, the Obama Administration has approved 46 wind farm projects that would cover a proposed 216,356 acres of public land. Yet only 15 of these 46 projects have made it into operation. The rest are stuck in limbo with years of mandatory environmental analysis ahead or have been cancelled outright. Against this backdrop, it is little wonder that renewables are still only a tiny fraction of total power output. The Power Company of Wyoming exemplifies exactly this issue with its massive 1,000 turbine windfarm still waiting for construction to begin almost a decade after it was proposed and with $50 million in administrative costs sunk into the project. The BLM’s solution to this issue is to change the way it deals with land allocation. Essentially the government has two methods for dealing with private use of public land: first-come, first-served, and competitive bidding. The former method is used for cases like power line right of ways and engineered ditches. The latter is used for natural resource leases like oil and gas rights. Currently, wind farms operate on the former system. The BLM is proposing to switch to leasing windfarm acreage under the latter system as it does with O&G properties.

Compliance costs undermining the goal of the US Renewable Fuel Standard: Fuel for Thought - The system devised to force compliance with the US Renewable Fuel Standard appears to be backfiring, forcing refiners to spend more on buying increasingly expensive credits than actually blending renewables into the nation’s transportation fuel. While renewable fuel advocates see RINs as a tracking tool needed to ensure RFS compliance by refiners and blenders, it does not provide the financial stability fledgling renewable fuel producers need. “I think when you have RFS, you have to make sure people are complying,” said Wayne Lee, CEO of Lee Enterprises, the world’s largest biofuel consultant in an recent interview with Platts. “But I would certainly be open to a way other than RINs.” RINs, or Renewable Identification Numbers, are credits generated when biofuels like ethanol and biodiesel are blended with gasoline and diesel, as mandated by the RFS. Currently, if refiners or other “obligated parties” can’t meet their EPA-mandated RFS blending requirement, they have to buy RINs—a situation that has has contributed to the creation of a speculative trading market. After a contentious beginning, refiners appear to have made peace with the fact that renewables are here to stay. But they say RINs are not increasing volumes of renewables in transportation fuels.

 Study Finds Biofuels Worse for Climate than Gasoline - Years of number crunching that had seemed to corroborate the climate benefits of American biofuels were starkly challenged in a science journal on Thursday, with a team of scientists using a new approach to conclude that the climate would be better off without them. Based largely on comparisons of tailpipe pollution and crop growth linked to biofuels, University of Michigan Energy Institute scientists estimated that powering an American vehicle with ethanol made from corn would have caused more carbon pollution than using gasoline during the eight years studied. Most gasoline sold in the U.S. contains some ethanol, and the findings, published in Climatic Change, were controversial. They rejected years of work by other scientists who have relied on a more traditional approach to judging climate impacts from bioenergy — an approach called life-cycle analysis. Following the hottest month on record globally, and with temperatures nearly 2°F warmer and tides more than half a foot higher than they were in the 1800s, the implications of biofuels causing more harm to the climate than good would be sweeping. The research was financially supported by the American Petroleum Institute, which represents fossil fuel industry companies and has sued the federal government over its biofuel rules.

Why ship owners see little point in greener vessels - Efficient ships can save millions of dollars in fuel costs, but their owners see little of the benefit. That is the conclusion of analysis from UCL and Carbon War Room, based on a decade’s worth of shipping data. It means ship owners are not rewarded for investment in clean technology, researchers warn, holding back climate action in maritime transport. “These results are a challenge to the industry, to its business model,” said co-author James Mitchell, from Carbon War Room. “Transparent data on operational efficiency would also help rebalance the power dynamic in negotiations, allowing all parties to profit from efficiency.” In 2012, a B-rated “Capesize” ship (dry bulk carrier too big for the Panama Canal) saved some US$1.5m on fuel compared to its F-rated equivalent. Yet in the time charter market, the cargo owner – who hires the vessel for a period and pays the fuel bill – reaped all the savings. The owner earned no premium. In the smaller Panamax category, there was some benefit-sharing. The owner of a vessel rated A-C commanded 2% higher rates than for a D-G class. Still, Mitchell noted the efficiency premium collapsed with the 2008 financial crash, despite high fuel costs at the time.

US EIA: Natural Gas CO2 Emissions Surpassing Coal Emissions - For the first time since 1972, energy-associated carbon dioxide (CO2) emissions from coal are dropping below natural gas CO2 emissions. The US Energy Information Agency’s latest Short-Term Energy Outlook reports that energy-related CO2 emissions from natural gas are expected to be 10% higher than coal emissions for 2016. This is a classic case of good news wrapped in bad. Tirelessly documenting the long, slow slide into statistical irrelevance, the US EIA is finally reporting the decline of Old King Coal’s reign of CO2 Terror. But the dictator’s death is not a cause for celebration. Natural gas has staged a coup.  The EIA states that, in general, US carbon intensity rates have been decreasing annually since 2005. Carbon intensity in energy terms represents the weight of CO2 emitted by a fuel type per unit of energy consumed, typically the British thermal unit (Btu). This is commonly expressed as CO2/Btu. A total carbon intensity rate reflects the relative consumption of each fuel type and each types’ relative carbon intensity. Petroleum, at around 65 million metric tons of CO2 per quadrillion British thermal units (MMmtCO2/quad Btu), is more carbon intensive than natural gas and less intensive than coal. The carbon intensity of natural gas is around 52 MMmtCO2/quad Btu. Coal’s carbon intensity is nearly 95 MMmtCO2/Btu, or around 82% higher than natural gas. For this reason, even when annual consumption of natural gas and coal were roughly equal, as was the case in 2005, CO2 emissions from energy-related coal were around 84% higher than emissions from natural gas.   Now, however, natural gas consumption is 81% higher than coal consumption. The problem is, not all energy-related emissions are the result of annual consumption. Natural gas emissions occur throughout the pumping process, although they are invisible. Take a look at Humphreys compressor station in Ohio, documented by Earthworks using FLIR video by ITC certified Optical Gas Imaging Thermographer:

The Cost of Slashing Greenhouse Gas Emissions – WSJ - President Barack Obama’s pledge to slash U.S. greenhouse gas emissions by 80% from 2005 levels by 2050 might cost more than $5 trillion over three decades, according to a new analysis. More than 190 countries announced similarly ambitious targets in Paris in December, but none included estimates of the costs. For the U.S., they’re huge: up to $176 billion a year, or $5.28 trillion over 30, according to Columbia Business School economist Geoffrey Heal. His new paper breaks down the costs of the most important prerequisite for achieving the target: making electricity generation carbon-free. The costs aren’t a line item in the federal budget, but would largely be picked up by utilities, which would pass on the capital costs to consumers. “The short answer is: You and I will be paying,” Mr. Heal said in an interview. That estimate includes savings from not having to buy as much gas and coal (sunshine and wind are free), or replace existing fossil fuel power stations. It doesn’t calculate potential environmental benefits, such as avoiding flooding, air pollution or damage to farmland. Even under Mr. Heal’s most optimistic assumptions about the development of battery technology, the cost of meeting the president’s pledge would be $42 billion a year. mThe need to store energy for days when the sun and wind aren’t performing crimps the economic case for renewable energy, making up 70% of the total cost. To store a day’s power output from a single wind turbine, for instance, costs $7.8 million, or more than twice the cost of the turbine.  And one day isn’t enough to ensure a reliable electricity grid. Mr Heal assumes construction of enough storage to cover two. “[But] there is no very solid basis for this number,” he said.

Wall Street Journal Warns that President Obama's Target on Global Warming Could Cost Half as Much as Iraq/Afghan Wars – Dean Baker - That is what they warned, but they didn't quite put it to readers that way. Instead the subhead warned that meeting President Obama's goal of reducing emissions by 80 percent by 2050 would cost $5.28 trillion. Yes folks, that sounds pretty scary. After all, $5.28 trillion over the next 34 years is bigger than a bread box, possibly much bigger.  Of course, it is unlikely that many of the WSJ's readers have a clear idea of how big the economy will be over this 34-year period, so they are not likely to be in a good position to assess how much of a burden this would be. Since annual output will average more than $20 trillion a year (in 2016 dollars), this sum comes to about 0.9 percent of projected GDP. (This context is included near the bottom of the piece.) By comparison, the cost of the Iraq and Afghanistan wars at their peak was roughly 2.0 percent of GDP, implying that they imposed more than twice the burden on the economy as President Obama's proposal to cut greenhouse gas emissions. Another comparison that might be useful is the loss of potential GDP due to the austerity measures demanded by the Republican Congress and supported by many Democrats. In 2008, before the financial crisis, the Congressional Budget Office (CBO) projected that potential GDP in 2016 would 22.5 percent higher than in 2008. It now projects that potential GDP in 2016 is just 12.0 percent higher in 2016 than it was in 2008. This decline in potential GDP is roughly ten times as large as the projected costs from meeting President Obama's targets for greenhouse gas emissions.  And, as the piece notes, the estimates do not take account of any benefits from reduced damage to the environment. For example, we might have fewer destructive storms, flooding of coastal regions, and forest fires in drought afflicted regions. It is also worth noting that the WSJ piece entirely focuses on the high-end estimate in the study, the low-end estimate is just over one quarter as large.

 The $8 Trillion Fight Over How to Rid America of Fossil Fuel - For every economist, there exists an equal and opposite economist, and they’re both wrong. Like many jokes, this one is funny (to economists, anyway) because it’s true. What isn’t so funny is its application to the biggest challenge of the 21st century: How to shed a fossil-fuel energy infrastructure that seems hell-bent on destroying us. There are several camps trying to decide how much we must spend to avoid environmental disaster. Consensus on a grand total is a matter of degree, with estimates varying by as much as $8 trillion. Geoffrey Heal, an economist at Columbia Business School, recently published a National Bureau of Economic Research working paper that asks what would it take—over the next three-and-a-half decades—to cut U.S. greenhouse gas emissions to 80 percent below their 2005 level? That’s not a made-up target: It’s the goal the Obama administration submitted (PDF) to the UN. It’s also the long-term goal the U.S. will bring to G20 negotiations next week. And it shows up in the 2016 Democratic Party Platform (PDF) upon which Hillary Clinton is running for president. (Republican candidate Donald Trump has rejected the science of global warming. Libertarian candidate Gary Johnson recognizes climate change and is “open to” a carbon tax.) Among scientists, however, there is agreement. Two Harvard economists, after trawling through voluminous, authoritative research, said last year that the odds of an utterly catastrophic finale to humanity’s atmospheric experiment is about 10 percent. That’s a conclusion that can focus minds pretty quickly—and perhaps turn the expenditure of trillions of dollars over three decades into only a tough, but manageable, problem.

The Eastern US could get a third of its power from renewables within 10 years. Theoretically. - The power grid in the Eastern US, known as the "Eastern Interconnection" (EI), is a technological marvel: an impossibly large, sprawling, and complex machine that’s been operating continuously for over a hundred years, now serving around 240 million people. When considered together with the Canadian EI, it forms what the National Renewable Energy Laboratory calls "the largest coordinated power system in the world." Here it is, with all its transmission lines: The colored outlines (MISO, PJM, SERC, etc.) denote areas managed by different Regional Transmission Organizations (RTOs). The RTOs are somewhat autonomous, but their grids are synced up on a common frequency and form part of a continuous whole. The EI was built around coal, nuclear, natural gas, and hydro power, which can be deployed whenever grid operators need them. (They are "dispatchable.") The pressing question facing today’s policymakers is whether the EI can, relatively quickly, accommodate much more renewable energy, which is variable, i.e., only available when the wind blows or the sun shines. Prior to the question of how that might be accomplished socially or politically is the simple question of whether it’s technically possible. That is the question examined by NREL in its newly released Eastern Renewable Generation Integration Study (ERGIS, if you’re nasty). The study is a remarkable technical achievement, marrying enormous datasets with enormous computing power to produce incredibly rich scenarios (one reason it stretches to 220 pages, with six appendices). But the basic conclusion of the study can be summed up in four words: It can be done.

Maryland officials: companies to pay penalty for polluting (AP) — The owners that operate two power plants in Maryland have agreed to pay a $1 million penalty to resolve allegations over polluting in the Potomac and Patuxent Rivers. The Maryland Department of the Environment announced the federal court agreement Monday. The department says NRG Chalk Point and GenOn Mid Atlantic operate the Chalk Point Electric Generating Station and the Dickerson Electric Generating Station, respectively. The department says they also will perform $1 million in environmental projects and upgrade wastewater treatment technologies at the coal-burning facilities. The department alleged in a complaint filed in U.S. District Court in Baltimore that the power plants exceeded the annual limits in their discharge permit for nitrogen from 2010 to 2013. Chalk Point is in Prince George’s County; Dickerson is in Montgomery County.

What renewables? 16,372MW thermal capacity gets eco nod - Times of India: When worldwide focus is on renewable energy, during the last two years from July 4, 2014 to July 26, 2016, 15 proposals to set up 16,372MW thermal power capacity have been granted environment clearance (EC) by the BJP government at the Centre. Gujarat leads the tally with 3,980MW followed by Tamil Nadu (3,732MW), Uttar Pradesh (3,300MW) and Telangana (2,400MW), Andhra Pradesh (1,600MW), Madhya Pradesh (1,320MW) and West Bengal (40MW). "When the Narendra Modi government itself has said additional thermal capacity is not required for next 5-6 years, why is environmental clearance being granted to coal-based plants?" asks Pushp Jain, director of Environment Impact Assessment (EIA) Resources & Response Centre (ERC), New Delhi, that keeps a watch on EIA processes and ensures the impact of developmental activities on India's environment and communities is properly accounted for. The ministry of environment, forests and climate change (MoEF&CC) introduced online filing of applications for environment clearance from July 4, 2014, soon after Narendra Modi government came to power. Since the change in system of information, it is two years of the government as well as the new system in place.Is the rate of clearances high? Jain says, "One cannot say environment clearance to projects is too fast but the point is, when Modi's power minister himself says additional capacity is not required for 5-6 years, why is MoEF&CC overenthusiastic about granting the clearances? The environment ministry should be the last to agree to such approvals."

The Challenge of Cutting Coal Dependence - It won’t be easy to get rid of coal. Worried the nation might miss its 2020 target to drastically cut emissions of carbon dioxide, the German government proposed a steep levy last year on the most heavily polluting generators. The tax was intended to deliver a decisive blow against lignite or brown coal, the dirtiest fuel around and Germany’s main source of electricity. Germany views itself as a leader in the push against climate change. It is probably the world’s most enthusiastic investor in renewable energy, mainly wind and sun. But even the powerful Chancellor Angela Merkel couldn’t quite pull it off. Facing blowback from labor unions and governments in coal country, Berlin backed off, replacing the levy with a subsidy of 1.6 billion euros to gradually mothball eight coal-fired plants and shut them down permanently by 2023. Environmentalists hated it. “Instead of being fined for polluting by the proposed new climate levy, utilities will instead get paid for keeping their oldest and most inefficient lignite plants on standby,” noted a report for Oxfam on Germany’s energy policies by the environmental nonprofit E3G. It “amounts to a golden handshake for utilities at the expense of taxpayers and consumers.”  And that wasn’t all. The chancellery also rejected a push by Barbara Hendricks, the environment minister, to establish a road map to the total phaseout of coal, hoping to postpone timing decisions until after national elections next year.

Gov. Brown signs bill to block state funding of coal terminals - LA Times: Gov. Jerry Brown signed legislation Friday that prohibits the California Transportation Commission from providing money for any new bulk-coal terminals in the state, and he urged cities with ports to take action to reduce such shipments.“I believe action on multiple fronts will be necessary to transition away from coal,” Brown wrote in a signing message. “In California, we’re divesting from thermal coal in our state pensions, shifting to renewable energy, and last year coal exports from California ports declined by more than one-third, from 4.65 million to 2.96 million tons. That’s a positive trend we need to build on.”State Sen. Loni Hancock (D-Berkeley) authored the bill, which was signed even as Brown noted that the city of Oakland has documented the health, safety and climate effects of coal and banned its shipment through the city.“Other localities should follow suit — and the state should, too — to reduce, and ultimately, eliminate the shipment of coal through all California ports," Brown wrote. "That’s why I’m signing SB 1279 and why I will continue to work with the Legislature on further actions to curb coal and combat climate change.”The bill is opposed by groups including the California Teamsters Public Affairs Council, the California Trade Coalition and the League of California Cities. Opponents said the measure might violate U.S. treaty obligations and commerce laws because it singles out one commodity.

Group asks regulators to stop work on proposed nuclear plant (AP) — A consumer group wants electric utility Dominion Virginia Power to get explicit approval from state regulators before it spends any more money prepping for a potential new $19 billion nuclear plant. The Virginia Citizens Consumer Council filed a motion Tuesday arguing that Dominion is currently in violation of state law because it’s started doing preliminary construction on a new nuclear plant, known as North Anna 3, without permission from state regulators. Dominion has not committed to build the new plant, but plans to have spent at least $647 million by next year preparing for a potential build. The company says such preparations are prudent and ratepayers will benefit from having the option to build a reliable, long-lasting and carbon-free power source.

 Japan’s ‘Hail Mary’ at Fukushima Daiichi: An Underground Ice Wall -- NYT --More impressive is what is taking shape unseen beneath: an underground wall of frozen dirt 100 feet deep and nearly a mile in length, intended to solve a runaway water crisis threatening the devastated Fukushima Daiichi Nuclear Power Station in Japan. Officially named the Land-Side Impermeable Wall, but better known simply as the ice wall, the project sounds like a fanciful idea from science fiction or a James Bond film. But it is about to become a reality in an ambitious, and controversial, bid to halt an unrelenting flood of groundwater into the damaged reactor buildings since the disaster five years ago when an earthquake and a tsunami caused a triple meltdown. Built by the central government at a cost of 35 billion yen, or some $320 million, the ice wall is intended to seal off the reactor buildings within a vast, rectangular-shaped barrier of man-made permafrost. If it becomes successfully operational as soon as this autumn, the frozen soil will act as a dam to block new groundwater from entering the buildings. It will also help stop leaks of radioactive water into the nearby Pacific Ocean, which have decreased significantly since the calamity but may be continuing. The reactor buildings are vulnerable to an influx of groundwater because of how the operator, Tokyo Electric Power Co., or Tepco, built the plant in the 1960s, by cutting away a hillside to place it closer to the sea, so the plant could pump in water more easily. That also put the buildings in contact with a deep layer of permeable rock filled with water, mostly rain and melted snow from the nearby Abukuma Mountains, that flows to the Pacific.   Either the natural disasters themselves, or the explosive meltdowns of three of the plant’s six reactors that followed, are believed to have cracked the buildings’ basements, allowing groundwater to pour in. Nearly 40,000 gallons of water a day keep flooding into the buildings. Once inside, the water becomes highly radioactive, impeding efforts to eventually dismantle the plant. During the accident, the uranium fuel grew so hot that some of it is believed to have melted through the reactor’s steel floors and possibly into the basement underneath, though no one knows exactly where it lies. The continual flood of radioactive water has prevented engineers from searching for the fuel. Since the accident, five robots sent into the reactor buildings have failed to return because of high radiation levels and obstruction from debris.

India's Nuclear Riddle - Al Jazeera English: Deep in the rural plains of southern India, a mysterious government construction project is under way. Some allege the site will be a top secret "nuclear city", designed to produce highly enriched uranium and allow the country to develop thermonuclear weapons - devices more than 1,000 times more powerful than those detonated over Hiroshima and Nagasaki towards the end of World War II.In response, India's neighbour and decades-old foe Pakistan has vowed to keep pace and build its own equivalent programme, sparking fears that a new arms race is under way on the sub-continent - a race which could bring the region to the brink of thermonuclear war and threaten the lives and livelihoods of half of the world's population.To find out what is really going on behind the walls of this secret site, People and Power sent Indian journalist Mandakini Gahlot to investigate.

 Remain vigilant on fracking - The Star Beacon -- Though not totally unexpected, it is still a disappointing blow to hear a fracking regulation bill championed by State Rep. John Patterson will not move forward in this General Assembly.  At a fracking discussion hosted by the Ashtabula County League of Women Voters Tuesday, Patterson said House Bill 422 had gotten its one promised hearing and that was as far as it would advance this session. The oil and gas lobby has the ear of many powerful lawmakers, and with legislators only expected back for a short lame duck session following the Nov. 8 election, the fracking bill isn’t a priority to most lawmakers — or at least not the ones in the majority with the power to grease the wheels. That means the process starts over again in 2017, so in all likelihood the state is probably looking at 2018 before any significant regulations of the fracking industry get introduced.  While not a perfect bill as proposed, House Bill 422 certainly would have taken real, meaningful steps toward regulating the fracking industry. A few of the proposals the bill aimed to address included setbacks and access to deeds, requiring the state notify local entities of new proposed wells and prohibiting wells in 100-year flood plains. Even those small, reasonable steps are too much for some lawmakers, apparently. Depending on what happens after the November election, it will be worth monitoring what changes might come in the General Assembly’s makeup that could push the legislation forward. Patterson urged those at Tuesday’s meeting to review the bill and “see what holes are in it” before it’s reintroduced during the next General Assembly in January. So in that light, whatever form the new bill takes in the next General Assembly, we encourage Patterson and his co-sponsors to go big.  . Oil and gas companies, citing “proprietary information,” adamantly refuse to disclose what potentially hazardous chemicals first responders might encounter if there is a fire or spill. They have called such proposals a non-starter for any regulations they would be willing to accept.  But anything that can significantly lessen the dangers emergency crews face — or reduce the risk of serious environmental contamination — shouldn’t just be on the table, it should be law of the land.

 Charter supporters ask Ohio Supreme Court to change its prior ruling -The Ohio Supreme Court is being asked to overturn, or at least clarify, part of a decision it rendered last year on county charters. On Monday, supporters of proposed county charters in Athens, Meigs and Portage Counties submitted legal arguments in a lawsuit they filed Aug. 19. The lawsuit asks the Supreme Court to order election boards in the counties and Ohio Secretary of State Jon Husted to put the charters on the November ballot. The election boards had ruled the charter initiative petitions invalid, and Husted upheld those rulings. In their filing, charter proponents argue that the election boards and Husted exceeded their authority by looking at the substance of the proposed charters, rather than limiting their inquiry to whether the form of the initiative petitions was correct. It’s undisputed that the petitions had enough signatures. Proponents argue that in a ruling last year (on 2015 charter proposals), the Supreme Court said that boards, the secretary of state and courts cannot, before an election, assess the legality or constitutionality of a charter. They also argue that the Supreme Court in the same decision then “weakened this proscription nearly to the point of eliminating it” by saying that pre-election invalidation can occur if charters do not meet the threshold requirements that define a charter initiative — which, charter proponents argue, requires an improper examination of the constitutionality and legality of the charter. “By authorizing such review, (the Ohio Supreme Court’s) decision last year was unconstitutional and must be overturned (or clarified) to that extent,” the charter supporters assert. Charter supporters argue that they have a constitutional right to local community self-government that prevents the state and county from ruling on the substance of charters until after the people have voted on the charters.

Well permit issued despite concerns - Despite concern from area residents, the Ohio Department of Natural Resources has issued a drilling permit for the NuKonKord No. 1 injection well in Guernsey County. The site is in Westland Township, south of New Concord on the east side of Ohio 83. It is the fourth injection well in the New Concord vicinity. Three of the four wells are in Guernsey County, and one is in Muskingum County. Meghan Wynne heads the Concerned Citizens of New Concord, a group opposed to fracking wastewater injection sites in the area. Earlier this year, Wynne wrote a letter to ODNR requesting the permit be denied because of health and safety risks posed by fracking wastewater injection wells. "There have been well over 600 articles written providing evidence of widespread contamination from radioactive poisoning due to fracking wastewater," Wynne said. "There is also lots of written scientific evidence that fracking wastewater causes serious environmental and safety concerns." "Pennsylvania has banned injection wells because they are unsafe, so they truck the wastewater into southeast Ohio," Wynne said. "Look at the issues they are having in places like North Dakota." In the Bakken region of North Dakota, surface waters are showing unsafe levels of radium, selenium, thallium, lead and other toxic chemicals, according to the Environmental Protection Agency's Office of Research and Development. The fracking boom, which peaked in 2012, generated nearly 10,000 wells for oil and gas production. Along with them, about 4,000 wastewater spills were reported. Toxic pollution was found in the ground as well as in the water. According to a study released earlier this year by Duke University, the highest level of radium found in soil measured more than 4,600 becquerels per kilogram. That translates to roughly two and a half times the levels of fracking-related radioactive contamination discovered in Pennsylvania in 2013, which drew national attention.

Fracking activity continues despite end of boom - The fracking frenzy in Eastern Ohio has come and gone, and it might never be back again in quite the same way. Spurred by high energy prices, improvements in drilling technology and an abundance of gas beneath Ohio, oil and gas companies began rushing to drill in Ohio in 2011. They brought with them an unprecedented surge in economic optimism: high-paying jobs, windfalls for land owners and new business for a range of establishments in an economically challenged region. But after a crash in fuel prices in late 2014 and early 2015 slowed new drilling, and the economic benefits that come with it, the outlook in the shale region has shifted. While shale fracking is expected to provide an economic boost to eastern Ohio for years to come, a more measured mindset has taken hold for both drillers and communities as energy prices have begun to tick up.  Accustomed to striving for 5 percent year-over-year growth in the auto business, Dunning Motor Sales saw annual sales growth approaching 30 percent during the boom times of 2012 through 2014, he said. Indeed, when the oil and gas industry set its sights on Ohio, it moved quickly — and the economic benefits rushed in. In 2011, just 25 shale wells were drilled in the state, but that number jumped to 198 in 2012, 389 in 2013 and 521 wells drilled in 2014, according to data from the Ohio Department of Natural Resources. Activity dipped slightly in 2015 to 451 new wells. Ohio has seen 192 new shale wells drilled in 2016 as of Aug. 25. The vast majority of Ohio's fracking wells are located in the eastern and southern parts of the state. As drilling increased, so did Ohio jobs serving the industry. Those jobs reached 16,463 at the end of March 2015, more than double the 7,426 industry jobs at the end of 2011, according to data from the Ohio Department of Job and Family Services. But those numbers dropped 26 percent by the end of 2015 as the industry slowed amid crude oil prices that dropped from $113.39 a barrel in April 2011 to $26.19 a barrel in February 2016, according to data from the U.S. Energy Information Administration.

MPLX's plan for moving northeast condensate and natural gasoline - MPLX LP and the midstream limited partnership’s subsidiaries (collectively referred to as “MPLX”) are stepping up to address a lingering hydrocarbon-delivery issue in the Utica and “wet” Marcellus plays, namely, how to more efficiently transport the field condensate and natural gasoline produced there to refineries, Western Canadian heavy-crude shippers and other end-users. Currently, condensate and natural gasoline are moved within and out of production areas in eastern Ohio, northern West Virginia and western Pennsylvania via truck, rail or barge. MPLX’s three-part, $500-million plan, the first elements of which are nearing completion, is mostly about pipelines—a mix of new ones and creatively repurposed existing ones. It looks like a win-win for condensate and natural gasoline producers and buyers. Today we begin a series on improving the flow of these two close relatives in the hydrocarbon family to buyers in the Midwest and beyond.

Living Near a Fracking Site Is Tied to Migraines, Fatigue - The New York Times: Living near a natural gas hydraulic fracturing site is associated with increased rates of sinus problems, migraines and fatigue, according to new research.Scientists had 7,785 randomly selected participants in a large Pennsylvania health system fill out health questionnaires. About a quarter met criteria for one or more of three disorders: chronic rhinosinusitis, migraine headaches and severe fatigue.The study, in Environmental Health Perspectives, ranked participants according to how closely they lived to fracking sites and larger wells. Compared with those in the bottom one-quarter by this measure, those in the top one-quarter were 49 percent more likely to have sinusitis and migraines, 88 percent more likely to have sinusitis and fatigue, 95 percent more likely to have migraines and fatigue, and 84 percent more likely to have all three symptoms.The senior author, Dr. Brian S. Schwartz, a physician and environmental epidemiologist at the Johns Hopkins Bloomberg School of Public Health, acknowledged that there may be variables the researchers did not account for, and that this was an observational study that does not prove cause and effect. But, he said, “there have now been seven or eight studies with different designs and in different populations, and while none is perfect, there is now a growing body of evidence that this industry is associated with impacts on health that are biologically plausible. Do we know the exact mechanism? No. That requires further study.”

Living near fracking sites can double the chance of making you ill | Daily Mail Online: Living near a fracking site almost doubles the risk of migraines, chronic sinus problems and severe fatigue, suggests new research.The study in the United States found residents with the highest exposure to the natural gas wells are nearly TWICE as likely to suffer from the combination of conditions.The findings add to a growing body of evidence that fracking worsens air quality, contaminates water sources and harms public health. More than 15 million Americans live within a mile of a fracking site that has been drilled in the past 15 years. While it has not yet taken place on anything like the same scale in the UK, the government here has granted more than 300 licences for firms to carry out shale gas exploration. Previous research has suggested fracking poses threats to residents living close by which is backed by the new findings published in Environmental Health Perspectives. Dr Aaron Tustin, of Johns Hopkins University in the US, said: 'These three health conditions can have debilitating impacts on people's lives. 'In addition they cost the health care system a lot of money. Our data suggest these symptoms are associated with proximity to the fracking industry..' The study of 7,785 adults found 1,765 (23 per cent) suffered migraines, 1,930 (25 per cent) severe fatigue and 1,850 (24 per cent) chronic rhinosinusitis - three or more months of nasal and sinus symptoms).

New Fracking Study Pulls Rug Out From Under "Safe" Fracking Study: Whenever a new fracking study comes out, you can be sure that fossil industry stakeholders will run over to the history machine and crank out a purported decades-long safety record. The problem is, until recent years fracking was confined mainly to low-population areas in the western US. Now that fracking has flooded into Pennsylvania and other northeastern states, researchers finally have a big enough data pool to draw some conclusions, and they ain’t pretty.  Last year, researchers at Johns Hopkins University linked fracking to increased risk of premature birth in Pennsylvania (fracking is short for hydrofracturing, a formerly unconventional gas and oil drilling method that involves pumping high volumes of chemical brine into shale formations). In a stunning twist of irony, earlier this summer researchers at the same school found an increased risk of asthma linked to fracking in Pennsylvania — just in time for the Pennsylvania-based company Mylan to face withering criticism for price gouging related to its EpiPen asthma relief product. Deepening the irony, the Mylan CEO who oversaw the price increases is the daughter of US Senator Joe Manchin (D), a vigorous advocate for fracking who represents the neighboring state of West Virginia. The latest study from Johns Hopkins just turned up this week in the journal Environmental Health Perspectives. Here’s the money quote: …Pennsylvania residents with the highest exposure to active natural gas wells operated by the hydraulic fracturing — or fracking — industry are nearly twice as likely to suffer from a combination of migraine headaches, chronic nasal and sinus symptoms, and severe fatigue. Ouch!

The Evidence Of Fracking’s Health Effects Keeps Mounting - Hydraulic fracturing has over the past few years been associated with ground water pollution, spills, and earthquakes in various states. Now, a study led by John Hopkins University researchers found that fracking in Pennsylvania may be associated with migraines, fatigue, and sinusitis. The study, published Thursday, adds to a growing body of scientific work that on regular basis links the controversial extraction process with adverse effects on the environment and people. It also stands out as previous studies on the health effects of fracking have suffered from small sample sizes, and difficulties on how to assess exposure. Researchers chose to evaluate migraines, fatigue, and sinus symptoms due to their high prevalence, large economic costs, and possible link to environmental risk factors like chemical toxicity, or odors. Fracking can produce air pollution, odors, noise, bright lights, and other factors known to be linked to migraines and respiratory problems. For instance, odors can trigger migraines in some people. To reach their conclusions researchers evaluated the responses of nearly 8,000 people on the Geisinger Health System, a health care provider that covers about 40 counties in north and central Pennsylvania. Participants were reached via questionnaires through 2014. The questionnaires did not mention fracking, a process where drillers inject massive amounts of chemicals, sand, and water into wells to break shale rock and extract oil or gas. Researchers then used residential addresses and data on Pennsylvania’s fracked wells from state agencies and other sources, to rank participants depending on how close they lived to fracking operations. According to the report, respondents living closer to wells were 49 percent more likely to report sinusitis and migraines, 88 percent more likely to report sinusitis and fatigue, and 84 percent to report all three conditions.

Fracking and Health: What we Know from Pennsylvania's Gas Boom -- The fracking industry has been an energy success story: Natural gas prices have decreased as fracking has skyrocketed, and natural gas now produces more electricity than coal does, which has resulted in improved air quality. The first states to begin unconventional natural gas development with fracking have cited potential economic, energy and community benefits.  Yet early on, communities where fracking spread raised doubts. Nearby residents reported a variety of common symptoms and sources of stress. Public health professionals trumpeted their concerns, and epidemiologists launched health studies of the industry. States like Pennsylvania, where almost 10,000 wells have been drilled since 2005, continued development. But other states, including Maryland and New York, have not permitted drilling because of the potential for environmental and health impacts. Tensions between economic development, energy policy and environmental and health concerns are common in public health’s history. Often, economic and energy development trump environmental and health concerns, leaving public health playing “catch-up.” Indeed, only recently have rigorous health studies on the impact of unconventional natural gas development on health been completed. We have published three studies, which evaluated birth outcomes, asthma exacerbations and symptoms, including nasal and sinus, fatigue and migraine headache symptoms. These, together with other studies, form a growing body of evidence that unconventional natural gas development is having detrimental effects on health. Not unexpectedly, the oil and gas industry has countered our findings with pointed criticism.

Health News - Exposure to Chemicals Released During Fracking May Harm Fertility - More than 15 million Americans live within a one-mile radius of unconventional oil and gas (UOG) operations. Scientific studies, while ongoing, are still inconclusive on the potential long-term effects fracturing has on human development. Today, researchers at the University of Missouri released a study that is the first of its kind to link exposure to chemicals released during hydraulic fracturing to adverse reproductive and developmental outcomes in mice. Scientists believe that exposure to these chemicals also could pose a threat to human development.“Researchers have previously found that endocrine-disrupting chemicals (EDCs) mimic or block hormones — the chemical messengers that regulate respiration, reproduction, metabolism, growth and other biological functions,” said Susan C. Nagel, Nagel, an associate professor of obstetrics, gynecology and women’s health in the School of Medicine. “Evidence from this study indicates that developmental exposure to fracking and drilling chemicals may pose a threat to fertility in animals and potentially people. Negative outcomes were observed even in mice exposed to the lowest dose of chemicals, which was lower than the concentrations found in groundwater at some locations with past oil and gas wastewater spills.” Researchers mixed 23 oil and gas chemicals in four different concentrations to reflect concentrations ranging from those found in drinking water and groundwater to concentrations found in industry wastewater. The mixtures were added to drinking water given to pregnant mice in the laboratory until they gave birth. “Female mice that were exposed to commonly used fracking chemicals in utero showed signs of reduced fertility, including alterations in the development of the ovarian follicles and pituitary and reproductive hormone concentrations,”  “Our studies suggest adverse developmental and reproductive health outcomes might be expected in humans and animals exposed to chemicals in regions with oil and gas drilling activity.”

Appeals court: State can weigh impact of gas drilling wells (AP) — A Pennsylvania appeals court says state environmental regulators can continue weighing the effects gas drilling wells have on public and natural resources. The court ruled Thursday in favor of the state Department of Environmental Protection and against the Pennsylvania Independent Oil and Gas Association. The industry group includes hundreds of members mainly involved in conventional drilling operations. The group had said the state Supreme Court threw out the public resource protection sections when it struck down other parts of an oil and gas law. Commonwealth Court rejected the argument and says the high court allowed those powers to survive by inserting language separating the public resource protections from the enjoined parts of the law. The association says it believes the court erred and will review its options.

 State OKs use of gas drilling waste on hunting club road (AP) — State regulators are allowing nearly 4,000 tons of natural gas drilling waste to be used in a road project in north-central Pennsylvania. StateImpact Pennsylvania reports ( the Department of Environmental Protection has approved a plan from waste handler Clean Earth Inc. to use the materials on a road at the Bobst Mountain Hunting Club in Lycoming County. StateImpact, a project of radio stations WITF and WHYY, says it’s the first time drill cuttings are being used in an area that is not an industrial site. The waste dirt and rock from drilling deep underground may contain chemicals and naturally occurring radiation. Most ends up in landfills. The DEP has allowed the repurposing of some waste through research and development permits. But StateImpact reports future projects will go through a standard permitting process requiring full public review and comment.

 Gas leak prompts evacuation order in central Pennsylvania (AP) — A gas leak has prompted an evacuation order for parts of one central Pennsylvania community. The Pennsylvania Emergency Management Agency issued the order Thursday evening for residents within a half-mile of the reported leak in Hamilton Township in Adams County. Officials say the leak was caused when the driver of a truck backed up and hit a pipe at a Columbia Gas regulator station. Motorists and pedestrians are being asked to avoid the area as a safety precaution. A temporary shelter has been set up at a nearby fire station. No injuries have been reported.

How Congress Makes Regular Taxpayers Foot the Bill for Oil Pipeline Fat Cats - A regulation has forced Americans to pay the corporate income taxes of an industry that Congress exempted from that tax in 1986, an outrage I have chronicled for years. Now a federal court has determined that this taxpayer abuse is worse than I reported. In fact, it’s twice as bad. Yet despite the latest court ruling in a long-running case, this rip-off may continue.The idea that any business could force you to pay its taxes may strike some readers as beyond belief. When I first heard about this more than a decade ago my skepticism meter hit high alert. Then I started reading the laws, regulations, and official proceedings, none of which made the news. I’ve been writing about it ever since, hoping the public will demand an end to this abuse. The way it works is simple: The Federal Energy Regulatory Commission (FERC) sets the rates that monopoly pipelines can charge. The rates are based on all of their costs—people, equipment, taxes, and the corporate income tax. But that last expense is fake. The pipelines are exempt from that tax.  No industry benefits more from the forced payment of taxes for private gain than the pipelines that are the subject of the latest court ruling. Pipelines are monopoly rights-of-way granted by government. The rates that oil pipelines charge shippers—oil companies, airlines, chemical companies—to move their product across the country are regulated under a law first enacted in 1887, the Interstate Commerce Act, which was designed to protect shippers from abuses by railroads—and was partly drafted by those railroads. Natural gas pipelines are regulated under updates to a 1938 law. FERC chooses to set pipeline profits on an after-tax basis. This means that for every dollar of authorized after-tax profit, a monopoly pipeline adds 54 cents to cover the “grossed up” federal income tax of 35 percent of profits. Thus, a monopoly pipeline authorized to earn $1 billion after tax actually collects $1.54 billion. If it actually owed the 35 percent income tax rate, it would be left with a net profit of $1 billion.

Too Much Pipe On My Hands?? - Marcellus/Utica Takeaway Capacity to the Gulf -- Of all the demand markets in the U.S., the biggest prize eyed by Marcellus/Utica natural gas producers is the Gulf Coast region, where a combination of industrial demand, LNG exports and power generation projects is driving a need for more and more gas. And beyond the U.S. Gulf Coast states, there lies still another market capable of gobbling up even more of the excess Northeast gas supply: Mexico’s rapidly growing gas-fired generation sector ––that is, assuming pipelines in Texas can get it all the way there. There is over 4.0 Bcf/d of Marcellus/Utica-to-Gulf-Coast takeaway capacity planned to be completed over the next few years. Today, we look at the status and timing of Northeast pipeline takeaway projects targeting the Gulf Coast.  With the Northeast producing region hoping for access to close to 18 Bcf/d of incremental takeaway capacity over the next several years, the question now becomes, will there be too much takeaway capacity out of the Northeast? To answer this, we first looked in Part 1 at the RBN Northeast production outlook and prospects for supply growth under three commodity-price scenarios, concluding that efficiency gains and the uncompleted well inventory (DUCs) indicate that even the low production case will lead to at least some supply growth in the region. With that in mind, we turned our attention in Part 2 to upcoming takeaway capacity projects, organized into five outbound flow corridors that we defined for our analysis. Of the 24 projects RBN is tracking in our Midstream Infrastructure Database Interface (MIDI), six projects totaling 3.3 Bcf/d are headed to the New England and Mid-Atlantic states, or along what we call the East corridor; two projects adding up to 0.65 Bcf/d are planned for the Canadian corridor and four projects totaling 4.3 Bcf/d to the Midwest via Ohio (covered in Part 3);and  four projects with a combined 5.2 Bcf/d to the Southeast along the Atlantic Coast are under development (see Part 4).  We also started our examination of what some of this new gas supply will do to natural gas markets along the Gulf Coast in the first part of our latest Drill Down report titled I Saw Miles and Miles of Texas.  Today, we look at each of the projects that will flow Marcellus/Utica gas along the fifth and final corridor — the Gulf Coast via Ohio, aka the Promised Land of future natural gas demand.

In the Pipeline's Path - Mountainous, thickly forested, with a population of just over 4,600, Bath County borders West Virginia in the Allegheny Mountains, and is known for its small farms, scenic beauty, and great stretches of intact forest. It also lies along the proposed route of the Atlantic Coast Pipeline (ACP), a 600-mile-long behemoth that would carry some 1.5 billion cubic feet of gas through their community every day. The proposed pipeline will cross the central Allegheny Highlands, the Blue Ridge Mountains, and the adjacent valleys. It will cut through 30 miles of national forest and cross numerous rivers, streams, and wetlands.  The people of Appalachia, well accustomed to exploitation from moneyed outside corporations, are rallying against the loss of land, home values, and safety posed by the pipeline proposal. In fact, the pipeline has united communities across political and social spectra, in a fierce defiance against the project and a common goal to defeat its proponent, Dominion Resources.  The furor over the proposed Keystone XL pipeline may have abated since President Obama vetoed the project last November, saying that the transborder infrastructure project “would not serve the national interest of the United States.” But while Keystone has certainly been the most well-recognized fossil-fuel transmission project, many other potentially disastrous pipelines are now under consideration, yet are receiving far less public scrutiny.  The bulk of these pending pipelines would transport natural gas. Domestic natural gas production reached a record high in 2015, and the US Energy Information Administration (EIA) projects that US production will increase 55 percent by 2040. Much of this increase has and will come from the Marcellus and Utica shale formations in the Appalachian Basin, particularly in West Virginia, Pennsylvania, and Ohio. According to the EIA, West Virginia alone – the eighth-largest natural gas-producing state in the nation – had more than 28 trillion cubic feet in gas reserves in 2014. Production in the Appalachian Basin has increased thirteen-fold since 2009, and is projected to double again by the early 2030s, at which point the region could provide 50 percent of all US gas production.  In the past year or so, several new pipeline projects to move gas out of the Northeast, mainly to the Mid-Atlantic and the Gulf Coast have been completed. Still, pipeline infrastructure projects have not kept pace with production in Appalachia, which means there is not currently enough pipeline capacity to move gas out of the region. Industry is looking to fill this gap, and there are dozens of Appalachia pipeline projects pending before the Federal Energy Regulatory Commission (FERC). Four of these proposed pipelines would cut through West Virginia and Virginia. The Atlantic Coast Pipeline is one of them.

WVU study looks closely at fracking waste – WOWK - A recent study undertaken by the West Virginia Water Research Institute at West Virginia University takes a detailed look at what chemicals and compounds are in waste from hydraulic fracturing. The findings suggest fracking wastes are below federal guidelines for radioactive or hazardous waste if properly cared for. Research was conducted on two wells near Morgantown to study both the solid and liquid wastes associated with fracking. “Two wells do not mean we have fully representative samples from across the state,” said Paul Ziemkiewicz, director of the Water research institute. But Ziemkiewicz said he was encouraged by the study’s results. There are three basic types of wastes generated in a fracking operation, Ziemkiewicz told members of the West Virginia Legislature during legislative interim meetings in August. There’s water — in the case of the study, water drawn from the Monongahela River — injected into wells to fracture subterranean rock and release gas; the mud that results from the injection or used to lubricate drills; and the rock fragments or cuttings that the drills bring up to the surface. “The cuttings are only very mildly radioactive,” Ziemkiewicz said. “The water itself was very mildly radioactive.” Much of the water used in fracking is recycled throughout the process. Mud and cuttings are typically landfilled. “These are certainly materials that have to be handled with respect and have to be treated very carefully,” Ziemkiewicz said. But he said some of the fracking waste may not be as dangerous as previously suspected. The worst contamination from traditional fracking wells comes from the lubricating mud used with the drills. Ziemkiewicz told legislators that gas drillers typically use diesel fuel in the mud mix to help the drills cut through rock. The mud that comes back up is therefore highly contaminated with benzene, heavy metals and other chemicals.

 BLM Issues Rule on Online Oil, Gas Lease Sales - The Bureau of Land Management issued a rule on Tuesday announcing the agency’s intent to hold online lease sales for oil and gas drilling, starting in September. The agency’s first online lease sale will be Sept. 20, offering 4,398 acres of land in Kentucky and Mississippi, the agency said. Congress gave the agency the authority to hold the auctions online, rather than in person, in an amendment in the National Defense Authorization Act for fiscal year 2015. The agency “believes that online sales have the potential to generate greater competition by making participation easier, which has the potential to increase bonus bids,” it said in its announcement. The rule, which formalizes the plan to hold online lease sales, takes effect immediately. It doesn’t require a public comment period because it simply restates language from the NDAA legislation and only changes the agency’s own operations. The decision is part of a broader push by the Obama administration and lawmakers to move onshore and offshore lease sales online rather than in person. The possibility of attracting more bids is one reason for such a shift. Another is that it stops anti-fossil fuel protesters from disrupting lease sales. The Bureau of Ocean Energy Management held its first live-streamed offshore oil and gas lease sale last week, prompting complaints from protesters who weren’t allowed to attend the event.

 About 11% of US Gulf of Mexico oil output shut-in as storm threatens area: BSEE - About 11% of US Gulf of Mexico oil production has been shut-in as operators evacuate platforms in the possible path of a tropical depression expected to pass through the Central-Eastern and Eastern Gulf of Mexico, the US Bureau of Safety and Environmental Enforcement (BSEE) said Monday. Offshore operator reports submitted to BSEE as of late Monday morning show operators had shut-in a total 168,334 b/d of oil output as they evacuated crews from a total of six production platforms, the agency said in a statement. There is a total of 781 manned platforms in the US Gulf. Total Gulf of Mexico production was almost 1.62 million b/d in May, the latest month for which data was available from the Energy Information Administration. Tropical Depression 9 is currently off the west coast of Cuba, but the National Hurricane Center expects it to become a tropical storm on Tuesday and veer to the northwest. It is then forecast to head to the northeast and could make landfall in western Florida later in the week, the NHC said. BSEE said shut-in production figures are estimates based on the amount of oil and natural gas the companies plan to produce that day.Operators have also shut in about 190,000 Mcf/d of gas output, BSEE said, or 5.51% of total US Gulf gas production.

Shale and demand uncertainty put Big Oil on its back foot - The Barrel Blog - Under pressure from low oil prices and their rising debt levels, top oil executives at the ONS 2016 conference this week might well have found the blunt message of shale driller Scott Douglas Sheffield unsettling. The chief executive of Pioneer Natural Resources seemed to enjoy the role of spoiler-in-chief, harrying Big Oil with some uncomfortable assertions. The bad news, for those in the industry who missed out on shale and expected it to fade in the face of low prices, is that the Permian basin should be able to increase its output from 2 million b/d to 5 million b/d in the next 10 years, assuming prices reach $56/b in 2025, Sheffield said. Pioneer itself is growing its output by 27-30% annually. “It’s in that [price] strip that I see the Permian adding 300,000 b/d per year in US supply,” he told the Offshore Norwegian Seas conference, held Aug. 29 through Sept. 1 in Stavanger. Ramming home his contrarian stance, he said he was skeptical of some of the higher forecasts of long-term oil demand growth due to global warming, alternative energy and electric vehicles, while boasting of the company’s use of renewables in its own operations and the solar panels on his home. In Sheffield’s view, the dip in US production has been misconstrued, with some in the industry underestimating the Permian basin as output falters in the Eagle Ford and the Bakken. Some have failed to appreciate that rig reductions in the Permian have happened partly because of reduced drilling at conventional, non-shale sites, rather than in the shale plays, he said. The Spraberry-Wolfcamp shale, where Pioneer operates, remains resilient and Pioneer’s own breakeven price is below $25/b. Prices paid for shale acreage have been rising, in some cases, to levels higher than in 2013-2014, he said. “In the Permian we still have about 600,000 b/d of conventional production that’s declining — it’s arresting the growth. [However] there’s one field in the Midland basin, six fields in the Delaware basin that make up most of the growth in production. The Permian is still growing,” he said. With the Permian accounting for over half of US oil rigs, he forecast another 50-75 would be added.

  Blackstone Unleashes Cash Hoard in Texas Shale Oil Land Grab - Bloomberg - Blackstone Energy Partners LP is partnering with two oil and gas companies as it targets assets in the sought-after Permian shale formation. Jetta Permian, formed with Jetta Operating Company Inc., plans to acquire leaseholds in the Permian’s Delaware Basin in West Texas and southern New Mexico, Blackstone said in a statement Thursday. The partnership has $1 billion of capital committed. Blackstone has also designated $500 million in a partnership with Guidon Energy to acquire assets in the Permian’s Midland Basin "with the potential to commit significantly more with future acquisitions." Guidon purchased about 16,000 net acres in Martin County, Texas, in April. Blackstone Energy’s private equity business, led by partner David Foley, raised $7 billion across two funds in the past four years. The most recent vehicle, which finished gathering $4.5 billion last year, had only spent about 5 percent of its money as of June 30, according to Blackstone’s second-quarter earnings statement. The partnerships underscore the industry’s interest in one of the few regions where drilling remains profitable at current prices. The Permian has dominated acreage deals among independent drillers this year. PDC Energy Inc. bought into the Permian with a $1.5 billion acquisition announced this week. Meanwhile Parsley Energy Inc. and Concho Resources Inc. also added holdings in the play this month.

Study finds air contamination near fracking sites result of operational inefficiencies: Chemists at the University of Texas at Arlington have published a new study that indicates that highly variable contamination events registered in and around unconventional oil and gas developments are the result of operational inefficiencies and not inherent to the extraction process itself.The study, published today as "Point source attribution of ambient contamination events near unconventional oil and gas development" in Science of the Total Environment, found highly variable levels of ambient BTEX, or benzene, toluene, ethyl benzene, and xylene compounds, in and around fracking gas drilling sites in the Eagle Ford shale region in South Texas. BTEX compounds in high concentrations can be carcinogenic and have harmful effects on the nervous system. "These variable contamination events, attributable in many cases to specific natural gas flaring units, condensation tanks, compressor units and hydrogen sulfide scavengers, indicate that mechanical inefficiencies, and not the inherent nature of the extraction process as a whole, result in the release of these compounds into the environment," said Kevin Schug, UTA Shimadzu Distinguished Professor of Analytical Chemistry and director of the University's Collaborative Laboratories for Environmental Analysis and Remediation, or CLEAR lab. "These results therefore suggest that air contamination events from fracking can be monitored, controlled and reduced," Schug said. "We hope that this research would help producers and other upstream operators improve the efficiency and reduce the environmental impact of unconventional drilling."

EPA: North Texas earthquakes likely linked to oil and gas drilling: Federal regulators believe "there is a significant possibility" that recent earthquakes in North Texas are linked to oil and gas activity, even if state regulators won't say so. That's according to the U.S. Environmental Protection Agency's annual evaluation of how the Texas Railroad Commission oversees thousands of injection and disposal wells that dot state oilfields — underground resting places for millions of gallons of toxic waste from fracking and other drilling activities. "In light of findings from several researchers, its own analysis of some cases and the fact that earthquakes diminished in some areas following shut-in or reduced injection volume of targeted wells," the Aug. 15 report states, "EPA believes there is a significant possibility that North Texas earthquake activity is associated with disposal wells." Scientists have known for decades that injecting fluid deep underground could trigger earthquakes, and a growing body of research has linked disposal wells to seismicity in Texas and other states, which has grown more frequent. Jim Bradbury, a Fort Worth-based oil and gas attorney who has closely followed the earthquake saga, said he could not recall the EPA explicitly tying Texas earthquakes to industry activity. "It's a big deal they said that," he said. Texas, home to thousands of such wells, is the third-most at-risk state for man-made earthquakes, according to the U.S. Geological Survey — behind only Oklahoma and Kansas. Several Texas drilling regions have recently felt more earthquakes, most of them small. But temblors in the Dallas-Fort Worth area have drawn the most attention, particularly those that struck in the past two years.

Commentary: Railroad Commission should improve earthquake monitoring --  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 manmade, 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.

Why is Oklahoma seeing fewer earthquakes? Scientists point to new oil & gas rules - PBS The number of earthquakes in Oklahoma have decreased since peaking last year, a development geologists have said this month may be linked to stricter regulations on wastewater created by the oil and gas industry. The U.S. Geological Survey announced that the state has experienced 461 3-magnitude earthquakes or larger in 2016, down from 592 during the same period a year ago.  After historically averaging two 3-magnitude earthquakes or above each year, Oklahoma saw those numbers surge around 2013, soon after domestic production of oil and gas grew along with the price. That year, 109 earthquakes were recorded and by 2014 that number shot up to 585. By 2015, more than 900 earthquakes were documented on that scale, as growing consensus among scientists pointed to wastewater injection as the reason behind the uptick.  The wastewater is routinely pumped deep within the earth and into the nooks and crannies of the vast Arbuckle formation, a 7,000-foot-deep sedimentary rock layer under Oklahoma. Fault lines rooted in place, sometimes for millions of years, lie below it. “It looks like the majority of water, about 68 percent, was going into the Arbuckle zone,”The water fills into holes in the rock, increasing pore pressure, according to George Choy, a USGS seismologist. “So you have a fault that might have been locked for millions of years and would have stayed that way indefinitely,” Choy said. “[The wastewater] counteracts the pressure that’s holding these faults together.” Murray said that in 2009 the industry moved about 50 million gallons of wastewater a day into the earth. By 2014, the peak of the wastewater disposal, that number nearly tripled to an estimated 126 million gallons per day.Todd Halihan, a professor of geology at Oklahoma State University, said the vast amount of water reduced friction between faults, releasing energy and causing the the earth to shudder.

 Colorado's anti-fracking measures fail to qualify for ballot | Reuters: Environmental groups have failed to gather enough signatures to put two measures on Colorado's ballot in November that aim to curb fracking and oil and gas work, the state said on Monday. The ballot initiatives would have transferred regulatory control of oil and gas development to local governments and created more stringent setback requirements to keep new oil and gas facilities further away from occupied structures. Proponents gathered more than 98,492 signatures required to make the ballot, the state said, but failed to gather enough to offset the number that would possibly be rejected during a random sample that examines the validity of the signatures. Proponents of the measures have 30 days to appeal the decision. Earlier this year, the state's Supreme Court struck down local fracking bans approved in the cities of Fort Collins and Longmont. Oil companies in Colorado, one of the top U.S. oil and gas producing states, had spent several million dollars trying to derail the campaign. Protect Colorado, the industry-backed issues committee fighting the measures, praised the outcome in a statement released Monday morning. “Colorado voters recognized that these extreme measures would destroy the state’s economy and take away private property rights,"

Colorado Voters Won’t Get To Decide On New Fracking Rules -  After celebrating a last-ditch effort earlier this month to put fracking regulations on the November ballot, Colorado environmental groups were dealt a blow on Monday when Secretary of State Wayne Williams ruled not enough of the submitted signatures were valid.  Measures aimed at oil-and-gas fail to make the ballot. Energy measures 75 & 78 fail to make ballot. #copolitics — @colosecofstate Under Colorado law, 98,492 valid signatures — 5 percent of the number of votes cast for the office of Colorado secretary of state in the most recent election— are required to get a measure on the ballot. The state then verifies a random sample of submitted signatures and calculates the overall validity of the submission.In this case, the state audit found that support for Initiatives 75 and 78 fell short. Organizers on Monday said they would review the ruling and determine whether to challenge the state’s decision in court.“We want to assure our volunteers and supporters that we are as committed as ever to giving the residents of Colorado a say this November on whether their communities can regulate fracking,” Tricia Olson, executive director of Yes for Health and Safety Over Fracking, said in a statement emailed to ThinkProgress. “Today’s announcement is not the final action on this issue as countless residents are now committed to protecting their children’s schools, parks, and homes.”

Groups challenge federal oil, gas leasing on climate grounds (AP) — Two environmental groups say in a lawsuit the federal government needs to consider the potential effects of climate change before allowing oil and gas drilling on public land. The federal lawsuit filed Thursday in Washington, D.C., challenges almost 400 oil and gas leases the U.S. Bureau of Land Management recently has issued in Wyoming, Utah and Colorado. The groups WildEarth Guardians and Physicians for Social Responsibility say almost 10 percent of U.S. greenhouse gas emissions trace back to publicly owned oil and gas reserves. BLM spokeswoman Cindy Wertz declined to comment, citing agency policy not to comment on pending litigation. Several groups have joined in a movement to end fossil-fuel extraction on public lands. The U.S. Chamber of Commerce says doing so would wipe out thousands of jobs.

Greens sue Obama to stop fossil fuel production on federal land | TheHill: A pair of environmental groups is suing the Obama administration to try to stop oil and natural gas production on federal lands. The lawsuit filed Thursday by WildEarth Guardians and Physicians for Social Responsibility seeks to block drilling on nearly 380,000 acres of public lands that were leased to oil and gas companies since 2015.They say that the drilling unacceptably threatens the climate, public health and the integrity of the lands. It’s part of the Keep it in the Ground movement, a project that’s taken hold in recent years to pressure the federal government to stop fossil fuel production on federal lands and waters, and to eventually stop fossil fuel production altogether. “President Obama seems to get climate change, but he has an unexplainable blind spot when it comes to leasing public lands to oil and gas companies,” Tim Ream, WildEarth Guardians’ climate and energy campaign director, said in a statement. “The Obama administration leases a million acres of public lands a year to dirty energy companies, but hasn’t bothered to disclose the inevitable climate pollution? That’s not just immoral, it’s illegal, and we’re going to stop it,” he continued. “Americans want and expect their public lands to be managed to protect pristine air and crystal clear water, not creating smog alerts and fracking waste spills,” said Catherine Thomasson, executive director of Physicians for Social Responsibility. The green groups are asking the administration for an immediate moratorium on new oil and gas leases, similar to the moratorium on coal leases that the Interior Department instituted earlier this year.

 BLM Moves Onshore Oil and Gas Lease Auctions Online To Stymie ‘Keep It In The Ground’ Protests -  Steve Horn - On August 30, the U.S. Department of Interior’s Bureau of Land Management (BLM) announced that it would utilize Congress’ blessing, given to it in the form of passed legislation, to proceed with online bidding for oil and gas located on U.S. public lands.  The industry push to make online bidding the norm — as opposed to standard in-person, oral bidding — began with a fervorous pitch in 2009 in reaction to the “Bidder 70” civil disobedience action of activist Tim DeChristopher at an auction in Utah. It has culminated seven years later in reaction to another movement, this one involving the U.S. environmental movement at-large and not just a single person, otherwise known as the Keep It In The Ground campaign. As of late, another industry-funded group — the Western Energy Alliance (WEA), of which EnergyNet sits as a member — has launched an aggressive public relations campaign to “end the circus” of protests outside of BLM oil and gas bids and move toward online bidding. EnergyNet will conduct an online-based bid for oil and gas on U.S. public lands on September 20.  “If protesters disrupt a lease sale, we suggest BLM hold additional auctions online within that same quarter,” WEA proclaims on its website. “Online auctions also have added cost-savings benefits as venues and security personnel do not have to be enlisted to handle potentially unruly crowds.” WEA and EnergyNet share the same federal-level lobbyist, Tim Stewart, whose brother Chris is a Republican U.S. Representative for Utah. Their nephew Cody Stewart is an energy aide for Utah’s Republican Governor Gary Herbert, who recently served as Chairman of the Interstate Oil ad Gas Compact Commission.  Furthermore, Spencer Kimball — a staff member on the Federal Lands Subcommittee of the U.S. House Natural Resources Committee — formerly worked for WEA as a Manager of Government Affairs. Tim Stewart formerly served as served as Chief of Staff for the House Natural Resources Committee.  In a press release, WEA lobbyist Kathleen Sgamma praised the BLM’s online bidding decision.  “We’re pleased BLM is moving forward with online oil and natural gas lease auctions to take advantage of well-established technology,” she said. “Transitioning auctions from in-person to online will enable BLM to meet its obligations under existing law, reduce administrative costs, and eliminate disruptions from Keep-It-in-the-Ground protesters.”

FAQ: How Much Sand/Ceramic Is Used To Frack A Typical Well In The Bakken? -- Over at FAQs, this was the posting as of August 30, 2016, and obviously needs to be updated:  When I first started blogging, one million lbs of sand was common and then, as noted, BEXP pushed it to 4 million lbs. Maybe two years or three later EOG, with its own sand mines in Wisconsin pushed it to 10 million lbs for a long lateral. Now, EOG has used almost 20 million lbs in a long lateral.]  Updates: August 20, 2016: Mike Filloon talks about mega-fracks --

  • Mega-fracs continue to use large volumes of sand per well, with some operators now using up to 3,000 lbs/ft
  • The combination of increased locations completed in the STACK, Delaware and Midland basins with enhanced completions using up to 30,000,000 lbs per well could aid in increasing sand pricing
  • Frac sand producer stock prices have improved, significantly from earlier this year but with demand growing at its current pace there could be extended gains into year end
In the Bakken in North Dakota there is very little fracking being done in 2016 due to depressed commodity prices. However, of the wells that have been fracked in the past twelve months, it appears that for a long lateral:
  • number of stages: 35 - 45 stages seems typical; there are few exceptions on the low side; more exceptions on the high side
  • sand/ceramic: 4 million lbs to  8 million pounds seems typical; again, there are few exceptions on the low side; more exceptions on the high side.

 Pipeline company seeks restraining order against protesters  (AP) — The company building an oil pipeline across Iowa is asking a federal judge to issue a restraining order against two protest groups and their leaders. Dakota Access filed the action in Des Moines on Monday against Iowa Citizens for Community Improvement, Bold Iowa and their directors including former state lawmaker Ed Fallon, who leads Bold Iowa. The groups are planning acts of civil disobedience along the pipeline route to protest its construction. The company seeks a court order keeping protesters at least 25 feet away from construction easements which it says will “permit the meaningful opportunity to exercise protected First Amendment speech while ensuring the safety of all involved.” Dakota Access says protesters have burned its equipment causing $3 million in property damage and delaying construction in two counties.

Amidst protests, Energy Transfer sells shares of Bakken Pipeline - In the midst of protests across North Dakota and Iowa in recent weeks, Energy Transfer Partners  (ETP) and Sunoco Logistics (SXL) announced an agreement to sell 36.76% of the Bakken Pipeline Project, according to Iowa’s Chronicle Times on August 31. The two companies have agreed to sell their shares to MarEn Bakken Company LLC, jointly owned by Marathon Petroleum Corporation and Enbridge Energy Partners. Enbridge is already involved in several pipeline projects across the U.S. and Canada. You can read Energy Transfer’s press release here. According to press release, upon closing, ownership in the Bakken Pipeline Project will be as follows: ETP/SXL – 38.25%, MarEn 36.75% and subsidiaries of Phillips 66 – 25%. ETP continues to oversee construction of the pipeline, which is expected to be ready for service at the end of this year. Once in operation, Sunoco will be the operator. Marathon and Enbridge paid $2 billion for the minority share of the Dakota Access Pipeline (DAPL) and its sister pipeline, the Energy Transfer Crude Oil Pipeline. The DAPL will bring Bakken crude oil from western North Dakota through South Dakota and Iowa to Patoka, Illinois. Once the oil hits Patoka, it will be transferred to the ETCOP, which travels from there to Nederland, Texas. Currently, oil travels mostly by rail from Western North Dakota, but the DAPL is scheduled to move 470,000 barrels of crude per day. Currently, North Dakota produces over a million barrels a day, so over half of that crude will still move by rail. In recent years, increased rail traffic has caused congestion on the tracks, causing shipping difficulties for other industries, including agriculture. In addition, rail accidents, such as the one near Casselton in December 2013 and the crash near Heimdal May 2015, have many citizens concerned about the manner in which crude oil is transported. Pipeline transport is considered safer and more economical than crude-by-rail. Yet construction of the DAPL has prompted protests both in Iowa and North Dakota, from landowners as well as citizens who are concerned that pipeline leaks and spills could harm drinking water and pose other environmental risks. Advocates for the DAPL insist that the pipeline is constructed under the highest standards, and environmentalists should be more concerned about aging pipelines than new ones.

Can a protest against oil happen without oil? -- Protests against the Dakota Access Pipeline continue to mount, causing work stoppages both in southern North Dakota near the Standing Rock Sioux Reservation as well as in Iowa. Today, the  Iowa Utilities Board ordered a work stoppage around the property of 15 landowners to give the board time to review legal issues. Landowners argue against “forced condemnation of farmland for a privately owned pipeline project under eminent domain laws.”  In North Dakota, the protests have gained momentum, even attracting the attention Hollywood stars Shailene Woodley and Susan Sarandon. Yesterday, a report from MintPress News that supplies and drinking water were removed from the protest site has fueled the fire across the Internet. The article stated that the North Dakota Division Homeland Security Division removed water tanks from the protest site on Monday afternoon, with Director Greg Wilz claiming “the removal was based on alleged unlawful activity” and that the equipment wasn’t secure. However, there are always two sides to the story. Not everyone is in favor of stopping construction of the Dakota Access. Some supporters cite safer oil transport over transport by rail. Others just support the petroleum industry and its economic benefits. Bakken Backers, a North Dakota coalition that supports the oil industry in North Dakota, submitted this video Tuesday, showing why they believe protesters need the Dakota Access. They asked the question: Can a protest against oil happen without oil? You can view the video on Facebook and make your own conclusions about the Dakota Access.

Tribe trucks totem pole 4,800 miles in fossil fuels protest   — A Pacific Northwest tribe is traveling nearly 5,000 miles across Canada and the United States with a 22-foot-tall totem pole on a flatbed truck in a symbolic journey meant to galvanize opposition to fossil fuel infrastructure projects they believe will imperil native lands. This is the fourth year the Lummi Nation in northwest Washington has embarked on a “totem journey” to try to create a unified front among tribes across North America that are individually fighting plans for coal terminals and crude oil pipelines in their backyards. The highly visible tours, which include tribal blessing ceremonies at each stop, fit into a trend of Native American tribes bringing their environmental activism to the masses as they see firsthand the effects of climate change, said Robin Saha, a University of Montana associate professor who specializes in tribal issues and environmental justice. “I wouldn’t go as far as to say there’s an anti-development movement, but tribes are feeling the effects of climate change quite dramatically and are responding in a lot of different ways,” Saha said. “Some of them feel as if they’re not going to survive.” In North Dakota, for example, people from across the country and members of 60 tribes have gained international attention after gathering in opposition to the four-state Dakota Access oil pipeline. The totem pole heads to that site, near the Standing Rock Sioux’s reservation, next week.

Far-reaching tribal solidarity displayed at pipeline protest (AP) — Native Americans from reservations hundreds of miles away from North Dakota have joined the Standing Rock Sioux Tribe’s growing protest against a $3.8 billion four-state oil pipeline that they say could disturb sacred sites and impact drinking water for 8,000 tribal members and millions further downstream. About 30 people have been arrested in recent weeks and the company has temporarily stopped construction. A federal judge will rule before Sept. 9 on whether construction can be halted on the Dakota Access pipeline, which will pass through Iowa, Illinois, North Dakota and South Dakota. Meet a few of the people camping out near the confluence of the Cannonball and Missouri Rivers in southern North Dakota:

Native Americans encouraged as judge delays North Dakota pipeline ruling - Native American activists have said they are still hopeful they can halt the construction of a controversial oil pipeline that will run from North Dakota to Illinois, after a federal judge said he needed more time to decide whether indigenous rights were violated when the project was approved. Judge James Boasberg of the US district court said he will make a decision by 9 September on whether to stop work on the pipeline during tribal leaders’ lawsuit against the US army Corps of Engineers for approving the Dakota Access project.The pipeline will run close to the Standing Rock Sioux tribe’s reservation in North Dakota and across several rivers, including the Missouri and the Mississippi, that supply drinking water for millions of people. “Whatever the final outcome in court, I believe we have already established an important principle – that is, tribes will be heard on important matters that affect our vital interests,” said Standing Rock Sioux chairman David Archambault, who has previously said the project would “knowingly poison water”. The attempt to force a temporary halt to the project came amid vociferous protests on the prairies of North Dakota and outside the court in Washington DC, where tribal members were joined by famous faces, including actors Susan Sarandon and Shailene Woodley, to decry the 1,000-mile-long pipeline.

Dakota Pipeline Was Approved by Army Corps Over Objections of Three Federal Agencies — Senior officials at the U.S. Environmental Protection Agency and two other federal agencies raised serious environmental and safety objections to the North Dakota section of the controversial Dakota Access oil pipeline, the same objections being voiced in a large protest by the Standing Rock Sioux tribe that has so far succeeded in halting construction. But those concerns were dismissed by the U.S. Army Corps of Engineers, which relied on an environmental assessment prepared by the pipeline's developer, Dakota Access LLC, when it approved the project in July,according to public documents.  The 1,134-mile pipeline would carry approximately 500,000 barrels of crude per day from North Dakota to Illinois along a route that did not originally pass near the Standing Rock reservation, public documents show. After the company rerouted the pipeline to cross the Missouri River just a half-mile upstream of the reservation, the tribe complained that the Army Corps did not consider threats to its water supply and cultural heritage. The EPA, the Department of the Interior and the Advisory Council on Historic Preservation echoed those concerns in public comments on the Army Corps' draft environmental assessment.  Citing risks to water supplies, inadequate emergency preparedness, potential impacts to the Standing Rock reservation and insufficient environmental justice analysis, the agencies urged the Army Corps to issue a revised draft of their environmental assessment. "Crossings of the Missouri River have the potential to affect the primary source of drinking water for much of North Dakota, South Dakota, and Tribal nations," Philip Strobel, National Environmental Policy Act regional compliance director for the EPA,wrote in a March 11 letter to the Army Corps.  The current route of the pipeline is 10 miles upstream of Fort Yates, the tribal headquarters of the Standing Rock Sioux tribe and the county seat. The Standing Rock Sioux rely on the Missouri River for drinking water, irrigation, and fish. 

 Dakota Access Pipeline Tribal Liaison Formerly Worked For Agency Issuing Permit To Cross Tribal Land – Steve Horn - The Standing Rock tribe has filed a lawsuit against the U.S Army Corps of Engineers for using the controversial Nationwide Permit 12 to fast-track authorization of the hotly contested Dakota Access pipeline. Slated to carry oil obtained via hydraulic fracturing (“fracking”) from North Dakota's Bakken Shale basin to Patoka, Illinois, the plaintiffs say not only was the Army Corps' permitting of the Energy Transfer Partners and Enbridge Corporationjointly owned pipeline a violation of the National Environmental Policy Act (NEPA) and the Clean Water Act, but also a violation of the National Historic Preservation Act's (NHPA) Section 106. A review of court documents for the case currently unfolding in the U.S. District Court in Washington, D.C. has revealed that the tribal liaison for Energy Transfer Partners tasked with abiding by Section 106 passed through the revolving door and formerly worked for the Army Corps. The finding also raises key ethical questions in the field of archaeology.  That liaison — Michelle Dippel — technically works for a Dakota Access LLC contractor named HDR, a company which helps pipeline companies and other oil and gas industry infrastructure companies secure permits for their projects. Dippel, the South Central Region Environmental Services Lead for HDR, began her career as a project manager for the Army Corps' Fort Worth District and also formerly worked for the natural gas pipeline company Spectra Energy.  An archaeologist by academic training and a member of the Register of Professional Archaeologists, a biographical sketch for Dippel tracked down on the Florida Department of Transportation's website lists her job sub-title as “Project Streamlining” on behalf of the DOT.  Dippel lists Section 106 consultation as an area of expertise on her LinkedIn page.  Section 106, in turn, serves as a major part of the focus of the lawsuit, the recently completed occupation of a Dakota Access Pipeline construction site in Cannon Ball, North Dakota, and the push by the Standing Rock Indian Reservation for a court-ordered injunction to halt pipeline instruction.

‘This Is the Only Way That Pipelines Will Be Stopped’ - Inside the courthouse, in Courtroom Number 19, where there were no seats to be had, District Judge James Boasberg was conducting a hearing in the matter of The Standing Rock Sioux Tribe v. U.S. Corps of Engineers. At issue was an injunction which would delay the construction of the Dakota Access pipeline through the tribe's land. Ever since April, members of the Standing Rock nation in North Dakota have been demonstrating and blocking the construction of the pipeline, arguing that it is profaning lands that the tribe considers to be sacred. The pipeline is meant to carry Bakken oil from North Dakota through Iowa to Illinois. The confrontations between the protesters and the people who are building the pipeline have grown increasingly touchy. Governor Jack Dalrymple, in charge of one of the continent's few petro-states, has declared the demonstrations to be a threat to the public order and has declared a state of emergency along the pipeline route. Electric power to the protest camp, as well as its water supply, have been cut off. In front of the courthouse on Wednesday, people who had come to Washington from North Dakota expressed concerns for their people back home, because nobody was quite sure what steps Dalrymple might take to enforce the state of emergency he declared. There seems little question that the Dakota Access pipeline has replaced the defunct Keystone XL pipeline as ground zero for the multi-faceted battle over pipelines and, therefore, over energy policy going forward. After the president canceled Keystone, it seemed that a little of the air went out of the anti-pipeline forces. Major environmental groups moved on to other issues. However, on the ground in places like Iowa and the Dakotas, local grassroots activists looked at the campaign against Keystone and drew their own lessons from it. Purely through the dint of the efforts of local ranchers and Native tribes along the proposed route, the Dakota Access pipeline is the new Keystone XL.  "What should have happened after Keystone got rejected was a huge influx of resources to local and state groups fighting pipelines, and that hasn't happened. What has happened is landowners and tribes on the ground are fighting with everything they have and there have been 20-plus projects that have been cancelled."

Judge to hear arguments in Sacagawea pipeline case -- North Dakota’s oil-rich Three Affiliated Tribes say a Texas company didn’t get tribal permission to put an oil pipeline and a natural gas pipeline beneath Lake Sakakawea. The tribes ordered the project halted last month, saying they had no assurances from the company that water supplies would not be harmed. Sacagawea Pipeline developer Paradigm Energy Partners says it has federal permission to run the pipelines beneath the lake that’s the largest of the six reservoirs on the Missouri River. A hearing on the issue is slated Thursday in federal court in Bismarck. Paradigm wants Judge Daniel Hovland to continue an injunction against the tribe so construction can proceed. North Dakota’s Public Service Commission approved construction of the $125 million, 70-mile-long oil pipeline project in January and it’s nearly complete.

Over 10K gallons of oil-saltwater mixture spills by Fryburg (AP) — The North Dakota Department of Health says about 10,710 gallons of an oil and water mixture has spilled in Billings County. The spill happened Friday at a site almost five miles southwest of Fryburg. The spill resulted from a tank leak at a site operated by Texas-based Denbury Onshore LLC. The agency estimates about 9,240 gallons of produced water have been recovered. Produced water is a mixture of saltwater and oil that can contain drilling chemicals. The department says no surface water has been impacted.

Regulator: Dakota Access pipeline worker killed in accident (AP) — A man working on the four-state Dakota Access oil pipeline was killed in an apparent accident in western North Dakota, a state regulator said Saturday. North Dakota Public Service Commissioner Brian Kalk said the man, whose name has not been released, died of his injuries Friday afternoon. The man was working as subcontractor for Dallas-based operator Energy Transfer Partners, which is building the nearly 1,200-mile pipeline from North Dakota to Illinois. “We are saddened to learn that an employee of a subcontractor on the project in western North Dakota has died in an apparent work-related accident,” the company said in a statement. “Our hearts and prayers are with his family. We do not have any additional details at this time.” The pipeline begins in western North Dakota and already is completed there, Kalk said. The site of the death is more than 200 miles away from where hundreds of mostly American Indians are protesting the pipeline in southern North Dakota. Tribal members fear the pipeline will harm water supplies and destroy sacred sites. Kalk said the man was on a tractor Thursday, covering the underground pipeline with soil and grass seed. Kalk said the company reported Friday that the man suffered a serious head injury, apparently while working on equipment. He was taken to a Minot hospital, where he died. The man was working alone and was found by his foreman, Kalk said. “The company no reason to believe this was anything other than terrible accident,” Kalk said.

Tank explodes at California refinery; no injuries reported (AP) — A sulfur storage tank exploded Friday at the largest oil refinery in California, sending a chemical cloud into the air and causing a fire, authorities said. No injuries were reported. There was no immediate word on the cause of the blast at the Tesoro refinery in Wilmington near Long Beach. The fire was quickly extinguished, but the tank continued to send up a cloud of steam for hours afterward, company officials said. “We are currently conducting air quality monitoring around the site,” company spokesman Destin Singleton said. “At this time we have not detected any harmful levels of toxins.” Everyone near the scene was accounted for, Singleton said. The Los Angeles County Fire Department sent in a hazardous materials team. No evacuations were ordered, but the Sheriff’s Department urged people within a quarter-mile of the scene to stay indoors. That advisory was later canceled. The tank rupture didn’t immediately affect other refinery operations. The 930-acre plant near the Port of Long Beach is the largest refinery on the West Coast, according to Tesoro. It produces gasoline, jet fuel, diesel and other fuels.

Three ‘Raging Grannies’ arrested for blocking oil and coal trains - Police arrested three protesters calling themselves “Raging Grannies” on Wednesday after the women blocked BNSF tracks to protest oil and coal trains. “We were willing to be arrested to stop climate change,” said Nancy Nelson, dressed in a blue floral dress with a matching hat. “With the oil and coal trains coming right through our city, this is a very serious issue, which we have to address.” The women – all grandmothers – were the last of about 20 people who blocked rail lines near Trent Avenue and Napa Street. Trains carrying crude oil from North Dakota’s Bakken region and Alberta’s tar sands pass through the city every day. Coal from the Powder River Basin heading to Northwest ports for shipment to Asia also moves through the city on trains. “Climate change is the most urgent issue of our time. Today, short-term profit by fossil fuel corporations is coming at the cost of environmental destruction and our children’s future,” said Margie Heller, a protester and one of the Raging Grannies arrested Wednesday. The others were Nelson and Deena Romoff. All three are members of the activist group Raging Grannies – an international nonviolent group that began in 1987 in Victoria, British Columbia, to protest the environmental impact of a U.S. Navy ship. Membership is restricted to grandmothers, though there is no age limit.

New natural resources commissioner says he’s working to put more oil in Alaska’s future - Alaska Dispatch News: The new head of the Alaska Department of Natural Resources plans to take an aggressive approach to encouraging development in Alaska, one that includes working closely with local communities in an effort to boost oil production, which provides most state income."I am optimistic we can flatten out the (oil) production line, if not increase it over the next few years," said Andy Mack, who was appointed by Gov. Bill Walker in June to replace acting commissioner Marty Rutherford.Though oil production is up slightly in Alaska, years of sagging production as the state's large oil fields have aged has contributed to massive deficits and an uncertain future, though the sharp decline in oil prices has been a larger factor.Mack, a managing director of private equity fund Pt Capital before his move to the state, said he'll be hyper-focused on bringing together communities, regulators and companies to see projects developed in a responsible way."Everyone needs to be on the playing field," Mack said

We Don't Need No Correlation - Big Shift in Energy Fundamentals – Fall 2016... U.S. crude oil prices languish below $50/bbl, but the oil-directed rig count is up by 90, an increase of almost 30% over the past 12 weeks. Natural gas production is down less than 1% from the all-time high hit back in February even though the price of natural gas remains below $3/MMbtu. The price spread between U.S. propane and international markets is far below a level that should justify exports, but LPG exports to overseas markets continue at astronomical levels –– approaching 700 Mb/d, most of which is propane. What’s wrong with this picture? Why does it seem that relationships between energy production, demand and prices have broken down, or at least have undergone some fundamental shift? That is what our upcoming School of Energy Fall 2016 is all about. At first glance, a number of energy market relationships may seem to have shifted, but the reality is that we are just looking at the market from a different perspective than ever before – the recovery from a Shale Revolution crude oil price crash. Two years ago U.S. hydrocarbon markets entered Shale 2.0. (Sorry about using such a tired old metaphor, but it works.) Back in 2007-09 before the Shale Revolution started to impact markets (labeled Pre-shale), gas, NGLs and crude tended to move in tandem. Moving in almost perfect correlation, all three of these markets blew out in the commodity run-up of 2008 and all crashed with the Great Recession. But by then shale had come to natural gas, and pricing for gas, NGLs and crude diverged (the Shale Gas era). Natural gas oversupply kept prices low while crude and NGLs recovered along with the global economy. That motivated producers to move to wet gas – containing lots of NGLs, because NGL prices were still strong. U.S. hydrocarbon markets entered the Wet Gas era.

US distillate exports hit record high in June -  The US exported a record high 1.45 million b/d of distillates in June, up 207,000 b/d from May, with increases seen to Latin America and Europe, US Energy Information Administration data showed Wednesday.Distillate exports to the Netherlands jumped 115,000 b/d to 225,000 b/d in June, while exports to France edged up 11,000 b/d to 79,000 b/d. In Latin America, increases were seen across the board. US refiners exported 116,000 b/d of distillate to Brazil in June, up from 97,000 b/d in May. Exports to Mexico jumped 52,000 b/d to 212,000 b/d, while exports to Argentina climbed 46,000 b/d to 118,000 b/d. US Gulf Coast refiners -- notably Marathon, Valero and Phillips 66 -- have increasingly depended on export demand to market their refined products. While sluggish economic growth has sparked concerns that export demand might begin to dry up, threatening USGC refinery margins, the EIA June data showed export demand running strong. The market may be glutted with refined products, making the diesel arbitrage to Europe difficult, but near record low freight rates have helped keep the barrels moving.

US exported 698,000 b/d of crude last week, new record: EIA - While US crude supply continues to decline, the amount of oil the US is exporting continues to rise, the US Energy Information Administration said Wednesday. The US exported an average of 698,000 b/d of crude in the week that ended Friday, more than 8% of the nearly 8.49 million b/d produced in the US over that period. Exports were up 3.1% from the 677,000 b/d average a week earlier, when the US produced nearly 8.55 million b/d. A year ago, when most restrictions on US crude exports were still in place, the US exported 477,000 b/d, which was about 5% of the nearly 9.22 million b/d that was produced in the US that week. The amount of US crude exported last week was a record. In the first six months of this year, the US has exported an average of 482,000 b/d of crude.On December 18, President Barack Obama signed a government spending bill into law that included a provision lifting all limits on US crude exports. The end of these limits, which had been in place for 40 years, was the result of a landmark deal between House of Representatives and Senate leaders. The EIA crude export data was released in the EIA's Weekly Petroleum Status Report which, for the first time, included much more immediate export data from US Customs and Border Protection. EIA had previously used monthly export data published by the US Census Bureau. "By using this near real-time data, EIA is able to provide more accurate market balances and a clearer picture of the weekly consumption of key petroleum products in the United States," said EIA Administrator Adam Sieminski in a statement Wednesday.

First US Gulf Coast ethane cargo departs for Europe -- The first ethane cargo from the US Gulf Coast has departed from Enterprise's Morgan's Point, Texas, terminal, two weeks after loading began. The JS Ineos Intrepid -- which carried the first US waterborne ethane cargo from Sunoco's Marcus Hook, Pennsylvania, in March -- Wednesday left for Rafnes, Norway, and expected to arrive on September 14, according to cFlow, Platts tradeflow software.  US Coast Guard officials had confirmed the ethane transfer began late on August 18. The 260,000-barrel Intrepid is one of five ethane carriers in service globally and is one of Ineos' four ethane carriers. Enterprise's 200,000 b/d Morgan's Point terminal began initial flaring in July -- more than two years after the company announced plans to construct the fully refrigerated ethane export facility. The terminal is supported by long-term contracts including those with Ineos, Braskem, Reliance Industries and Sabic.  Ineos and Enterprise did not immediately respond to requests for comment. Non-LST ethane, reflecting prices for September barrels at the Enterprise terminal in Mont Belvieu, was trading at 17.75 cents/gal, down 62.5 points from Wednesday assessment. Ethane prices rose as high as 24.875 cents/gal in June, incentivizing recovery from the natural gas stream. The increased supply then pressured prices lower through August.

Inside FERC September US natural gas average climbs 10 cents to $2.52/MMBtu - Natural Gas | Platts News Article & Story: The September bidweek national average natural gas price climbed 10 cents to $2.52/MMBtu, as prices across the country, with the exception of markets in the Northeast, mostly moved higher, according to Inside FERC's Gas Market report Thursday. The September bidweek price at the benchmark Henry Hub rose 18 cents to average $2.85/MMBtu, which came as the NYMEX September contract settled at $2.853/MMBtu, up 18.1 cents from the August contract's close of $2.672/MMBtu.Upstream, prices at Rockies Express Zone 3 jumped 19 cents to average $2.75/MMBtu. Along the West Coast, Pacific Gas and Electric city-gates averaged $3.31/MMBtu, up 23 cents. Elsewhere in the region, El Paso, Permian Basin tacked on 4 cents to average $2.60/MMBtu. Around the Rockies producing region, Northwest Pipeline Rockies rose 11 cents to average $2.62/MMBtu. Prices toward the East Coast mostly fell, led by Transcontinental Gas Pipe Line Zone 6 New York, which dropped 43 cents to average $1.49/MMBtu. Nearby, Texas Eastern Transmission M-3 fell 11 cents to reach $1.27/MMBtu. In the Southeast, Florida Gas Transmission Zone 3 prices rose 18 cents to average $2.91/MMBtu. Elsewhere in the region, Southern Natural Gas, Louisiana rose 17 cents to average $2.79/MMBtu. Toward the Upper Midwest, Chicago city-gates jumped 14 cents to reach $2.81/MMBtu. Nearby, Consumers Energy and Michigan Consolidated city-gates were up even more, rising 23 cents to average $2.85/MMBtu and $2.82/MMBtu, respectively.

Long-term outlook for Asian LNG demand could make region attractive for excess US LNG  Snapshot video: With the question about when US LNG will reach Asia answered, the market is now wondering how much more volume will be coming to the region. So what's next? Editor Abache Abreu analyzes the supply-demand situation in Asia, export costs with the expansion of the Panama canal, and the behavior of traditional buyers in the region when it comes to the spot market. Watch now...

 Oil glut to ease by 2017, clean energy investment to rise - IEA's Birol | Reuters: The International Energy Agency (IEA) expects oil markets to reach a balance between supply and demand in 2017 as the current oil glut slowly eases, IEA chief Fatih Birol said during meetings in South Korea. The head of the Paris-based agency also exchanged views with energy minister Joo Hyung-hwan on the direction of the world's energy markets in the wake of the renewed commitment to tackle climate change after last year's Paris climate talks, South Korea's Energy Ministry said in a statement on Thursday. The IEA forecast in its August report that oil markets will slowly tighten in the second half of 2016 as global demand growth declines and non-OPEC supplies rebound. "Oversupply of oil markets will gradually be eased and (oil markets) will find a balance between supply and demand in 2017," Birol said in the statement. In a separate interview with Reuters after the statement was released, Birol said he saw two drivers for the rebalancing of the oil market. The first is a drop in production from countries outside of the Organisation of the Petroleum Exporting Countries (OPEC) of about 900,000 barrels per day (bpd), especially in the United States in 2016. The second is "demand that is growing in a healthy way" and that the IEA expects to climb by 1.4 million bpd this year."We may be on a higher side compared to others (forecasts), this is mainly because we're more upbeat when it comes to Europe and emerging Asia demand in demand growth," he said. In the statement, Birol also said there is concern that a decline in upstream oil and gas investments because of the prolonged low oil prices could increase oil price volatility.

NYMEX October gas settles 6 cents higher at $2.887/MMBtu - The NYMEX October natural gas contract headed higher Wednesday, supported by a bullish weather outlook and concerns of tropical storm activity in the Gulf of Mexico. The contract rose 6 cents to settle at $2.887/MMBtu, having traded in a range of $2.808-$2.900/MMBtu. The latest six- to 10-day and eight- to 14-day outlooks from the National Weather Service both call for temperatures above seasonal averages in much of the US, particularly in the heavily populated energy consuming areas of the Upper Midwest and New England. The National Hurricane Center's latest two-day tropical weather outlook issued advisories on Hurricane Gaston, as well as two tropical depressions. Tropical Depression 9 is currently projected to move northeast and make landfall near central Florida on the Gulf Coast. The speed and the direction of this storm have affected production in the Gulf and along the region s coast. The latest five-day track shows the storm possibly affecting the upper Northeast coast near Labor Day.US dry production fell slightly to 71.4 Bcf/d Wednesday from 71.5 Bcf/d Tuesday, nearly 0.8 Bcf/d below the six-day average, with the largest drop in the Southeast Offshore sample on Destin and Discovery pipelines, likely due to adverse weather in the Gulf of Mexico, according to Platts Analytics' Bentek Energy. Over the course of the next few weeks, dry production is expected to rebound to 71.8 Bcf. US demand is slated to decrease over the same time frame from a current estimated 67 Bcf down to 65.4 Bcf, despite warmer-than-normal forecasts for the eastern half of the country.

  An update on methane emissions from fracking (in the US) - A relatively large number of research publications has appeared in the peer-reviewed literature since we last updated our readers on fracking and methane, CH4, emissions. We cannot discuss them all here. However, in summary, it can be concluded from these papers that EPA is very likely underestimating fossil fuel related methane emissions in its greenhouse gas inventory, anywhere between 30% and 100%, possibly even more. Meaning, in order for the US to effectively lower its greenhouse gas emissions, it also needs to get fugitive methane emissions under control. The US administration has reacted to the new data, and EPA issued a number of regulatory actions. In addition, EPA has begun to update its inventory. However, a look at the inventoried totals …  However, a look at the inventoried totals …  … and the “energy” related emissions …  … suggests that inventoried methane emission totals have not been increasing over the last ten years. Decreases in “waste” related emissions (primarily from landfills) have been counteracted mostly by increases from “agriculture” related emissions (mostly exhaling cows) and increases in “energy” related emissions.  Meanwhile, global atmospheric methane concentrations continue to rise. There is evidence from satellite observations that US emissions have increased by 30% or more in the last decade, and a substantial amount of the global increase could be explained by increasing US emissions.However, there is also indirect isotopic evidence that the global increase is dominated instead by a biogenic source, with the authors highlighting agriculture in East Asia. The latter is somewhat corroborated by where most of the atmospheric methane seems to come from, namely the tropics, but there remain large estimate ranges in part due to limited measurement capabilities at tropical latitudes.  Independent evidence comes from global observations of atmospheric ethane, which turns out to be an excellent tracer of fossil fuel related hydrocarbon emissions. While ethane’s abundance had been dropping for decades as the industry’s fossil fuel exploration activities had been becoming more efficient, it appears to be increasing in the atmosphere again, with especially high emissions from shale regions that produce oil. The Nature Geoscience authors estimated an ethane emissions increase of approximately 0.4 million metric tons per year, seemingly all from North America. Since, ethane is typically five to ten times less abundant relative to methane in oil and gas sources (on a molar basis), one can estimate an annual methane emission of 1-2 million metric tons from that, with a likely range of 0.5-4 million metric tons CH4.   The best case scenario assumes that relative leak rates, globally, are about 50% higher than what EPA currently estimates (based on Brandt et al., 2014). Since we know by now that even that could be too optimistic, it becomes more and more obvious that a switch from coal to natural gas for electricity production is not likely to curb global warming effectively, but rather delay effective measures further.

Major Insurers to G20 Nations: Stop Wasting Time, Phase-Out Fossil Fuel Subsidies by 2020 -  Major global insurance companies are urging G20 leaders to commit to a specific timeline for rapidly phasing out fossil fuel subsidies – something they’ve repeatedly failed to do over the years despite numerous promises to end support for the industry. In a joint statement issued ahead of the G20 conference in China this weekend, insurers with more than USD$1.2 trillion in assets under management warn that support for the production of coal, oil, and gas is at odds with the nations’ commitment to tackle climate change agreed in Paris last December.  The statement, signed by Aviva, Aegon NV, and MS Amlin, calls for governments to set “a clear timeline for the full and equitable phase-out by all G20 members of all fossil fuel subsidies by 2020.” It adds that the phase-out should begin by eliminating all subsidies for fossil fuel exploration and coal production. “Climate change in particular represents the mother of all risks – to business and to society as a whole,” said Mark Wilson, chief executive of Aviva. “And that risk is magnified by the way in which fossil fuel subsidies distort the energy market. These subsidies are simply unsustainable.”  G20 nations have been pledging to phase out fossil fuel subsidies every year since 2009. Yet, research by the Overseas Development Institute (ODI) and Oil Change International shows governments spending $444 billion in 2013 and 2014 supporting the fossil fuel industry.  Shelagh Whitley, lead research fellow working on subsidies at ODI, said: “These subsidies fuel dangerous climate change. If we are to have any chance of meeting the 2C target set at the Paris climate summit then governments need to start a programme of rapid decarbonisation.  “It is extremely worrying therefore that the G20 energy ministers earlier this year acted as if Paris hadn’t happened by repeating the same empty promises they have been making since 2009.” In May, G7 nations agreed to phase-out fossil fuel subsidies by 2025. However, when G20 leaders gathered the following month, they were met with criticism for failing to follow the G7 in setting a date to end the subsidies.

 What will it take to break Canada's infrastructure logjam? - Western Canada has extraordinary oil and natural gas resources, but producers there have been suffering from a long list of woes. Oil sands producers need higher oil prices to justify expansion projects, and face shortfalls in pipeline takeaway capacity to refineries in Eastern Canada and export markets on both coasts. Natural gas producers can move gas east, but face stiff competition from the Marcellus and Utica plays; meanwhile, their efforts to expand LNG exports from British Columbia have been stymied by the new glut in worldwide LNG supplies and low LNG prices. Today we discuss the challenges in advancing Canadian oil and gas infrastructure projects. Canadian energy production and the pipelines, rail facilities and other infrastructure needed to move oil and natural gas to market have been frequent topics in the RBN blogosphere. In Over the Hills and Far Away, we considered the challenges faced by oil sands producers in Alberta, namely that 1) their hydrocarbon-extraction process is more complicated and costly than their shale-play counterparts; 2) the oil sands are farther away from most major refinery centers than most U.S. shale plays; 3) oil sands producers need to either add diluent to their bitumen to allow it to flow through pipelines, or transport low-viscosity bitumen in special “coil” rail cars that can be heated before unloading; and 4) existing pipelines out of the oil sands to the U.S. Midwest and Gulf Coast—and the existing Trans Mountain Pipeline to British Columbia (BC)—had been bumping up against capacity limits, resulting in significant, margin-erasing price discounts versus West Texas Intermediate (WTI), at least until incremental pipeline capacity started coming online in early 2015.  We also noted that—for these and other reasons—RBN’s forecast for Alberta production in 2021 is far less upbeat than the recent 4-MMb/d estimate of Canada’s National Energy Board (NEB); we see the province’s production (now about 3.1 MMb/d) rising to only 3.4 MMb/d over the next five years under our Growth Scenario (with $65/bbl in 2021) and staying flat at best under our Contraction Scenario.

 Shell dumps stake in Gulf of Mexico fields for cash - (UPI) -- In a deal that included $425 million in cash, Royal Dutch Shell said it sold off its entire stake in assets held in the U.S. waters of the Gulf of Mexico. Shell said the sale of the 100 percent stake of three blocks known collectively as the Brutus/Glider assets to EnVen Energy Corp. was in line with the company's divestment strategy. In July, the company's chief executive officer, Ben van Buerden, said "significant and lasting changes" were underway as lower crude oil prices continued to present problems for the industry. Moving through the year after its mega-merger with British energy company BG Group, the company reported its net income during the second quarter fell more than 70 percent to $1.18 billion. Shell this year has moved away from other North American projects apart from the Gulf of Mexico decision, saying in July that capital constraints were in part behind a decision to delay a final investment decision for a gas export facility in Canada. This year, the company said it was leaving oil and gas operations in as many as 10 countries, while focusing more heavily on gas-rich Australia and shale opportunities in the United States. Shell said it maintained a strong portfolio of assets in the Gulf of Mexico and plans are to increase output from established reservoirs. The Brutus/Glider assets combine for about 25,000 barrels of oil equivalent in production per day, or less than 5 percent of its total output. Shell this year closed down production briefly after observing sheen in the region. More than 2,000 barrels of oil were released into the U.S. waters of the Gulf of Mexico about 97 miles from the southern tip of Louisiana from operations the company's Glider oil field.

 Chevron signs 650,000 mt/year LNG sales agreement with China's ENN - - US-based Chevron Corporation late Monday said its subsidiary Chevron USA has signed a binding LNG Sales and Purchase Agreement with Chinese gas distributor ENN to supply up to 650,000 mt/year of LNG over 10 years. This is the first binding SPA to be signed to import LNG by ENN and marks the next step in the process after Chevron and ENN signed a non-binding Heads of Agreement to supply 500,000 mt/year from its Gorgon LNG project in January.At 650,000 mt/year, the latest Chevron deal is also the largest deal currently on the table, with the Total and Origin deals both expected to send 500,000 mt/year of LNG. Chevron's deal was signed with ENN LNG Trading, a subsidiary of ENN Energy Holdings, one of China's largest gas suppliers. ENN has operations in 150 cities, supplying more than 12 million residential and 56,000 industrial customers. The revised contracted volumes of up to 650,000 mt/year would now not be solely limited to the Gorgon LNG project, but may be sourced from Chevron's LNG portfolio including the company's other Australian LNG interests in the North West Shelf and Wheatstone projects. ENN had previously signed two separate HOAs with France's Total and Australia's Origin Energy in February and March respectively, which have yet to be converted into formal SPAs. The agreement with Total is a binding HOA and with Origin a non-binding HOA.

BP expands push into Chinese shale gas with second CNPC block deal - - BP has signed a new production-sharing contract with China's state-owned CNPC for an onshore shale gas block, its second such deal in less than six months giving it a foothold in China's emerging shale gas sector. The PSC, signed on July 27, covers an 1,000 sq km area at Rong Chang Bei in the Sichuan Basin and lies adjacent to its exiting Neijiang-Dazu shale block, BP said in a statement. BP took its first step into China's onshore shale gas plays in March, agreeing a PSC for the 1,500 sq km Neijiang-Dazu block which also lies in the Sichuan Basin. BP said CNPC will operate both shale PSCs but gave no information on the gas potential of the blocks. The latest shale deal builds on BP and CNPC's framework agreement on strategic cooperation signed in London last October during a state visit by Chinese President Xi Jinping."We are pleased to be making further progress in our strategic partnership with CNPC and deepening our business in China," BP CEO Bob Dudley said in a statement. "...Combining CNPC's operational expertise with BP's technology and experience, we now expect to leverage the synergies between these blocks."

Australia steps up gas fracking bans despite supply crunch | Reuters: Victoria state has gone further than any other in Australia to block shale and coal seam fracking, announcing a permanent ban on Tuesday due to concerns of farmers and green groups on health and water risks despite a looming natural gas supply crunch. The state's Labor government, however, left the door open to allowing onshore conventional gas drilling after 2020. A new Labor government in the Northern Territory is also getting set to ban fracking until it is satisfied the drilling technique does not harm farm land or Aboriginal sites. The bans come despite a large portion of eastern Australia's gas being produced from Queensland and New South Wales coal seam developments, and deal a blow to manufacturers who have been clamoring for more of the fuel to help keep prices down. "Victorians have made it clear that they don't support fracking and that the health and environmental risks involved outweigh any potential benefits," Victoria state Labor Premier Daniel Andrews said in a statement. Farmers and environmental groups are worried that groundwater reserves could be depleted or contaminated by both conventional and unconventional onshore gas drilling. A pipeline networks association said, though, that shale and coal seam gas would be key to supporting Australia's shift to cleaner energy and replacing aging coal-fired power.

 Colombian peace deal with FARC won't cure oil industry's problems: analysts - Analysts and industry sources are skeptical that the peace agreement announced this week between the Colombian government and a rebel group with which it has been at war for a half century will provide any short-term boost to the fortunes of Colombia's beleaguered oil industry. Continued violence, logistical difficulties and an expected tax increase later this year on top of an already high government take will continue to make Colombia's oil patch a challenging place to find, produce and transport oil and gas, experts said, particularly compared with more hospitable venues. After nearly four years of negotiations, the government announced late Wednesday it had reached agreement on all major points with the Revolutionary Armed Forces of Colombia (FARC), with which it has been at war since 1964. The accord will be put to a nationwide vote October 2. Public opinion is sharply divided on the proposed accord. FARC declared a cease-fire a year ago and has since halted oil pipeline bombings and oilfield personnel kidnappings, the two banes of the industry over the last several decades. Thus, the peace deal will make more permanent the improvement in oilfield security that has been seen over the last year.Still, Colombia remains a high-cost venue for drilling and producing oil and many wildcatters in recent years have left for greener pastures such as Mexico, Argentina and Peru. It's not just security and logistics that have driven players from Colombia: industry officials complain that the government charges producers a high government take (royalties plus taxes).

Cyprus, Egypt sign deal paving way for gas pipeline (AP) — Cyprus and Egypt signed an agreement Wednesday that paves the way for the supply of gas to the Arab nation via an undersea pipeline that officials hope will create a regional energy hub. Cypriot Energy Minister Yiorgos Lakkotrypis and Egypt’s Petroleum Minister Tarek el-Molla said the deal sets the political framework for additional commercial agreements that will determine of how, where and when the gas will reach Egypt. “This is part of the development of the east Mediterranean gas as a whole and I think our strategy optimally is to position ourselves as an energy hub in the region,” el-Molla said after signing the agreement. It is yet to be determined whether the gas will be used for Egypt’s domestic needs or be liquefied at Egypt’s processing plants for export to other markets. El-Molla said Egypt’s large population and growing industry will need more energy, adding that gas “is the energy of the future” and will increasingly replace other hydrocarbons, like crude and coal. Lakkotrypis said the first gas through the new pipeline should reach Egypt sometime between 2020 and 2022, but officials will try to speed up the timetable. Hopes for energy finds in the region were buoyed last year when Italian firm Eni discovered in Egyptian waters what it touted as the largest ever gas find in the Mediterranean sea. A field off Cyprus’ southern coast is estimated to contain over four trillion cubic feet of gas. Companies including Texas-based Noble Energy, Eni, France’s Total and South Korea’s Kogas are licensed to drill inside Cypriot waters. Last month, ExxonMobil, Qatar Petroleum and Capricorn Oil were among eight companies that applied for a license to conduct more exploratory drilling off Cyprus.Cyprus, Egypt and Greece are already in talks to expand energy cooperation. Cyprus and Greece are in separate talks on strengthening energy ties with Israel. Meanwhile, breakaway Turkish Cypriots have objected to the deal, repeating that such “unilateral” actions by Cyprus’ internationally-recognized government ignore their rights to the ethnically-divided island’s potential mineral wealth.

 Zacks' Recap Of Week's Most Important Stories -- August 31, 2016 -- Zacks recap of the week's most important stories:

  • the world's largest publicly traded oil company, Exxon Mobil, has decided against investing further in the proposed Alaska LNG facility
  • Royal Dutch Shell will sell all US-based properties in the Gulf of Mexico
  • Chevron entered a deal with a Chinese distributor for shipping LNG from the company's existing projects in Australia
  • Petrobras received government permission to sell 49% stake in its natural-gas distribution unit to Japan's Mitsui & Co
  • Chinese energy giant PetroChina reported huge decline in earnings and revenue
  • Not mentioned by Zacks, but it was also announced this past week that Chinese oil production may be facing "peak oil" production

 Oil Price Spike Inevitable As New Discoveries Hit Seventy Year Low - The oil industry only discovered about 2.7 billion barrels of new supply in 2015, a tiny fraction of the annual average for the past fifty years. The dismal result was one of the worst performances from the oil industry in decades. 2016 could be even worse. The 2015 figure is about one tenth of the annual average dating all the way back to 1960, according to Wood Mackenzie. Shockingly, 2015 saw the least amount of oil discovered in a calendar year since 1947. But with the massive spending cuts extending into 2016, this year the industry is on track to discover even lower volumes. As of the end of July, the global oil industry has only reported 736 million barrels of new oil discovered. Of course, with oil prices trading at less than $50 per barrel, many of the oil fields around the world that have yet to be explored are not economically viable. New discoveries are “at rock bottom,” Nils-Henrik Bjurstroem, a senior project manager Rystad Energy AS, told Bloomberg.  Rystad Energy published similar findings earlier this year, concluding that 2015 was the worst year for new oil discoveries in over sixty years. “There will definitely be a strong impact on oil and gas supply, and especially oil.”  In another damming statistic from Rystad Energy, the oil industry is very far from even replacing the oil that they are currently producing: in 2016, only about one barrel out of every 20 barrels consumed will be replaced with new discoveries. The shortfall in upstream investment could be a presage of a supply crunch somewhere down the line. The oil industry has slashed about $1 trillion in investment for the period between 2015 and 2020, Wood Mackenzie said a few months ago. The supply gap will only grow over time as demand continues to rise. The EIA expects oil demand to expand to 105 million barrels per day (mb/d) by 2026, up from just 94.8 mb/d this year. Obviously, forecasts that far out are inevitably off the mark, but the estimate at least gives the sense of the problem. If demand continues to increase by more than 1 mb/d annually, as it has for a long time, the oil markets could quickly swing from supply glut to a deficit. Bank of America Merrill Lynch already predicts a deficit next year of about 800,000 barrels per day.

Oil down 1 percent, pressured by glut, dollar, Nigeria outlook | Reuters: Oil prices settled down more than 1 percent on Monday, snapping two consecutive days of gains, on renewed concerns about an oil glut, a stronger dollar and expectations that Nigerian rebels will stop hampering that country's crude output. U.S. crude stockpiles likely rose for a second straight week last week, building by 1.3 million barrels, a Reuters poll showed. That came on top of Iraq's pledge at the weekend to ship more crude after a ramp up of exports from its southern ports in August. Nigerian rebels pledged to end hostilities against the industry in Africa's No. 1 producer, which they repeatedly attacked earlier this year by blowing up pipelines. Fears of a renewed glut offset news that oil and gas operators in the U.S. Gulf of Mexico have shut production equal to 168,334 barrels per day of oil and 190 million cubic feet per day of natural gas as a precaution against a tropical storm. The closures represent 11.5 percent of oil output and 5.5 percent of gas production. Brent crude LCOc1 settled down 66 cents, or 1.3 percent, at $49.26 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 finished down 66 cents, or 1.4 percent, at $46.98.

Oil Tumbles As Market Questions Whether An OPEC Production Freeze Is Even Remotely Possible? --Oil prices enjoyed a bump last week, thanks in part to a weakened dollar and some geopolitical tensions in the Persian Gulf. But a large factor in the recent rally has been the return of apossible OPEC production freeze, a subject that was last tossed around before the organization’s much-publicized, and ultimately unproductive, meeting in Doha last April. The likelihood of a freeze sent markets up on Thursday, though some less-than-confidentcomments from the Saudi oil minister sent them dropping back on Friday. And we noted previously, the short squeeze ammo has been eviscerated in oil, disabling (for now) the 'freeze' headline risk... Whether a freeze occurs or not is likely to be the trending gossip among speculators for the next month, at a time when such talk is exerting greater-than-average pull on the crude price,but as's Gregory Brew notes, a question worth asking is whether a freeze is even possible, given the state of OPEC and the increasingly divergent interests of its fourteen members. This new attempt at a production freeze comes as Saudi Arabia, OPEC’s largest producer and de facto leader, reaches a new production record of 10.67 million barrels, more than 400,000 more than when the last freeze was discussed, while its oil revenues continue to plummet. OPEC profits have fallen 55 percent since 2014, according to the EIA. Ecuador, Kuwait and other Gulf producers want the price to recover past $50 a barrel. If a production freeze is on the cards, it will be discussed in late September during an informal meeting of the OPEC states at the International Energy Forum in Algeria. Iraq and Iran, OPEC’s number two and three producers, respectively, have offered tacit acceptance of a production freeze, with important caveats.

 Oil Extends Losses After Big Distillates Inventory Build --After last week's surprise crude build (biggest in ~4 months) and builds across the entire complex, API reported a crude build of 942k barreles (just shy of expectations of +1.5mm) and while Cushing and Gasoline saw draws, Distillates saw a major 3mm barrel build (+275k exp). The initial reaction in crude was to extend the day's losses, back below $46.50... API

  • Crude +942k (+1.5mm exp)
  • Cushing -620k
  • Gasoline -1.6mm (-1.25mm exp)
  • Distillates +3mm (+275k exp)

Another Crude build but the big news was a major Distillates build...

 EIA now using near-real-time export data to improve weekly petroleum consumption data - Today in Energy - U.S. Energy Information Administration (EIA) -- Starting with today's release of the Weekly Petroleum Status Report (WPSR), EIA is now publishing weekly petroleum export and consumption estimates based on near-real-time export data provided by U.S. Customs and Border Protection (Customs). EIA previously relied on weekly export estimates based on monthly official export data published by the U.S. Census Bureau roughly six weeks following the end of each reporting month. This new methodology is expected to improve weekly estimates of petroleum consumption (measured as product supplied) by improving estimates of weekly exports of crude oil, petroleum products, and biofuels, which increased from 1 million barrels per day (b/d) in 2004 to nearly 5 million b/d in 2015. The use of near-real-time export data should reduce differences between EIA's weekly data, as presented in the WPSR, and monthly data, as presented in the Petroleum Supply Monthly (PSM). The monthly data that EIA publishes 60 days after the end of each month are based on EIA's comprehensive monthly survey data and the actual Census Bureau export data for that month.  Export data are an important component for the calculation of EIA's weekly estimates of U.S. consumption of petroleum products. EIA calculates U.S. consumption (using product supplied as a proxy for consumption) for petroleum products as:  CONSUMPTION = PRODUCTION + IMPORTS - STOCKS CHANGE – EXPORTS  Three of those components are surveyed directly by EIA each week: refinery and blender net production, stocks change (inventories), and imports. Exports, the remaining component, have become more critical for market assessment and calculation of U.S. consumption of key petroleum products such as gasoline and distillate.  Over the first six months of 2016, EIA weekly estimates underestimated total crude oil, petroleum, and biofuel exports by an average of 16%, compared with final data published in the PSM. This underestimation of exports led to the overestimation of total consumption. The new methodology using near-real-time data from Customs significantly reduces the difference between weekly estimates and the actual data for total exports shown in the PSM during the first half of 2016. This improves both the export and total weekly petroleum consumption estimates found in WPSR Tables 9 and 1, respectively.

Oil Prices In Freefall As Fundamentals Worsen | Crude prices are softening for a third consecutive day thus far, as a decent ADP employment report out in the U.S. has boosted expectations from Friday's official employment report, as well as for an interest rate hike. The dollar is looking higher again, while oil market digest the build to crude stocks from the weekly EIA report. Hark, here are five things to consider in oil markets today:

  • 1) Surging product exports from China are pressuring refining margins lower across Asia, as refiners from India to South Korea and Singapore roll up their sleeves to do battle. Even though Chinese product exports continue to rise as they make inroads into countries such as the Philippines and Australia, impending maintenance and increased regulation / scrutinization of independent teapot refiners in the north of the country is set to stymie their refining activity. This is already being reflected in their import data; with August data nearly complete, imports are down over 20 percent from their peak in March:
  • 2) Conjecture continues to swirl relating to China's strategic stockpiling. The latest statement from the National Bureau of Statistics was in December, which stated that its SPR was up to 191 million barrels by mid-last year.According to the chart below, there appears to have been another 250 million barrels accrued since; all the while, the Chinese government say it has pushed back its completion deadline to beyond the current 2020 deadline.
  • 3) Not only has Nigeria now entered into a recession, but its inflation is up for a ninth consective month to 17.1 percent year-on-year - the highest since October 2005. Its economy contracted for a second consecutive quarter, down by 2.06 percent in Q2.

Crude Tumbles After Big Crude, Distillates Build -- Having extended yesterday's losses on the back of API's unexpectedly large distillates inventory build, DOE data confirmed an even bigger crude inventory build (+2.276mm vs ~1.3mm build exp.) Gasoline drew down less than API reported and Distillates built considerably more than expected (+1.5mm vs +275k exp). While production slipped lower, crude prices tumbled on the inventory news, back to $45.50. DOE:

  • Crude +2.276mm (+1.3mm exp)
  • Cushing -1.039mm
  • Gasoline -691k (-1.25mm exp)
  • Distillates +1.496mm (+275k exp)

The second weekly build in crude and a big build in Distillates...

 Oil skids on US crude and distillate stock build; still up on the month: Oil prices fell 3 percent on Wednesday, paring their big gains for August, after government data showed a larger-than-expected weekly build in U.S. crude and distillate stockpiles and a smaller-than-expected drawdown in gasoline. Crude futures remained on track for their best monthly return since April, rising as much as 11 percent, after speculation in recent weeks that the Organization of the Petroleum Exporting Countries and other oil producers could agree to curb output at September talks in Algeria. Even so, oil has fallen since the start of this week as the dollar rallied and expectations for an OPEC-led production freeze fizzled. Wednesday's supply-demand data from U.S. Energy Information Administration (EIA) could trigger a more bearish trend, analysts said. The EIA said crude stockpiles rose for a second straight week, building by 2.3 million barrels last week, compared with analysts' expectations for a rise of 921,000 barrels.Distillate stocks, which include diesel and heating oil, unexpectedly rose 1.5 million barrels, while the gasoline inventory drop of 691,000 barrels was about half the drawdown forecast. "I would call this the trifecta of bearish news," said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in New York. "We should be getting draws for this time of year. Not only are we getting shocking builds, we're also being squeezed by the bullishness of the U.S. dollar and a hurricane season that's had very little impact thus far on actual crude production." Brent crude oil futures fell $1.33, or 2.75 percent, to $47.04 per barrel. U.S. West Texas Intermediate (WTI) crude futures were down $1.65, or 3.56 percent, at $44.70.

The Truth Emerges: EIA Admits It "Overestimated" Crude, Gasoline Demand In The First Half By 16% -- One of the recurring peculiarities of oil complex data as reported by the EIA was how, during a time of an unprecedented crude glut by OPEC and pronounced economic weakness in the US, was overall US demand of various petrochemical products as strong as the DOE reported on a weekly basis. To be sure, the alleged increase in demand was one of the major catalysts that prompted rising oil prices together with relentless jawboning by OPEC members about a "production freeze" that would never materialize, in turn spurring not one but two record short squeeze across the commodity complex. We now know the answer. In a note released moments ago by the EIA, whose bias to keeping prices as high as possible is no secret, admitted that "over the first six months of 2016, EIA weekly estimates underestimated total crude oil, petroleum, and biofuel exports by an average of 16%, compared with final data published in the PSM." This underestimation of exports "led to the overestimation of total consumption" by a similar amount. The new methodology using near-real-time data from Customs significantly reduces the difference between weekly estimates and the actual data for total exports shown in the PSM during the first half of 2016. So time to fix the mistake then, and as a result, the EIA said that starting with today's release of the Weekly Petroleum Status Report (WPSR), EIA is now publishing weekly petroleum export and consumption estimates based on near-real-time export data provided by U.S. Customs and Border Protection (Customs). EIA previously relied on weekly export estimates based on monthly official export data published by the U.S. Census Bureau roughly six weeks following the end of each reporting month. This new methodology is expected to improve weekly estimates of petroleum consumption (measured as product supplied) by improving estimates of weekly exports of crude oil, petroleum products, and biofuels, which increased from 1 million barrels per day (b/d) in 2004 to nearly 5 million b/d in 2015.

US crude oil falls toward $43 as high stocks offset talk of curbing output: Oil prices fell more than 2 percent on Thursday, heading for their sharpest weekly loss since January, as investors brushed aside talk that OPEC might freeze production and focused on a growing glut from U.S. crude stockpiles. Energy monitoring service Genscape's report of a 714,282-barrel drawdown at the Cushing, Oklahoma, delivery point for U.S. crude futures during the week ended on Aug. 30 did little to bolster sentiment, traders said. Investors focused instead on Wednesday's government data showing a 2.3 million-barrel build in U.S. crude stocks in the last week, more than double what the market had expected. Inventories of distillates, which include diesel and heating oil, rose nearly 10 times as much as forecast, the data from the U.S. Energy Information Administration showed. "The high U.S. inventory data suggest oversupply will remain for longer than expected," said Hans van Cleef, senior energy economist at ABN AMRO Bank N.V. in Amsterdam. "On top of that, anticipation of a higher dollar if the Fed starts to hike rates is negative for oil prices. And there's also uncertainty about the likelihood of OPEC/non-OPEC action at the end of the month."

Oil Prices Slide as Oversupply Comes Back Into Focus - WSJ: Oil prices fell to a three-week low after a second day of steep losses from rising U.S. stockpiles. Crude is now on a four-session losing streak, its longest in a month and an abrupt setback just two weeks after it reached bull-market territory. Speculators had been excited by talk of cooperation and output caps from the world’s largest exporters. But skepticism about those talks has also been widespread and many are now pointing to signs that oversupply is re-emerging as a weight on prices. Losses began accelerating Wednesday when the U.S. Energy Information Administration said U.S. crude stockpiles rose by 2.3 million barrels in the latest week. Analysts surveyed by The Wall Street Journal had expected that crude supplies rose by just 1.2 million barrels. The increase put total stockpiles of crude and oil products at a record high at a time when many thought stockpiles would be dropping and helping crude recover from two years of falling prices.Light, sweet crude for October delivery settled down $1.54, or 3.4%, to $43.16 a barrel on the New York Mercantile Exchange. It has lost 9.4% in its losing streak, the largest four-session decline since early February. Brent, the global benchmark, lost $1.44, or 3.1%, to $45.45 a barrel. Both Brent and U.S. crude reached their lowest settlement since Aug. 10. Commerzbank said Wednesday’s bearish U.S. stock data were merely the starting point for what he believed was a “return to reality” for the oil markets after the price rally that had dominated August. “Investors have finally woken up to the fact that the August rally was driven by speculation and not fundamentals, and what you are seeing is the market correcting itself accordingly,” Mr. Weinberg said. His team is forecasting that prices are heading toward $40 a barrel.

OilPrice Intelligence Report: Oil Down, But OPEC Offers Glimmer Of Hope: Oil prices had a bad week, falling on persistent concerns about a glut in crude oil and gasoline. Crude stocks climbed once again, news that sent oil prices tumbling midweek. On the other hand, U.S. oil production continues to fall, dipping by another 60,000 barrels per day last week. Also, the EIA confirmed monthly figures for June at 8.7 million barrels per day, which was just shy of a 200,000 barrel-per-day decrease from May. The rig count may be up, but the slide in U.S. oil production has not visibly come to a halt yet. Still, while supply and demand continue to adjust in fits and starts, the slowness of the process repeatedly catches the markets by surprise and frustrate oil bulls. OPEC deal looks more likely. Although crude prices performed poorly, the OPEC production freeze deal received a strong boost this week, with several comments from crucial sources in favor of a deal. Iraqi Prime Minister Haider al-Abadi voiced his support for the deal. Saudi Arabia’s foreign minister said at a conference in Tokyo that his country should support a deal if other OPEC members agree to one. And by September 2, the freeze deal had received the support of Russian President Vladimir Putin, who said that Russia would participate if they could all agree. Taken together, OPEC and Russia produce half of the world’s oil. The barrage of comments from OPEC and Russian officials suggest that all parties are warming to the idea of a freeze. They had come close to that agreement in April in Doha, but Saudi Arabia pulled out at the last second, a move interpreted as a decision by the young Deputy Crown Prince’s unwillingness to do anything to aid Iran. This time around, sentiment appears to be changing, increasing the odds that OPEC and Russia agree to something on paper in Algeria later this month.

Putin Joins "OPEC Headline" Fray, Pushes For Oil Production Freeze - Overnight the debate over the fate of the OPEC oil production freeze got a new and unexpected entrant when Russian president, 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. As Bloomberg first reported, Putin said that “from the viewpoint of economic sense and logic, then it would be correct to find some sort of compromise,” speaking in an interview in Vladivostok. “I am confident that everyone understands that. We believe that this is the right decision for world energy.”

U.S. Oil Producers Calling OPEC's Bluff - Crude futures prices fell $1.29/b (2.7%) in the week ending August 30th (to correspond to the data below), and dropped another $1.79/b through Friday, closing at $44.56. The sell-off came after the initial positive response to a series of statements hinting at a production freeze in late September. Perhaps the market is beginning to call OPEC's bluff. Utilizing the Commodity Futures Trading Commission's (CFTC) Commitments of Traders (COT) reports for crude oil, I was able to dissect how traders were re-positioning in the week ending August 30th. The four groups I follow -- Hedgers (Producer/Merchant/Processor/User) Longs and Shorts, and Speculators (Money Managers) Longs and Shorts -- are defined below: Hedgers: A "producer/merchant/processor/user" is an entity that predominantly engages in the production, processing, packing or handling of a physical commodity and uses the futures markets to manage or hedge risks associated with those activities. Speculators: A "money manager," for the purpose of this report, is a registered commodity trading advisor (CTA), a registered commodity pool operator (CPO) or an unregistered fund identified by CFTC. These traders are engaged in managing and conducting organized futures trading on behalf of clients. The latest data include data for both options and futures combined for the New York Mercantile Exchange (NYMEX). All comments below pertain to each group as a whole, on balance, noting there are exceptions among individuals.

 US Rig Count up 8 This Week to 497 - ABC News: The number of rigs exploring for oil and natural gas in the U.S. increased by eight this week to 497. A year ago, 864 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 407 rigs sought oil and 88 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Oklahoma, Wyoming and Texas gained four rigs each, Pennsylvania was up two, while North Dakota and West Virginia increased by one apiece. Louisiana declined by seven and Colorado was down one. Alaska, Arkansas, California, Kansas, New Mexico, Ohio and Utah were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

 US oil rig count rises by 1 to 407 for 9th increase in 10 weeks: Baker Hughes: Oil prices rose 3 percent on Friday as a report showing weaker U.S. jobs growth in August suppressed the dollar, but crude futures remained on track for a big weekly loss on glut concerns. U.S. employment growth eased more than expected last month after two straight months of robust gains and wage gains moderated, casting doubts the Federal Reserve Open Market Committee will raise interest rates at its Sept. 20-21 meeting. The dollar index weakened after the jobs report, making oil and other greenback-denominated commodities more affordable for holders of the euro and other currencies. The number of oil rigs operating in U.S. fields rose by 1 to a total of 407, marking the ninth increase in 10 weeks following a flat reading last week, according to a weekly count from energy services provider Baker Hughes. At this time last year, drillers were operating 662 oil rigs.Global benchmark Brent crude futures were up $1.27, or 2.8 percent, at $46.72 a barrel by 1:07 p.m. ET (1707 GMT) but were on course for a decline of more than 6 percent over the week. U.S. West Texas Intermediate crude were up $1.15, or 2.7 percent, at $44.31 a barrel, on track for a 7 percent weekly loss. "With the FOMC likely to stay in September and the dollar dictating where we could go, it's quite likely oil will hold at mid-$40 levels," said Carl Larry Director, director of business development for oil & gas at Frost & Sullivan. "But more telling of how oil performs will be the rig count in coming weeks and OPEC gestures to support prices."

Crude Slides After US Oil Rig Count Rises To 7-Month Highs -- Amid oil's worst week in 2 months (and a big bounce today on the back of Putin's comments) following large inventory builds and disappointing demand factors (PMI, ISM, shipping), Baker Hughes reports the US Oil Rig count rose by 1 to 407 (following last week's unchanged) - the highest in 7 months. This is the 10th straight week no decline in the rig count and crude is sliding on the print...


The 10th week without a decrease in oil rig counts...  And the reaction in crude is much more notable than in recent weeks... Charts: Bloomberg

 BHI: US rig count nears return to 500 despite drop in gulf activity - A week in which offshore operators braced for a potential hurricane strike didn’t prevent another rise in the overall US rig count. The tally of active units increased by 8 to 497 during the week ended Sept. 2, according to Baker Hughes Inc. data. The rebound from last week’s 2-unit drop was bolstered by a 14-unit jump in onshore rigs (OGJ Online, Aug. 26, 2016). Exploration and production activity in the Gulf of Mexico is returning to normal after some rig and platform evacuations and production shut-ins due to the threat of Tropical Depression No. 9, which eventually became Tropical Storm and Hurricane Hermine. Albeit temporary in nature, BHI’s gulf tally and overall US offshore tally for the week was down 7 units to just 10 rigs working. Total shut-in oil output in the gulf during Aug. 30-31 surpassed 300,000 b/d, or more than 20% of total gulf output, but has since fallen to less than 200,000 b/d as of midday Sept. 2, the US Bureau of Safety and Environmental Enforcement reported. Currently there are no remaining evacuated production platforms. Personnel have returned to all 11 nondynamically positioned rigs currently operating, and 3 dynamically positioned rigs are back on location after previously moving off. Overall US crude oil production, meanwhile, dropped 60,000 b/d during the week ended Aug. 26 to 8.49 million b/d, the US Energy Information Administration reported on Aug. 31. The Lower 48 accounted for 50,000 b/d while Alaska represented the remaining 10,000 b/d. For June, EIA said US crude output fell 2.2% month-over-month and 6.6% year-over-year to 8.7 million b/d. Production in Texas declined just 0.7% compared with its May level to 3.17 million b/d, still down 8.4% year-over-year.

Saudi Arabia’s Attempts to Boost Bank Liquidity Aren’t Working - Bloomberg: Easier lending rules and direct cash injections are doing little to alleviate a cash shortage at Saudi Arabian banks, now at its worst since the financial crisis. The government is seeking to plug a hole in its finances by withdrawing deposits and selling local currency bonds to lenders in monthly auctions. The country, grappling with lower oil prices, raised 98 billion riyals ($26 billion) from bond sales to domestic institutions last year, with that figure probably set to rise to about 120 billion riyals in 2016, according to Saudi Fransi Capital. That’s draining funds from the system, reflected in interbank rates in Saudi Arabia that are at their highest since 2009 and which climbed 17 straight days through Monday. In addition, the loan-to-deposit ratio has exceeded central bank limits for two months, even after the country boosted the percentage of its deposits that a bank can lend earlier this year. “The authorities are struggling to find an effective way to boost liquidity,” Asim Bukhtiar, the head of research at Saudi Fransi Capital, said by phone from Riyadh. “Any liquidity injection is just being pulled back out by the monthly government bond issues.”The three-month Saudi Interbank Offered Rate, a key benchmark used for pricing loans, rose to 2.318 percent on Aug. 30, its highest since January 2009, according to data compiled by Bloomberg. The Saudi Arabian Monetary Agency increased the limit that banks can lend to the equivalent of 90 percent of deposits, up from 85 percent, people with knowledge of the matter said in February. That figure rose to 90.5 percent in July, according to monthly data released by SAMA, as the central bank is known, even after the regulator offered $4 billion to banks in late June, people with knowledge of the matter said. The kingdom may raise more than $10 billion from its first international bond sale in October, people with knowledge of the matter said.

 Saudi Arabia Burns Through Foreign Reserves As Oil Prices Tank - You have to hand it to Saudi Arabia. The Kingdom ruled global oil markets for nearly 40 years, increasing or decreasing production as it willed, playing the role of global oil markets swing producer. The OPEC de facto leader, and the second largest global oil producer now after Russia, has simply lost its footing. The Reason? The U.S. shale oil and gas boom. The problem for the Saudis is that they have been caught in a snare of their own making. When global oil markets first became over supplied in 2014 due to increased U.S. oil production, the Saudis in their now infamous November 2014 decision, decided to not pull back production to support plunging prices. The Saudis have take a step further, actually increasing production in the past two years. The effects have been cataclysmic for the global oil industry. Prices, which topped off at $114 during the summer of 2014 are now trading in the low to mid $40s level, after dipping into the $20s mark earlier this year – a pricing scenario unthinkable just a few years ago.  Massive oil industry lay-offs, bankruptcies and a general downturn in the sector has ensued, with little respite on the horizon. Now, the Saudis are having to contend with Iran, post sanctions on Tehran’s energy sector, for market share in both Europe and Asia. Unfortunately, for the Saudis, Iran is willing to cut prices to the bone in order to reach a pre-sanction production level of 4 million barrels per day. Saudi Arabia is also losing market share in Asia to Russia, including China’s vast oil market, which could soon surpass the U.S. as the word’s largest oil importer.

Saudi Arabia Fires 10,000 Substitute Imams To Save Money, As Banking Crisis Looms -- In the latest confirmation of Saudi Arabia's rapidly deteriorating financial situation, having recently sacked 16,000 foreign workers, earlier today the Ministry of Islamic Affairs announced it has terminated the services of 10,000 substitute imams to save 360 million Saudi Riyals, or less than $100 million, the Saudi Gazette reported. The ministry gave the substitute imams the option to either transfer to the position of a full-time imam leading five prayers a day at a mosque or to leave their job all together.  “Many criticized the role of substitute imams claiming they do not do anything useful. Substitute imams receive a salary of SR3,000 a month. The ministry is changing the job title and description of substitute imams to cooperative preacher. Cooperative preachers are responsible for giving sermons when needed,” said the source. The Gazette's source also said cooperative preachers must have a bachelor’s degree in Islamic Studies. “The cooperative preacher will receive monetary compensation and reward for his services. He will follow the rules and regulations of a full-time and official preacher. Substitute imams, imams and preachers have the option to also become full-time imams and part-time preachers,” said the source, adding that those who do not wish to be imams will be cooperative preachers assigned to a mosque.

Iraq's August crude oil exports inch up to 3.230 million b/d - - Iraq's crude oil exports from its southern Persian Gulf terminals inched up by 28,000 b/d to 3.230 million b/d in August, provisional data from the oil ministry showed Thursday, but continue to fall short of previous record highs as greater volumes are allocated for domestic use. The average August export figure is up 4.9% year on year. But it is down some 134,000 b/d from the record rate set in April of 3.364 million b/d, despite fine weather in the upper Gulf for the entire month, according to daily terminal status reports from Basra. The fall from record rates is due to increased volumes sent to local power stations during the country's scorching summer months, as well as its refineries.Domestic supplies rose to 615,000 b/d in July, up 147,000 b/d compared to April. Power plants received as much as 194,000 b/d of crude during the month, up from just 124,000 b/d in April. No breakdown for Basrah Heavy and Basrah Light crude exports was given.

 Iraq seeks to relaunch investment plans for refineries, storage tanks - Iraq's oil ministry is revisiting a program announced four years ago to build four new refineries, while dropping a number of previously planned schemes. After years of stalling on its downstream projects, Iraq's new oil minister Jabbar al-Luaibi has invited international oil companies to invest in the construction of a raft of new refineries across the country. Companies would be invited this week to discuss the issue, oil ministry spokesman Assem Jihad said in a statement Sunday. The ministry also plans to double Iraq's crude oil storage capacity to 24 million barrels, over the next few years through international investment, Luaibi said after inspecting a tank farm near the Zubair oil field. Iraq is offering either a build, own, operate or a build, operate, transfer contract model for new refineries, where the private sector constructs the facility, operates it, and eventually hands it over to the government.The country has struggled to attract private investment after finally breaking with its tradition of state control over the oil industry. Baghdad passed a refining law in 2007 which gives foreign companies the right to build refineries and operate them over a 40-year period. It also set out the overall terms of investment. A 2010 amendment to the law was supposed to make it even more attractive.

 Iran to launch first tenders under new oil contract in October - Oil | Platts News Article & Story: Iran plans to launch its first hydrocarbon bid round using a newly revised upstream contract in October, a senior official said Tuesday. The new contracts will be issued in the Iranian month of Mehr, which corresponds with September 22-October 21, the managing director of state-owned National Iranian Oil Co., (NIOC), Ali Kardor said in comments quoted by oil ministry news service Shana. "In the last week of Mehr [starting October 15], we will issue the tenders regarding technical documents within the new framework of the oil contracts", Kardor said. "South Azadegan is probably the first of the big oil fields which will be put out for tender under this framework," he said.National Mortgage News - USDA to Lower Fees to Lenders in October: Lenders who use the U.S. Department of Agriculture Rural Housing Service's Single Family Housing Guarantee Program will pay less beginning in October, the department said last week. The USDA will lower the upfront and annual fees charged to lenders starting Oct. 1. The department cited low delinquency and foreclosure rates as the reason why it chose to lower fees. The upfront fee will be lowered from 2.75% of the loan-at-close amount to 1%. And the annual fee will drop to 0.35% of the unpaid principle loan balance from 0.45%. "When our borrowers succeed, the program succeeds," USDA Rural Housing Service Administrator Tony Hernandez said in a news release. "Excellent overall performance in our Single Family Housing Guaranteed Loan Program means we can charge less for the life-changing opportunity to own a home."

U.S., others agreed 'secret' exemptions for Iran after nuclear deal: think tank | Reuters: The United States and its negotiating partners agreed "in secret" to allow Iran to evade some restrictions in last year's landmark nuclear agreement in order to meet the deadline for it to start getting relief from economic sanctions, according to a think tank report published on Thursday. The report, which was released by the Washington-based Institute for Science and International Security, is based on information provided by several officials of governments involved in the negotiations. The group's president David Albright, a former U.N. weapons inspector and co-author of the report, declined to identify the officials, and Reuters could not independently verify the report's assertions. "The exemptions or loopholes are happening in secret, and it appears that they favor Iran," Albright said. (Link to the report: here

 Al Qaeda In Syria Changed Its Name And Now The US Is Arming Them --Though many scoffed when the Al Qaeda affiliate in Syria, Jabhat Al-Nusra, rebranded itself Jabhat Fateh Al-Sham, that cosmetic change was apparently enough to convince the US government to start sending them arms.  In the recent push by rebels in the city of Aleppo, Al-Nusra/Al-Sham took a leading role and was reportedly among the rebels groups who received US weapons. Those weapons will first be used to kill Syrian government troops and after that, well, who knows? Many, if not most, of the rebel groups fighting the Syrian government are jihadist and few have any serious objection to Al-Nusra participating in their operations, especially given that Al-Nusra has proven to be one of the most effective groups on the battlefield. If Al-Sham and fellow Sunni jihadists prevail over Syrian government forces, a genocide will likely commence against religious minorities in Syria, starting with the Alawites and moving on to other Shiites. From the Atlantic Council:  “According the Syria analyst Charles Lister, there is a significant subsection of the Syrian opposition that does not oppose Fateh al-Sham’s participation in Aleppo related military operations. Moreover, Lister said that opposition forces fighting in Aleppo received for the first time American weapons that are normally designated for forces fighting the Islamic State (ISIS). The opposition’s takeaway is that the United States does not object to preserving the balance on the ground with the Syrian regime, even if doing so indirectly bolsters Fateh al-Sham.” While it would be a mistake to say this is the first time the US gave assistance to Al Qaeda-linked rebels in Syria, it is a pretty stunning digression from earlier claims from US officials that assisting Al Qaeda and ISIS was completely off limits. Now the US is arming them in one of the most crucial battlefields of the Syrian Civil War. Then again, Al-Nusra/Al-Sham claims it no longer is within the Al Qaeda network (though they also appear to still hold much of the same beliefs). I guess a rebrand is all it takes for the US to take a group from sworn enemy to ally worthy of receiving anti-tank weapons. What could go wrong?

Turkey targets Kurdish forces south of Syria's Jarablus -  Turkish jets and artillery have targeted Kurdish forces south of the strategic town of Jarablus, according to a monitor and local sources, as Turkey continues a major military offensive inside northern Syria. Turkey first sent tanks across the border on Wednesday as part of a two-pronged operation against Islamic State of Iraq and the Levant (ISIL) fighters, as well as Kurdish-led forces.The UK-based Syrian Observatory for Human Rights said Saturday's air strikes and shelling hit the village of Amarneh, which was captured recently by the US-backed Syrian Democratic Forces (SDF). The strikes came as Turkish-backed Syrian rebels clashed with Kurdish fighters on the ground.  The Jarablus Military Council, which is allied with the SDF, said the air strikes in Amarneh marked an "unprecedented and dangerous escalation" after Turkish artillery shelling targeted Kurdish YPG forces, the backbone of the SDF alliance, on Friday. The council said there were injuries, without giving any further details, but warned that the escalation threatened to "endanger the future of the region" and vowed to stand its ground.

Wedding Crashers Who Kill: “In Turkey, Even Joyous Wedding Can Be a Target,” ran the headline in the August 22, 2016 New York Times. Two days earlier, a suicide bomber had struck at a Kurdish wedding celebration in the Turkish city of Gaziantep, close to the Syrian border. The bomber, a boy about 14 years old, killed more than 50 wedding guests, many of them children, and wounded 100 others. Gaziantep was the deadliest bombing in Turkey this year.Turkish President Recep Tayyip Erdogan blames the Islamic State (IS) for the attack.  As of late Wednesday, IS had not taken credit for the Gaziantep bombing. However, it’s not IS that I want to discuss. You would never know it from the Times account, but US armed drones and other aircraft have “crashed” weddings in Afghanistan, Iraq, and Yemen. I am not suggesting that the US was behind the slaughter at Gaziantep. Instead, I want to ask a question. Why do we condemn IS for attacking a wedding and not the US for doing the same thing?“The US Has Bombed at Least Eight Wedding Parties since 2001” according to the title of an article by Tom Engelhardt in the December 20, 2013 Nation. Engelhardt comments: “If the Taliban or the Iranians or the North Koreans had piled up such figures … [w]e would classify them as barbarians, savages, evildoers.” Yet US media gives these deaths a pass.There are too many incidents to discuss separately. The following will be enough to sicken any reader.

Syrian Kurds vow to fight to the death to stop Turkey 'invading' their territory - The Syrian Kurdish leadership vows to defend their de facto state in north east Syria to the end, but is fearful of a growing understanding between the Syrian and Turkish governments in opposition to Kurdish separatism at a time when US support for the Kurds is faltering. In an exclusive interview with The Independent, a senior Syrian Kurdish official says that the Kurds will fight to the death to stop Turkey “invading the region” and speaks of possible reconciliation between Damascus and Ankara on the Kurdish question. The Syrian Kurds, who have been the most effective US ally in the war against Isis in Syria, now see themselves as possible victims of international betrayal. The US support for the Turkish military intervention in Syria on 24 August and demand that the Syrian Kurdish People’s Protection Units (YPG), who had just captured the strategic town of Manbij from Isis after a hard-fought siege, should pull back east of the Euphrates river, were bitter blows to the Kurds. Without whole-hearted US support, they are vulnerable to attacks by the numerous enemies who encircle them, notably Turkey and possibly, in future, the Syrian government. Turkey denies reaching ceasefire with Kurdish forces in Syria

The US is pissing off everyone in northern Syria - Vice - When US Secretary of Defense Ash Carter asked Turkey on Monday to "stay focused" in the fight against the Islamic State (IS) and stop attacking US-backed Kurdish forces, Turkish officials responded with a suggestion of their own. "Americans should revise their policy of supporting (the Kurdish-led force) at all costs," Turkish presidential spokesperson Ibrahim Kalin said in a Turkish newspaper on Tuesday. It was the latest rebuke to American damage-control efforts after US-backed Kurdish forces clashed with American NATO ally Turkey over the weekend. The Syrian Kurds blew up a Turkish tank in the north of Syria on Saturday, killing at least one soldier, and Turkish warplanes attacked Syrian Kurds the following day, killing at least 35 people. Experts on the region say the US has mismanaged its relationships with allies who have wildly differing objectives in Syria. And this, says Robert Ford, the last US ambassador to Syria, has created a quagmire that could have been avoided. "We managed to make everyone angry at us: The Syrian kurds, the larger Syrian opposition, as well as the Turks," said Ford, who is now a senior fellow at the Middle East Institute. Ford said this is partly because the US failed to communicate the limits of its support to the Syrian Kurds. Before Turkey launched an unprecedented offensive, code-named "Operation Euphrates Shield," into northern Syria last week. US Vice President Joe Biden visited Turkey and publicly announced that the Kurdish-led Syrian Democratic Forces, or SDF, would need to withdraw to the east of the Euphrates River, as Ankara had requested, or the US would no longer support them. "If the vice president has to say that in Turkey, there's a problem," Ford said

"Apocalyptic Scenes" As Fleeing ISIS Fighters Set Iraqi Town's Oil Wells On Fire -- Back in 1991, when the Iraq army was retreating from Kuwait in the Persian Gulf War, it unleashed a literal "scorched earth" tactic as it set fire to some 600 oil wells, leading to iconic photos such as this one. Twenty-five years later, in an ironic twist, it was ISIS fighters who returned the favor, and while fleeing an Iraqi toawn, they did their best to raze it to the ground by flooding the streets with oil and setting it on fire.  Pressured by the latest advance of coalition forces approaching the Islamic State stronghold of Mosul in the north of the country, the jihadists were forced to retreat from Qayyara by Iraqi soldiers. As they fled, they took a page from the Iraq's own army as they ISIS bombed pipelines and set fire to nearby oil wells, creating an endless cloud of black smoke that blocked out the sun, leaving the town shrouded in darkness in an eerie redux of scenes from 1991.  Smoke billowing into the sky during a Reuters visit on Monday blotted out the sun in central districts hours before nightfall, producing an "apocalyptic scene" in this desert settlement which lacks electricity amid 49 degree Celsius (120°F) temperatures. While Baghdad wants to retake Mosul before the end of the year, which it says will effectively end the militants' presence in Iraq more than two years after they seized a third of its territory, some officials from countries in the U.S.-led coalition supporting the Iraqi forces have said that timeline may be too ambitious. However, the loss of Qayyara will certainly deal a blow to Islamic State, which had extracted oil from some 60 wells and sold it to help finance its activities.

  Saudi Arabia preparing and equipping 5,000 al-Qaeda terrorists to fight Yemeni army in Najran Province -- The Saudi army is preparing, arming and equipping over 5,000 Salafi and Al-Qaeda terrorists in the Southern part of Yemen for war against the Yemeni army and popular forces in the kingdom's Najran province, media reports disclosed on Sunday. "Saudi Arabia has resorted to making direct use of thousands of terrorists to confront the Yemeni forces following its heavy defeats in Najran and Assir provinces," the Arabic-language media quoted unnamed Yemeni military sources as saying on Sunday. Since the Saudi invasion of Yemen nearly one and a half years ago, there have been many reports about coordination and cooperation between the Saudi troops and al-Qaeda and other terrorist groups to attack the popular forces in different parts of the impoverished country. In late May, a senior Yemeni commander disclosed that the Saudi-led coalition has sent large cargos of state-of-the-art military weapons and equipment to the al-Qaeda terrorist group in Yemen. "The Saudi-led coalition has recently sent modern military equipment, including tanks and armored vehicles, through the sea to the port city of Mukalla in Hadhramout province, Southern Yemen,""The al-Qaeda terrorist group has received the military equipment to suppress the revolutionary moves and carry out terrorist operations,"

Russian producers sign deals with Asian, western partners at Vladivostok forum - Russia's oil and gas companies Friday signed a number of upstream and downstream cooperation agreements on the first day of Russia's Eastern Economic Forum in Vladivostok, focused on building ties between Russian and Asian countries. Russia's top producer Rosneft, in particular, agreed with Thailand's PTT to develop cooperation ties in upstream, crude and oil products trading, refining, petrochemical projects, and LNG supplies.The agreement "confirms the intention of both parties to conclude in the near future a long-term contract to supply crude oil and other feedstock to PTT," Rosneft said in a statement. "Through cooperation with the largest energy company in Thailand Rosneft will enter one of the most lucrative energy markets in the Asia-Pacific region," it added. Rosneft sees significant potential in its cooperation with PTT, which could include LNG trading, considering the expansion of the Map Ta Phut terminal and a natural decline in gas production in Thailand, Rosneft CEO Igor Sechin said in a statement, providing no further details. Separately, Rosneft, BP and Schlumberger announced agreements for collaboration on seismic research and developments, under which Rosneft will join as an equal partner BP's ongoing project with Schlumberger's seismic business, WesternGeco, to develop innovative cableless onshore seismic acquisition technology. The technology aims at raising the efficiency of exploration, appraisal and field development.

  Analysis: South Korea a bright spot for fuel oil demand - A combination of low prices and extreme weather has seen South Korea's demand for fuel oil, locally known as Bunker-C, rise by almost 40% to 27.91 million barrels in the first seven months of 2016. And with the heat wave showing no signs of abating, it is likely that demand for the fuel, which has fallen out of favor in other top Asian oil consumers such as China and Japan, will continue to remain strong in South Korea. Apparent demand for fuel oil in China fell nearly 21% year on year to an average 749,000 b/d over January-July 2016, and Japan's demand fell 23% to an average 242,139 b/d in the same period, latest data from S&P Global Platts and Japan's Ministry of Economic, Trade and Industry showed.But South Korea's fuel oil demand in July nearly doubled to 3.81 million barrels from 1.95 million barrels a year earlier, led by a heat wave that has swept the country, according to data from state-run Korea National Oil Corp. Fuel oil demand for power generation, which has accounted for nearly half of the country's total fuel oil demand, soared more than 10 times to 1.56 million barrels in July, from 153,000 barrels a year earlier, KNOC's data showed. According to KNOC, the proportion of Bunker-C in total feedstock for power generation has steadily increased to 10% in June from 4.3% a year earlier. "As South Korea has been suffering from scorching heat in August and temperatures for September are forecast to be higher than usual, the country's Bunker-C oil demand for power plants is expected to stay strong for the time being," a KNOC official said.

Analysis: After brief resurgence, China's oil demand falters yet again - China's oil demand fell to 11-month lows in July on the back of erratic weather and feeble industrial growth, crushing hopes of a recovery in consumption which the market had expected after the country in June pulled itself out of the red for the first time in many months. But analysts are hopeful that the fall would be temporary and demand would recover in the remaining months of the year. Total apparent oil demand in the world's second-largest oil consumer fell to 10.75 million b/d in July, dropping 6.9% from June and witnessing the steepest year-on-year decline of 5.4% since January 2009, S&P Global Platts calculations showed. China's apparent oil demand in June had increased 1.8% year on year to 11.54 million b/d, which was 6.1% higher from May."Apparent demand was dragged down by record high oil product exports in July, at around 860,000 b/d, a further reflection of overflowing supplies, overwhelming refiners," said Song Yen Ling, senior analyst at Platts China Oil Analytics. Demand for key oil products grew either in single digits or fell year on year in July. LPG, naphtha and jet fuel have largely been registering double-digit year-on-year growth in recent months.

 China’s oil majors scale back output as priorities shift - A shift in Beijing’s priorities away from production targets has allowed Chinese oil companies to halt output in maturing oilfields, a previously politically unpalatable decision that leaves them better placed for an eventual recovery in oil prices. International majors routinely scale back production from high-cost fields when oil prices fall, but in China, for decades, the government mandate has been to increase domestic supply and ensure energy security.“In years past, they were under pressure to produce higher numbers every year, even if they were producing uneconomically. Now that pressure is gone,” said Laban Yu, head of Asian energy research with Jefferies. In the past week both PetroChina and Sinopec reported declines in oil production for the first half of the year. Sinopec said domestic crude oil output fell 13 per cent versus a 3 per cent drop in its overseas operations, while PetroChina reported a 4 per cent decline in domestic production. Both managed to turn a profit in the first half, though PetroChina just barely remained in the black, reporting a 98 per cent plunge in first-half net profit to Rmb531m ($79m) while revenue fell 16 per cent to Rmb739bn. Sinopec, whose refining arm benefits more from low crude prices, said net profit declined 22 per cent to Rmb20bn as revenues fell 37 per cent to Rmb880bn. China’s third oil major Cnooc, which had told analysts it would likely cut output by as much as 5 per cent this year, said oil and gas production crept up by less than 1 per cent in the first half and is expected to see crude output fall in the second half of the year. The company lost Rmb7.74bn in the first half, reversing from a profit of Rmb14.73bn a year ago. In the first seven months of the year, Chinese crude oil output dropped 5 per cent compared with the same period of 2015, with production in July falling to levels last seen in late 2011.

Analysis: Tax crackdown on China independents may temporarily slow crude inflows - China has unveiled steps to tighten tax norms for independent refiners and better regulate their crude import quotas, a move that could potentially slow their crude buying plans and throughput in the near future, but the impact over the longer term is unlikely to be substantial, sources said. After an investigation following complaints that some independent refiners were avoiding taxes and reselling their cargoes, the National Development and Reform Commission said Tuesday that it would suspend the use of imported crude for 6-12 months or even cancel the right to use imported crude if any company was found to be avoiding taxes. The statement did not point to any specific company but the announcement was seen as an advance warning to independent refiners in an effort to stop them from resorting to such practices in future."Due to the uncertainty over how tough authorities will be when carrying out the measures, I expect the independent refiners will step back to take a wait-and-see approach for one to three months before reacting further," a Shanghai-based analyst said. Some of the other measures mentioned by the NDRC included the strict examination of applications, a strengthening of the auditing process and the elimination of outdated refining capacity.

China Is Building New Silk Road to Central Asia and Europe -  Xi Jinping, 63, the president of China and general secretary of the Communist Party, wants to revive the myth and build a New Silk Road, in large parts along the old trade route. It would mark the return of a legend. For some time now, many of his speeches have included references to "yi dai yi lu," or "a belt, a road." It is a gigantic project, and China envisions about 60 countries being involved, or about half of humanity. China wants to expand trade along the route and develop infrastructure. Beijing has earmarked $40 billion (€36 billion euros) for the project, to be invested in building new roads, and in railroads, pipelines and ports from Lithuanian to the Horn of Africa, Sri Lanka to Israel, and Pakistan to Iran. Two railroad lines lead to Germany, one from Zhengzhou to Hamburg and the other from Chongqing to Duisburg.  In order to finance the massive project, the Peoples' Republic initiated the establishment of a financial institution: The Asian Infrastructure Investment Bank (AIIB). For years, Xi Jinping was displeased by the fact that Washington provided his country with little say in organizations like the World Bank and the International Monetary Fund (IMF). In June 2015, 57 countries signed the charter of the AIIB, against the will of the United States. They included France, Great Britain and Germany. Everyone wants to be involved when the Chinese are planning big things. But what is Beijing trying to achieve with its Silk Road plan? Does the Chinese leadership want to promote economic development in nearby and faraway countries and "bring together" the world, as it insists in its government propaganda? Is it because Chinese companies need globalization to bolster their stuttering economy and create new export routes for surplus production of goods, as well as routes for importing oil? Or is the real goal to break the West's political dominance -- a plan, in a sense, to conquer the world?

What Rail Freight Volume just Said about China | Wolf Street: The Chinese government is getting nervous about the numbers and is insisting, top-down, on obtaining economic growth of 6.5% to 7% this year, one way or the other. China’s cabinet has sent inspectors fanning out to provinces across the country to “keep economic growth within a reasonable range and ensure the main objectives and tasks of this year’s economic and social development will be completed,” according to Xinhua news agency, cited by Reuters. Because, apparently not all of China was playing along…. Some regions and government departments are not coordinating their policies well and some officials are lazy in their work, Xinhua said. These inspectors, in addition to keeping up the pressure on growth, are also supposed to make sure that major policy measures are implemented along with “supply-side structural reforms” – cutting, for example, the massive and destructive overcapacity in the steel and coal sectors and the power generation sector. And these inspectors also supposed to support investment projects and innovations. The government must have taking a good look at the rail freight data and is getting desperate, and it’s going to force official growth to happen, because the rail freight data, one of the key gauges of the goods producing economy, is dismal and contradicts the official growth story. The National Development and Reform Commission (NDRC) said  Monday that rail freight volume in July dropped 5.8% from a year ago, to 263 million tons of cargo. For the first seven months, rail freight volume plunged 7.3% year-over-year.  Volume of rail freight traffic, as measured by metric tons of cargo transported and the distance traveled in kilometers, had plunged 13.4% from 2014, to 2.38 trillion ton-kilometers, according to Statista. And in 2014, rail freight volume had fallen 5.8% from 2013:

China’s Factory Gauge Unexpectedly Rises to Highest Since 2014 - China’s official factory gauge unexpectedly rose last month to the highest level in almost two years, suggesting the economy’s stabilization remains intact and that a weakening in July was flood-related and temporary. Key Points Manufacturing purchasing managers index rose to 50.4 in August from July’s 49.9 and compared to the 49.8 median estimate of economists surveyed by Bloomberg. Non-manufacturing PMI stood at 53.5 compared with 53.9 in July Caixin Media and Markit Economics China August Manufacturing PMI fell to 50 from 50.6 in July and below 50.1 median estimate Numbers above 50 indicate improving conditions.Floods across southeastern regions responsible for about a fifth of China’s economic output interrupted production in the summer. The rebound in August gives policy makers breathing space to push ahead with reforms of state-owned firms and cutbacks in overcapacity sectors such as coal and steel. The offshore yuan strengthened while the Australian dollar -- a proxy for China’s economy because of its shipments of raw materials -- climbed.

A weak yuan is a bigger threat to the global economy than Brexit - The managers of the world’s second-largest economy have taken advantage of the frenzied media coverage of Brexit, and other news events like the Rio Olympics and the U.S. election to slowly guide their currency, the yuan, lower against both the dollar and a trade-weighted basket of currencies without triggering a global financial panic. That’s in contrast to the global market chaos that followed a devaluation of the yuan in August 2015 and a sharp drop by the currency in January. But just because investors aren’t paying attention doesn’t mean they shouldn’t be. China is using a weaker yuan to help prop up its faltering economy and delay a seemingly inevitable reckoning with the private and public debt its government has allowed to balloon out of control. Because it’s being used to mask problems associated with the dangerously overleveraged Chinese economy, the steady depreciation of the yuan is a greater threat to the global economy than Brexit, argues Michael Arone, chief investment strategist for State Street Global Advisors, in a Thursday note.It’s clear that Chinese officials have taken advantage of the market’s preoccupation with Brexit, Arone said. On June 23, the day of the referendum vote, Chinese officials quietly fostered a 1% drop in the yuan’s value against the dollar—the largest one-day devaluation since the Aug. 11, 2015 that was widely blamed for a global market rout later that month. Strangely, the steady depreciation of the yuan over the past year has had little, if any, lasting impact on global financial markets. But that’s probably because distracted investors haven’t been paying enough attention, Arone said. “First and foremost, the devaluation may signal further deterioration in the world’s second largest economy. It may be an attempt to uphold already slowing GDP growth by exporting deflation to protect its exports,” Arone said.

Is The Dirty Little Secret of FX Intervention That It Works? - Foreign exchange intervention has long been one of those things that works better in practice than in theory.* Emerging markets worried about currency appreciation certainly seem to believe it works, even if the IMF doesn’t.** Korea a few weeks back, for example. Korea reportedly intervened—in scale and fairly visibly—when the won reached 1090 against the dollar in mid-August: “Traders said South Korean foreign exchange authorities were spotted weakening the won “aggressively,” causing them to rush to unwind bets on further appreciation. On Wednesday (August 10), according to the traders, authorities intervened and spent an estimated $2 billion when the won hit a near 15-month high of 1,091.8.” And, guess what, the won subsequently has remained weaker than 1090, in part because of expectations that the government will intervene again. And of course the Fed.  And that is how I suspect intervention can have an impact in practice. Intervention sets a cap on how much a currency is likely to appreciate. At certain levels, the government will resist appreciation, strongly—while happily staying out of the market if the currency depreciates. That changes the payoff in the market from bets on the currency. At the level of expected intervention; appreciation becomes less likely, and depreciation more likely.***   1090 won-to-the-dollar incidentally is still a pretty weak level for the won, even if the Koreans do not think so. The won rose to around 900 before the crisis, and back in 2014, it got to 1050 and then 1000 before hitting a block in the market. In the first seven months of 2016, the won’s value, in real terms, against a broad basket of currencies was about 15 percent lower than it was on average from 2005 to 2007. My guess is that Korea’s practice of intervening to cap the won’s appreciation at certain levels—and systematically trying to keep the won weaker than it was from 2005 to 2008 is part of the reason why Korea runs such a large current account surplus. Just a hunch.

China regulator will curb news that promotes 'Western lifestyles' - Business Insider: (Reuters) - China will crack down on social and entertainment news that promotes improper values and "Western lifestyles", the country's broadcasting regulator said, the latest effort at censorship in an already strictly regulated media environment. President Xi Jinping has embarked on an unprecedented drive to censor media that do not reflect the views of Communist Party leaders. Authorities have already issued rules limiting "foreign-inspired" television shows and put tougher penalties on the spread of rumors via social media. Social and entertainment news must be dominated by mainstream ideologies and "positive energy", the official Xinhua news agency said late on Monday, citing the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT). News content should not make improper jokes, defile classics, or "express overt admiration for Western lifestyles", the regulator said in a circular, according to Xinhua. "They should also avoid putting stars, billionaires or Internet celebrities on pedestals", and not advocate overnight fame or hype family disputes, Xinhua said.

A Chinese Mystery: Who Owns a Firm on a Global Shopping Spree? - Pingyang County’s verdant hills still hint at a long-lost China. Rice paddies and villages surround its bustling towns, and in the fields, farmers wade into the mud to plant seedlings as they have for thousands of years.It is an odd place to find the people behind a Chinese corporate powerhouse that is turning heads on Wall Street with a global takeover binge. Yet the area is home to a tiny group of just such people — small-time merchants and villagers who happen to control multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties.American regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others.The questions add to the mystery surrounding a company that seemed to come out of nowhere, surprising deal makers with offers to pay more than $30 billion for assets around the world.Anbang’s shopping spree is part of an outflow of money from China that has reshaped global markets but has often been shrouded in secrecy, sometimes by prominent Chinese looking to shift their wealth abroad without attracting attention at home. That poses a problem for international regulators trying to identify the buyers behind major acquisitions and to assess the riskiness of these deals.AdvertisementContinue reading the main story The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies. But according to dozens of interviews and a review of thousands of pages of Anbang filings by The New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui, Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.

 Digging Into China’s Growing Mountain of Debt -  Some prominent investors are worried about China’s debt. George Soros sees an “eerie resemblance” between conditions in China now and those in the U.S. leading up to the financial crisis in 2008. “It’s similarly fueled by credit growth and an eventually unsustainable extension of credit,” Soros told the Asia Society in New York in April. BlackRock Chief Executive Officer Laurence Fink was asked about China’s mounting debt on Bloomberg TV in May. “We all have to be worried about it,” Fink said, adding that he remains bullish on China’s economy in the long run. And in June a Goldman Sachs report warned that the country’s large and unaccounted-for shadow-banking activities raised concern “about China’s underlying credit problems and sustainability risk.” Indeed, many segments of the Chinese economy have taken on considerable debt, especially since the global financial crisis. Over the past decade, total debt grew 465 percent. Debt rose to 247 percent of gross domestic product in 2015, from 160 percent in 2005. Bloomberg Intelligence breaks China’s total debt into four components: bank, corporate, government, and household. For tickers, run {CHBGDCOP Index } and then type {DES }. Bank debt has decreased slightly in relation to the size of the country’s economy over the past 10 years, to 19 percent of GDP in 2015. Corporate debt, meanwhile, jumped to 165 percent of GDP from 105 percent. Government debt rose to 22 percent of GDP. Household debt has increased to more than 40 percent of GDP, a rise of 23 percentage points.

Global Growth – Still Made in China by Stephen S. Roach -- Despite all the hand-wringing over the vaunted China slowdown, the Chinese economy remains the single largest contributor to world GDP growth. For a global economy limping along at stall speed – and most likely unable to withstand a significant shock without toppling into renewed recession – that contribution is all the more important.   A few numbers bear this out. If Chinese GDP growth reaches 6.7% in 2016 – in line with the government’s official target and only slightly above the International Monetary Fund’s latest prediction (6.6%) – China would account for 1.2 percentage points of world GDP growth. With the IMF currently expecting only 3.1% global growth this year, China would contribute nearly 39% of the total.  That share dwarfs the contribution of other major economies. For example, while the United States is widely praised for a solid recovery, its GDP is expected to grow by just 2.2% in 2016 – enough to contribute just 0.3 percentage points to overall world GDP growth, or only about one-fourth of the contribution made by China. A sclerotic European economy is expected to add a mere 0.2 percentage points to world growth, and Japan not even 0.1 percentage point. China’s contribution to global growth is, in fact, 50% larger than the combined 0.8-percentage-point contribution likely to be made by all of the so-called advanced economies.  Moreover, no developing economy comes close to China’s contribution to global growth. India’s GDP is expected to grow by 7.4% this year, or 0.8 percentage points faster than China. But the Chinese economy accounts for fully 18% of world output (measured on a purchasing-power-parity basis) – more than double India’s 7.6% share. That means India’s contribution to global GDP growth is likely to be just 0.6 percentage points this year – only half the 1.2-percentage-point boost expected from China.

One Striking Chart Shows Why, According to MS, The Next Global Recession Begins In China - Much has been said about China in the past year. Now, courtesy of Morgan Stanley's Chetan Ahya, here is one additional data point revealing why China will be ground zero for the next global economic slowdown. As Ahya notes in his Sunday Start note, "several large economies in the world including but not limited to the US, euro area, China, Japan and UK are facing the 3D challenge of demographics, debt and disinflation. Among these economies, we believe that China, which currently accounts for 18% of global GDP and 27% of global manufacturing and contributes 45% to global growth, will be the biggest drag towards lower nominal GDP growth and consequently lower expected returns." Surprisingly, unlike many other Chinese doomsayers, Morgan Stanley does not think the catalyst of China's upcoming "hard landing" will be financial, or debt-related: The key concern that investors have on China is that its debt build-up could result in a potential financial shock, which would be akin to the experience of the US in 2008 and emerging markets in the 1990s. However, we think that the macro set-up and policy preferences will mean that the risk of a financial shock in China is low. There are three key characteristics of China’s current macro set-up: i) Debt is being largely funded domestically, i.e., China is misallocating its own excess saving; ii) It remains a net creditor to the world (with a net international investment position of 14.7% of GDP) and it runs a current account surplus; and iii) It is facing significant disinflationary pressures, which will allow the central bank to inject liquidity to manage any potential risk-aversion in the domestic financial system. While there are non-performing loans in the banking system, policy-makers will likely have significant control of liquidity conditions to prevent a financial shock, in our view.

 In Historic Event, China Sells First World Bank SDR-Denominated Bonds In Decades - In one of the most closely followed bond issues in recent history, overnight the International Bank for Reconstruction and Development (IBRD), one of the five member-institutions of the World Bank Group, sold 500 million SDR-denominated three-year bonds carrying a coupon of 0.49% at an auction in China's interbank market on Wednesday. This was the first SDR denominated offering in over three decades, with the issuance symbolically taking place in Shanghai one month before the official inclusion of China's currency in the SDR basket.  The issue, the first SDR bond in 35 years, is being closely watched by investors as it's part of a wider push in China to increase the net supply of such bonds, and comes as Beijing hosts the G20 summit in Hangzhou on Sept. 4-5. The SDR is a synthetic reserve currency administered by the IMF, whose value is determined by a basket of other major world currencies.  While some have speculated that the offering is a test toward internationalizing the SDR as a global reserve currency and putting the IMF at the forefront of a post-globalized world, with notable implications for the fate of the US Dollar as the global reserve, for now the consequences are more mundane: the SDR bonds that settle in RMB give Chinese domestic investors the option of getting exposure to different currency assets without investing overseas, says Ju Wang, a senior FX strategist at HSBC. According to PBOC deputy governor Pan Gongsheng the issuance of the SDR-denominated bond will help boost the stability of the international currency system.  Pan said the SDR bonds will help investors avoid exchange-rate risks and are a good way of making the reserve currency a more a market-oriented pricing tool. The PBOC will work with IMF to further expand the use of the SDR, he said.

Obama urges China to stop flexing muscles over South China Sea --  China needs to be a more responsible power as it gains global influence and avoid flexing its muscles in disputes with smaller countries over issues like the South China Sea, US President Barack Obama told CNN in an interview to be aired on Sunday. Obama, who meets with President Xi Jinping at a G20 summit next week in China, told CNN the United States supports the peaceful rise of China but that Beijing had to recognise that “with increasing power comes increasing responsibilities,” according to excerpts released on Friday. “If you sign a treaty that calls for international arbitration around maritime issues, the fact that you’re bigger than the Philippines or Vietnam or other countries ... is not a reason for you to go around and flex your muscles,” Obama said. “You’ve got to abide by international law.” China, a signatory to the UN Convention on the Law of the Sea, recently lost an arbitration dispute over the South China Sea. A court in the Hague found China had no historic title over the waters of the South China Sea and had infringed on the rights of the Philippines. Beijing has rejected the ruling. Obama said Washington had urged Beijing to bind itself to international rules and norms to help build a strong international order. “Where we see them violating international rules and norms, as we have seen in some cases in the South China Sea or in some of their behaviour when it comes to economic policy, we’ve been very firm,” Obama told CNN. “And we’ve indicated to them that there will be consequences.”

 How Obama’s Asia Pivot Nudged China Toward Pakistan But Helped Aggravate India - After many disastrous years spent trying to shape the Middle East, the Obama administration has refocused its foreign policy toward defending U.S. interests in economically wealthy East Asia. President Obama’s “pivot to Asia” is widely perceived as an attempt by the United States to contain China’s growing economic and political clout in that region. But the resulting increase in U.S. pressure on China’s eastern periphery has had an interesting side-effect — it has led China to look elsewhere on the continent for opportunities to trade, invest, and build diplomatic influence. A major target of this redirected effort has been China’s neighbor to its west, Pakistan. A series of joint Chinese-Pakistani infrastructure projects are now underway, branded collectively as the China-Pakistan Economic Corridor (CPEC). These investments are intended to build Pakistan’s economic capacity and increase its links to western China, while giving China access to port facilities on the Indian Ocean. Although the project could have significant long-term economic benefits to the region, it has engendered tensions with India, which has had contentious relations with both China and Pakistan in the past. How China navigates this effort to expand its influence with Pakistan, and how other powerful countries respond, could determine whether South and Central Asia embark on a new era of shared prosperity or remain trapped in a cycle of conflict.

  Japan's massacre of the disabled has gone completely unnoticed - On July 26, 2016 a man wielding a knife broke into Tsukui Yamayuriena, a home for the disabled outside of Tokyo and brutally murdered 19 people as they slept, while injuring another 26.  Afterwards, he turned himself in to a local police station, with the explanation:  “It is better that the disabled disappear.”  Disability advocates have expressed dismay that the massacre – Japan’s deadliest mass killing since World War II – has received so little attention relative to mass killings in Paris, Nice, Orlando, Kabul and Baghdad. Australian disability activist Carly Findlay wrote“There was no hashtag. No public outcry. Not even prayers.”  Disability rights journalist David Perry pointed out the irony that the attack came just one day before the anniversary of the Americans with Disabilities Act.  This sad coincidence is evidence of an ongoing ambivalence toward people with disabilities. On the one hand, they are increasingly visible – often as sources of inspiration for the able-bodied. And there are many signs of progress, such as recognition of their legal rights and more inclusive schools.  On the other, disabled people continue to face prejudice, social isolation, and violence.  In Japan there is a deep stigma against those who are unable to work. Indeed, it is still common to institutionalize people with disabilities, intellectual or otherwise, that impede their productivity.  By warehousing people with disabilities, institutions send the message that they need to be segregated and managed. It becomes easy for their differences to be seen as a shameful and frightening secret that happens to other, less worthy people.  In truth, disability is an aspect of ordinary experience that touches all people and all families at some point in the cycle of life.  Yet, fear of our own vulnerability and of the stigma that accompanies disability leads us to deny this basic truth. It is easier to see the disabled as a faceless population than as individuals who deserve respect, accommodation and opportunities to thrive.

Japan top spokesman signals readiness to stem yen gains - Japan's chief cabinet secretary has signaled Tokyo's readiness to intervene in the market if the yen spikes out of line with fundamentals and defended the Bank of Japan's negative interest rate policy. Yoshihide Suga, one of premier Shinzo Abe's closest aides, told Reuters in an interview on Tuesday the government will respond "appropriately" to unwelcome yen gains that hurt growth. He also stressed the need to respect the BOJ's independence from political interference, a sign the government will not get in the way if the bank opts to deepen negative rates to stimulate the economy. Suga's comments come as Japan struggles to get on a solid growth track. Its economy ground to a halt in April-June and analysts expect any rebound in the current quarter to be modest, as weak global growth and the yen's 20 percent rise against the dollar this year have hurt exports and capital spending. He said yen moves were a key debate topic at a regular meeting he created that gathers senior officials from the Ministry of Finance, the Financial Services Agency and the BOJ. "Through the meetings, the government will closely watch market moves and respond appropriately," the top government spokesman said, when asked whether Tokyo could intervene in the market if the yen spikes abruptly.

 BOJ Needs Massive Move to Shock & Awe, $2 Trillion Investor Says - Bloomberg: The Bank of Japan could announce a “massive stimulus program” as the nation seeks to reach a 2 percent inflation target, according to UBS Wealth Management. “It is how much they do, and whether they can create that kind of shock and awe at this point in the cycle,” said Mark Haefele, global chief investment officer at UBS Wealth Management, in a Bloomberg Television interview, on Monday. “They could announce a massive stimulus program both on the monetary and fiscal side or they could end up reducing their inflation targets. Right now, it looks like they are going to use more stimulus. ” Governor Haruhiko Kuroda said over the weekend in the U.S. that the central bank won’t hesitate to boost monetary stimulus if needed, and there is ample space for additional easing. He also said at the Federal Reserve’s annual policy retreat in Jackson Hole, Wyoming, that the central bank will carefully consider how to best use policy to achieve its price stability target.

Japanese Government Now The Largest Shareholder Of 474 Big Companies - The two biggest buyers of Japan Inc. are flying blind and don’t care. The Bank of Japan and the Government Pension Investment Fund (GPIF) have been buying stocks to inflate the market, create some kind of “wealth effect,” and bamboozle regular Japanese into pouring once again into stocks, after many of them lost a big chunk of their savings when the prior bubble imploded without ever recovering. In 2014, the GPIF – buckling under the pressure from the Abe administration – decided to plow about 25% (“±9%”) of its assets into Japanese stocks. With assets at the time of still about $1.4 trillion, 25% would amount to about $350 billion. So the fund has been buying a lot! And it has been a disaster! [Read…  Japan Mega-Pension Fund Dives into Stocks, Foreign Assets, Loses Shirt. People Not Amused]But even after Japanese stocks took a licking over the past year, the fund’s allocation to domestic equities is still 21%, so near its range and no longer a powerful buyer. But to make up for any holes left behind by the pension fund, the BOJ announced on July 28 that it would nearly double its annual purchases of equity ETFs to ¥6 trillion ($59 billion). The holdings of Japanese stocks by these two entities have nearly tripled over the past five fiscal years to about ¥39 trillion ($381 billion), according to The Nikkei. During that time, the Nikkei stock index soared 70%, “demonstrating their powerful support.”  But, but, but… the index remains 57% below its bubble peak of 1989. So what has this done to overall government ownership of Japanese stocks? We don’t really know, because it’s kept purposefully opaque, according to The Nikkei: These major public-sector buyers do not appear on shareholder lists because of their indirect ownership via trust banks and other intermediaries. And yet, The Nikkei figured thatthe two together are the largest shareholders for 474 of about 1,970 stocks” on the Tokyo Stock Exchange’s first section (the section for large companies), “based on public information.” And this is just the beginning.

 A ¥9 Trillion Hole Emerges Inside The BOJ's Balance Sheet: "It’s A Pretty Dangerous Situation" - When it comes to accounting conventions, the Fed and the BOJ differ in one major way: unlike the Federal Reserve, the BOJ counts its bond holdings at the purchase price, minus amortization costs. In the old days before NIRP this wasn't an issue because with positive yields, it meant that with time, the value of any central bank bond purchases would accrete through maturity and never lead to a booked loss; however under NIRP, it means that the BOJ is purchasing hundreds of billions in bonds at prices that are so high they guarantee a loss, meaning that by maturity the central banks will face a cumulative loss on the face value of recent bond purchases. From a purely accounting standpoint, it means that a gap has opened on the BOJ's balance sheet, representing the difference between the book and face value of the central bank's monetizations. How big is the gap? According to Bloomberg as of August, the delta between the balance sheetand face value has ballooned to some 8.7 trillion yen, or $84 billion. That "gap" is the difference between the 326.7 trillion yen in BOJ bond purchases at face value, and where they are marked on the balance sheet in August, or 335.4 trillion yen. That gap is 42% bigger than before the introduction of negative rates in January, and rapidly rising. At the end of the 2015 fiscal year on March 31, the gap between the two valuations was 6.4 trillion yen and the BOJ wrote down 874 billion yen, according to documents seen by Bloomberg. That was covered by the 1.29 trillion yen in coupon income the bank received that year. However, since the coupon of all current and future purchases are negligible, the BOJ will see limited future current income, and thus will have to resort to other means to plug the balance sheet gap. “These numbers show the distortions of the BOJ’s current policies,” said Sayuri Kawamura, a senior economist at the Japan Research Institute in Tokyo. “The annual amortization losses are going to increase and consume the BOJ’s profits, and the risk is increasing that the bank’s financial stability will be shaken.”

Talk persists of 'helicopter money' despite Kuroda denials | The Japan Times: Speculation of so-called helicopter money refuses to die in Japan, despite repeated denials by Bank of Japan Gov. Haruhiko Kuroda. From Japan-based economists to global investors including Templeton Emerging Markets Group Executive Chairman Mark Mobius, there is a reluctance to rule out the controversial policy coming as soon as next month amid the monetary authority’s struggles to stoke growth and inflation. Kuroda has said at least four times since April that helicopter money is not under consideration, and is prohibited by current law. He repeated over the weekend that there remains “ample space for additional easing” under the existing policy framework. “It’s unthinkable that nothing would happen in September,” said Daiju Aoki, an economist at UBS Group AG in Tokyo. “The most likely measure would be pseudo-helicopter money where the BOJ will commit to holding Japanese government bonds for a long time.” UBS is in good company. Mobius also said last week that direct financing of government spending could be imminent, while Aberdeen Asset Management said Japan is the most likely location for such an initiative. Bank of America Merrill Lynch’s head of global rates and currencies research David Woo said this month that helicopter money is probably the only option left on the table. The introduction of a negative deposit rate this year sent benchmark government bond yields tumbling to a record low of minus 0.3 percent last month. They have since retraced more than two thirds of that — and the policy failed to weaken the yen for more than a day. The 10-year sovereign yield was at minus 0.075 percent on Wednesday in Tokyo.

TPP failure could derail Abe reforms in Japan - Japanese Prime Minister Shinzo Abe will be challenged to find some other way to make much-needed economic reforms to stimulate growth if Congress fails to approve the TPP pact and the initiative dies on the vine, a former U.S. trade official said Thursday. Story Continued Below “Abe has a lot at stake in the TPP, and I think will really have to go back to the drawing board if it doesn’t move forward,” Eric Altbach, a senior vice president at the Albright Stonebridge Group, told reporters at a roundtable discussion hosted by former Secretary of State Madeleine Albright, who co-chairs the policy advisory group. “Japan has frequently relied on ‘gaiatsu’, foreign pressure, to make difficult decisions on domestic reform,” the former deputy assistant USTR for China affairs said. “The provisions of the TPP itself are an important way for Japan to make some changes at home, as well as to create more market access among the other TPP member economies.” If Congress fails to approve TPP, that could give some momentum to talks between Japan, China, India and 13 other Asia-Pacific countries on the Regional Comprehensive Economic Partnership. But that trade deal is regarded as a poor substitute for the TPP, since it is not nearly as ambitious in terms of economic reforms and market opening commitments. “I think [the Japanese] are extremely anxious” over TPP’s failure to advance in Congress, Altbach said, adding Abe is likely to raise the issue with President Barack Obama at the upcoming Group of 20 leaders meeting in Hangzhou, China, in early September.

What To Do When Countries With Fiscal Space Won’t Use It? -- This isn’t another post about Germany.Rather it is about Korea, in many ways the Germany of East Asia. Korea has a current account surplus roughly equal to Germany’s—just below 8 percent in 2015, versus just over 8 percent for Germany. Like Germany, Korea has a tight fiscal policy. Korea retained a structural fiscal surplus throughout the global crisis (it relied on exports to drive its initial recovery, thanks to the won’s large depreciation in the crisis).* After sliding just a bit between 2012 and 2015, Korea’s fiscal surplus is now heading up again. Korea’s public debt is below that of Germany. And as I noted on Monday, Korea’s real exchange rate is well below its pre-crisis levels. So for that matter is Germany’s real exchange ate. According to the BIS, Korea’s real exchange rate so far this year is about 15 percent below its 2005-2007 average; Germany’s real effective exchange rate is about 10 percent below its 2005-2007 average. The IMF—in its newly published staff report on Korea—recognizes that Korea has fiscal space, and encourages the Koreans to do a bit of stimulus. The IMF also, smartly, recommends beefing up Korea’s rather stingy social safety net. The Koreans though do not seem all that interested in spending more. Yes, there is officially a stimulus. But as the Fund notes it will be funded by “revenue over-performance”* rather than any new borrowing.** I think (based on footnote 26, on p. 18 of the staff report) that the “no new borrowing” stimulus is built into the IMF’s fiscal baseline. And that baseline, to my mind, should be characterized as an ongoing fiscal contraction. The central government’s surplus (using net lending and borrowing from table 2 of the staff report; other measures of the general government’s balance will show the same trend) rises from 0.3 percent of GDP in 2015 to 0.8 percent of GDP in 2016 and 1.0 percent of GDP in 2017.  Korea’s external surplus is fairly clearly a function of policies that could be changed. Especially as Korea continues to intervene in the foreign exchange market. Counting the rise in its forward book, Korea looks to have bought over $3 billion in the market in July. And by all accounts it also intervened in August. The IMF is pushing in the right direction. But, for now, with no real impact.

 Global Supply Chains Paralyzed After World's 7th Largest Container Shipper Files Bankruptcy, Assets Frozen -- After years of relentless decline in the Baltic Dry index... today the largest casualty finally emerged on Wednesday when South Korea's Hanjin Shipping, the country's largest shipping firm and the world's seventh-biggest container carrier, filed for court receivership on Wednesday after losing the support of its banks, leaving its assets frozen as ports from China to Spain denied access to its vessels. For those unfamiliar with the company, here is a brief overview from its website: Hanjin Shipping is Korea's largest and one of the world’s top ten container carriers that operates some 70 liner and tramper services around the globe transporting over 100 million tons of cargo annually. Its fleet consists of some 150 containerships and bulk carriers.

"Global Trade" Roiled, Cargo-Owners Panic In Wake Of Hanjin Bankruptcy - When we reported on the stunning collapse of South Korea's Hanjin Shipping, the country's largest shipping firm and the world's seventh-biggest container carrier, which earlier today was granted court receivership after losing the support of its banks, we speculated that "the global implications from the bankruptcy are unknown: if, as expected, the company's ships remain "frozen" and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos."We did not have long to wait for the aftershocks to emerge. As we first reported last night, just hours after the insolvency news hit the tape, three Hanjin ships promptly found themselves stranded off the California coast, stuck - together with the hundreds of tons of cargo - in legal and financial limbo. That was just the beginning and as Reuters updates this morning, more Hanjin vessels have been seized at Chinese ports, "further roiling the industry as freight rates jump and manufacturers scramble for alternatives." The Korea International Trade Association said on Thursday that about 10 Hanjin vessels in China have been either seized or were expected to seized by charterers, port authorities or other parties. That adds to one other ship seized in Singapore by a creditor earlier this week. After Hanjin's banks decided to end financial support for the shipper, which immediately catalyzed its insolvency proceedings, many of its vessels have either been denied entry to ports or unable to dock as container lashing providers worry that they will not be paid. This includes the port of Busan, South Korea's largest.

Rodrigo Duterte’s Campaign of Terror in the Philippines - Rodrigo Duterte, the new President of the Philippines, is a liberal’s worst nightmare. In his campaign, Duterte, a former mayor and prosecutor, promised to cleanse the country of drug users and dealers by extrajudicial means. Since his inauguration, on June 30th, he has been following through with a vengeance. In that time, more than eighteen hundred people have been killed—drug dealers, drug users, and in several cases people who happened to be nearby. The youngest was five years old.“My mouth has no due process,’’ Duterte said in a nationally televised speech on August 7th, in which he named judges, mayors, police, and military officials whom he claimed were involved in the drug trade. The Philippines has the highest abuse rate in East Asia for methamphetamines, known locally as shabu. Duterte has warned drug peddlers to surrender themselves or face summary execution. “My order is shoot to kill you,” he said on August 6th. “I don’t care about human rights, you’d better believe me.” Who wouldn’t believe him? During hearings before the Philippine senate on Monday, the national police chief, Donald Dela Rosa, said that, since Duterte’s inauguration, seven hundred and twelve people allegedly involved with drugs have been killed by police, and another thousand and sixty-seven by presumed vigilantes. Some six hundred thousand, the police chief said, had turned themselves in.The particulars are harrowing. At hearings, relatives of the victims, wearing sunglasses and scarves to disguise their identities, testified about low-level drug users being dragged out of their homes and shot at close range. The two-year-old daughter of one suspected user was stripped and subjected to an anal exam to see if she was being used to conceal drugs.

Philippines: Who's liable for the mounting death toll? - Al Jazeera English: On August 23, five-year-old Danica May was having lunch with her family in Dagupan City, north of the Philippine capital Manila, when a gunman came to their house looking for her grandfather, Maximo Garcia. Three days earlier, Garcia was told he was on a government drug watch list, prompting him to surrender to police. Garcia's wife said her husband, who suffered a stroke three years ago, has never been involved in illegal drugs. But the unknown attacker opened fire as soon as he spotted Garcia, hitting him in the stomach, according to the Philippine Daily Inquirer report. He survived by fleeing to the back of the house. One of the stray bullets hit Danica May in the head. She died in hospital, making her the youngest victim of the country's anti-illegal drugs war.   The Philippine police chief Ronald dela Rosa said at least 1,900 drug-related killings have been recorded across the country as of August 23.  Philippine President Rodrigo Duterte, however, defended the police from accusations of human rights violations, saying "the accusation itself is stupid". An Al Jazeera English investigation has gathered information about at least 831 people killed, based on news reports and public records. Of that number, at least 477 people were reported to have been killed during police operations, while 354 others were killed by unknown attackers, as of August 25.

Will Anyone Stop Rodrigo Duterte? -- Since Rodrigo Duterte assumed the presidency of the Philippines eight weeks ago, the same scene has unfolded night after night in the slum neighborhoods of Manila: A shot rings out, and a person lies dead on the street with a cardboard sign laid next to him, scrawled with a single word: “Pusher.”  This is how Duterte’s war on drugs is playing out on the ground. It is a punitive campaign spurred by the president’s promises of immunity and even bounties to those who take drug users and traffickers “dead or alive.” Last week, the national police chief testified during a Senate inquiry that more than 1,900 people suspected of being involved in the drug trade or abusing drugs had been shot dead by police or “vigilantes” (that number now approaches 2,500). Over 10,000 people have been arrested, and at least 675,000 people have voluntarily surrendered to the authorities.The numbers are staggering, but what remains unclear is whether those killed and imprisoned are even involved in the drug trade. According to bereaved relatives, Duterte’s take-no-prisoners approach has claimed former addicts, spouses of suspected drug peddlers, and even a 5-year old child as casualties. “Mothers are approaching me every week as their sons are threatened or listed in police precincts,” said Jean Enriquez, a long-time feminist leader who belongs to a coalition of 50 Philippine human rights organizations. “Being listed could mean death.”The soaring rise in extrajudicial killings has invited scrutiny and condemnation from both international and domestic human rights groups, as well as institutions like the Catholic Church. But Duterte shows no sign of slowing down. Only last Friday, he brushed off criticism from the United Nations in an address to the Philippine military: “What crime against humanity? I’d like to be frank with you, are [drug users] humans?”

Kashmir and Palestine: The story of two occupations - Al Jazeera - The India and Israel alliance has been described as a full-blown romance, but the ongoing siege of Kashmir makes this a bloody affair - covert for years. India has bought arms from Israel since the 1960s. Indian Prime Minister Narendra Modi is to visit Israel in 2017, marking the 25th anniversary of full diplomatic relations. The two nations are passionate about their brutal occupations of Kashmir and Palestine. India is one of Israel's biggest arms exports clients, spending about $10bn over the past decade. Indian police forces have been receiving training in Israel for "anti-terror" operations, which Israeli conducts against Palestinians. This terror frame supports the economy of arms trade between India, Israel and the United States. In this story, the aggressive religious nationalisms of Zionism and Hindutva are neutral shared security interests. Kashmiri and Palestinian quests for self-determination are reduced to neighbouring Muslim or Arab states causing unrest. The current siege of Kashmir by India's forces follows the killing of Hizbul Mujahideen commander Burhan Wani on July 8. Kashmiris came out in thousands to mourn the event. Kashmiri writers and journalists say that the savage response of the Indian state to the popular crowd support for the slain militant was unprecedented. The pellet gun, a weapon banned in many countries, was used to blind and maim hundreds from a one-year-old child to the elderly. The dead numbered more than 70, and 6,000 or more were injured. These numbers continue to rise. Yet, Kashmiris continue to protest against the Indian state and call for Azadi (freedom).

India GDP: Lessons from 7.1% --India’s April-June GDP growth came in below expectations at 7.1%. This is an especially unwelcome surprise when the world is in need of a growth engine. The knee-jerk response that more stimulus is needed is wrong. What is needed is better data to inform better policymaking. How to think about 7.1%:

  • 1) As ever, do not attach too much importance to GDP. It does not measure money in people’s pockets (that’s wealth) and it can be quite misleading with regard to India’s biggest need – job creation. A true evaluation of last quarter’s performance would feature jobs numbers contemporary with GDP. Timely and comprehensive employment figures are not available.
  • 2) The reliability of national accounts themselves remains poor. There is still no historical series to accompany the adjusted methodology that suddenly shoved GDP growth past 7%. Calculation “discrepancies” were less important in size this quarter than the previous but are still important, since their impact changes when calculating nominal versus real GDP.
  • 3) The components of GDP appear to show sharply different results. Most dramatically, consumption growth is robust but investment shrank outright. Manufacturing did well but construction fared poorly. Government officials reasonably expect agriculture to improve later in the year but ignore unsustainable gains in public spending this quarter.
  • 4) Inflation is not defeated. The implicit GDP deflator stood at a reasonable 3.2% in April-June. The trend, though, is more inflation, as seen in the deflator and producer prices. On the consumer side, a large wage hike for government workers will boost demand but also price pressure. The previous government ignored inflation warnings and paid the economic, and political, price.
  • 5) The obsession with interest rate cuts is therefore odd and unwise. Interest rates are only high by current world standards, a world focused more on India in part because loose money policies elsewhere have failed. Why make the same mistake? Further, the latest data shows corporate borrowing costs are falling, even while investment falls with them.

  Are Emerging Markets about to Switch US Treasuries for SDR Bonds? - The first issuance of SDR denominated bonds in the Chinese market is being implemented by the World Bank. Let that sink in for a moment. The World Bank, the great bastion of the western banking elite, will be providing SDR bonds specifically for the Chinese market. This is a major defeat for all of those who repeatedly promoted the idea that wealthy interests within China were attempting to overthrow the western banking structure or implement a competing system. A second issuance of SDR bonds will take place through the China Development Bank. The purpose of both issuances is multiform. First, SDR denominated bonds will allow for the diversification of the currency composition of foreign exchange reserves. This will allow the governments of emerging markets, whose central banks have carried the bulk of US Treasury bond debt for decades, to minimize their exposure to the single currency Treasury Bonds and exchange rate pressures. Second, it will provide Chinese investors with an alternative which will slow capital outflows and could even potential reverse and lead to large capital inflows. Most emerging markets suffer higher risk by the large accumulation of US Treasuries. The USD based exchange rate regime which most of these nations follow allows for destructive exchange rate swings when the Federal Reserve decides to raise interest rates.

Australians rally against refugee detention centres - News from Al Jazeera: Thousands of protesters across Australia have held rallies to demand the closure of the country's overseas refugee detention centres.Demonstrators took to the streets of several Australian cities on Saturday, carrying banners with the words "Close the camps, Bring them here" to demand that asylum seekers and refugees from camps on Nauru and Papua New Guinea (PNG) islands be resettled on the mainland. "Some have been there [in the camps] living in limbo for more than three years, the same goes for the families held on Nauru," our correspondent said.  "Finding out what goes on in those prisons is very difficult, journalists are banned and the Australian government has brought in a law that prevents those [who] worked in them talking about what they have seen, the penalty is about two years in prison."However, despite that, some former workers have sat down with me and told me about what they saw inside and why they want those prisons closed," Thomas said.Judith Reen, an ex-teacher on Manus Island and Nauru, said the conditions at the camps were shocking."It's just so pointless that the suffering you see, it felt a lot worse than a prison, a lot worse," she told Al Jazeera."When it would rain the sewerage would just rise up and you could see raw sewerage running through, it was really disgusting." Another former teacher in Nauru, Evan Davis, said there was no privacy and that the asylum seekers were constantly watched. "This is not by accident, this is a deliberate attempt to break people's spirits and the depression they are experiencing, the loss of hope, the denial for their education, the denial of their freedom, and the fact that we are stealing their childhood from them, it is torture," Davis said.

 Nigeria slumps into recession, Norway's economy stalls - Aug. 31, 2016: Nigeria slumped into recession and Norway's economic growth slowed to a standstill in the second quarter. Both countries rely on oil for a big chunk of their exports and have been hit hard by the collapse in prices. Oil has recovered from February's low of just over $26 per barrel but the current price of about $46 is still less than half what producers were getting just two years ago. Nigeria's second quarter GDP fell by more than 2% compared to last year, after slipping by 0.4% in the first quarter. Two consecutive quarters of decline mean Nigeria is now officially in recession. Low oil prices and fuel shortages have hit Nigeria's economy hard. Nigeria isn't only hurting from low prices. Its oil output also fell sharply because of a series of rebel attacks on infrastructure. Other sectors suffered too, with manufacturing and retail hit by chronic power outages. The slump in oil prices has drained Nigeria's foreign currency reserves. To stem the outflow of cash from the country, the government introduced strict restrictions on importing goods that it said could be produced locally. But that decision has reduced the flow of raw materials to the country's manufacturers. "Much of the blame for this must fall on Nigeria's government. Import restrictions have crippled the manufacturing sector, which was long seen as a potential driver of non-oil growth,"

3 men in line for Brazilian presidency accused of corruption: (AP) — Impeachment proceedings against President Dilma Rousseff have put a spotlight on corruption in the ranks of Brazil's lawmakers. Watchdog groups say about 60 percent of the 594 legislators in both chambers of Congress are being investigated for wrongdoing or are facing corruption charges, including the three men in line to replace Rousseff if she is removed from office.

  • FIRST IN LINE: Vice President Michel Temer. In a plea bargain, a former senator who had been a director of state-run oil company Transpetro made a direct link between Temer and the massive corruption probe centered on the main government oil company, Petrobras. Sergio Machado said that Temer asked him to channel $400,000 in Petrobras kickbacks to 2012 Sao Paulo mayoral candidate, Gabriel Chalita, a member of Temer's party. Machado said the payments were made in the form of campaign donations by the construction firm Queiroz Galvao. Temer denies wrongdoing and has not been charged. Another former senator turned state's witness recently accused Temer of appointing a lobbyist to distribute bribes from 1997 to 2001 in ethanol deals involving Petrobras. He denies wrongdoing.
  • SECOND IN LINE: Speaker of the lower house of Congress, Rodrigo Maia A key aide to a governor convicted of taking part in a corruption scheme involving overpriced contracts to many companies said Maia received illegal campaign donations. The probe goes to back 2010. Maia denies wrongdoing and has not been charged.
  • THIRD IN LINE: Senate President Renan Calheiros. Calheiros would be acting president if Temer and Maia travel outside Brazil. The country's Supreme Federal Tribunal currently has several open investigations against Calheiros in the Petrobras probe. He denies wrongdoing. Former senator and Transpetro boss Sergio Machado said Calheiros received almost $10 million in bribes over 10 years. A former Petrobras director accuses Calheiros of threatening to withhold support unless he was paid off. The same ex-director says Calheiros was paid $1.7 million through a Petrobras lobbyist in a case related to drill ship contracts.

Brazil Formally Impeaches Dilma Rouseff In 61 To 20 Vote - As was widely expected, the final step of impeachment process which started earlier this week and which ended moments ago, has concluded with a decision to formally impeach the former president Dilma Rouseff, with 61 senators voting for her ouster, and 20 voting against. Rouseff was previously charged for breaking the country's budget laws. As a result, the just as unpopular Michel Temer is set to become Brazil's official president until 2018. While some disagreed with the decision, notably Sen. Humberto Costa, from Rousseff's Workers' Party, who argued that the two issues — her removal from office and a ban from public office — be considered separately, adding that "the punishment is disproportional in relation to the crime she is accused of" it appears the Senate had its mind made up. Janaina Paschoal, the lawyer leading the case against Rousseff, said the suspended president had committed fraud when breaking fiscal laws. "We are not dealing with a little accounting problem," she said. "The fraud was documented." Meanwhile Rousseff told senators in a 30-minute address that"I know I will be judged, but my conscience is clear. I did not commit a crime."

 Brazil’s Dilma Rousseff, a Woman of Honor, Confronts Senate of Scoundrels: Dilma Rousseff entered the Senate and calmly stared down her accusers. She left with her head held high after exhorting those Senators to vote with their conscience. Most of those politicians present probably had no idea what conscience means; they’re no more than corrupt messenger boys. But the Brazilian collective unconscious – Jung to the rescue – will be marked.President Dilma Rousseff, in a detailed, occasionally emotional speech, defended herself with honor and dignity from accusations she committed a “crime of responsibility”. She was not actually facing a political cesspool, but that ‘Angel of History’ so beloved by Walter Benjamin. History will judge her kindly.Meanwhile, it ain’t over till a dodgy politico sings. As I write, Rousseff is on the way to be stripped from the presidency of the world’s 8th largest economy by a bunch of scoundrel-cum-coward politicos. Her only fear, she said, was the “death of democracy”. Rousseff’s impeachment means in practice that democratic voting in one of the world’s largest democracies will be cancelled by a parliamentary coup remote-controlled by oligarchic interests. This is not, and never was, about justice; it’s about dirty, nasty politics.There is no techno-bureaucrat argument whatsoever capable of proving the President should be impeached because of state budget maneuvers that did not yield a single cent for her pockets, or to the detriment of the Treasury – and this in an astonishingly corruption-infested nation.

Brazil's economy shrinks 0.6 pct in Q2 --- Brazil's economy shrank 0.6 percent in the second quarter, government statistics agency IBGE said on Wednesday, slightly more than the 0.5 percent drop expected by economists in a Reuters poll.  Brazil's gross domestic product fell 3.8 percent from a year earlier, according to IBGE.

The Brazilian Economic Collapse Reaches Unprecedented Proportions --While the mainstream media was focused on today's primetime Brazilian spectacle, namelyDilma Rouseff's impeachment vote in the Senate, which passed as expected with a substantial majority permanently removing Rouseff from office and assuring that her replacement, Michel Temer rules until at least 2018 (unless the unpopular politician is also impeached in the meantime), what has gotten far less press is the ongoing devastation of the Brazilian economy which has failed to see even a token pick up in recent months despite the change in the ruling administration. Here are the latest stunning updates. According to the most recent economic data, the labor market continues to implode: the unemployment rate surged to 11.6% with the ranks of the unemployed topping 11.8 million (up from 8.6 mn a year ago) as the following chart from Goldman Sachs shows.  The national unemployment rate printed at 11.6% in the 3-month period ending in July, up from 11.3% in June and up from 8.6% a year ago, and 6.9% two years ago. In seasonally adjusted terms the unemployment rate climbed to 11.4% in July, from 11.1% in June and 8.4% a year ago. Formal salaried employment in the private sector shrank 3.9% yoy, while employment in the informal sector grew 0.9% yoy. Self-employment grew 2.4% (a reflection of increasingly limited salaried employment opportunities). By sector of economic activity, industrial employment shrank by a large 10.6% yoy (-1.4mn jobs).Employment declined 1.8% yoy in the 3-month period ending in July, while the economically active labor force grew 1.5%.   Meanwhile, as the number of working Brazilians tumbles, average real wages conttinued their unprecedented decline, sliding 3.0% yoy. The labor force participation rate rose one-tenth from a year ago: to 61.5%.

Global central bankers, stuck at zero, unite in plea for help from governments | Reuters: Central bankers in charge of the vast bulk of the world's economy delved deep into the weeds of money markets and interest rates over a three-day conference here, and emerged with a common plea to their colleagues in the rest of government: please help. Mired in a world of low growth, low inflation and low interest rates, officials from the Federal Reserve, Bank of Japan and the European Central Bank said their efforts to bolster the economy through monetary policy may falter unless elected leaders stepped forward with bold measures. These would range from immigration reform in Japan to structural changes to boost productivity and growth in the U.S. and Europe. Without that, they said, it would be hard to convince markets and households that things will get better, and encourage the shift in mood many economists feel are needed to improve economic performance worldwide. During a Saturday session at the symposium, such a slump in expectations about inflation and about other aspects of the economy was cited as a central problem complicating central banks' efforts to reach inflation targets and dimming prospects in Japan and Europe. ECB executive board member Benoit Coeure said the bank was working hard to prevent public expectations about inflation from becoming entrenched "on either side" - neither too high nor too low. But the slow pace of economic reform among European governments, he said, was damaging the effort. "What we have seen since 2007 is half-baked and half-hearted structural reforms. That does not help supporting inflation expectations. That has helped entertain disinflationary expectations,” Coeure said.

 Canadian Economy 'Double-Dip' Crashes In Q2 - Worst GDP Growth In 7 Years - The first half of 2015 saw Canada informally enter 'recession' with two quarters of negative GDP but then, everything bounced back and policy shifts were 'proven' effective. However, that dead-canadian-cat-bounce is over as Q2 2016 GDP growth just slumped 1.6% - double-dipping to the worst since Q2 2009. The problem with this plunge is that oil prices actually had their best quarter in 7 years as the economy tanked. As Bloomberg reports, Canada’s economy suffered its biggest contraction since the 2009 recession as wildfires in Alberta crimped oil production. Gross domestic product fell at a 1.6 percent annualized pace in the second quarter, Statistics Canada said Wednesday in Ottawa. Economists expected a 1.5 percent decline, according to the median estimate of a Bloomberg survey with 24 responses. Exports of goods and services plunged at a 16.7 percent annualized pace, and Statistics Canada said that excluding the damage from the wildfires output edged up. Nevertheless, export declines ranged beyond the oil industry: automobiles and metals both fell while shipments of consumer goods posted the largest drop since 2003. Wednesday’s figures showed a good handoff to the third quarter, with monthly output rising 0.6 percent for June, faster than the 0.4 percent that economists predicted. It was the fastest gain since July 2013 and reversed a similar decline for May. The quarterly figures signaled the main forces in the economy this year are still at work: weak business investment and strong consumer spending. Business gross fixed capital formation fell 0.5 percent, the sixth straight decline, while consumer spending rose 2.2 percent.

After TPP Impasse, TTIP Failure is Close at Hand  - With US ratification of the Trans-Pacific Partnership in huge trouble, we receive word that things are even worse with the proposed US-EU Transatlantic Trade and Investment Partnership (TTIP). At least an international deal was hammered out with the TPP. With the TTIP, its negotiations have already stalled, leading German Vice-Chancellor Sigmar Gabriel frankly assessing that these negotiations have failed: The free trade negotiations between the European Union and the United States have failed, but “nobody is really admitting it”, Germany's Vice-Chancellor Sigmar Gabriel has said. Talks over the so-called Transatlantic Trade and Investment Partnership, also known as TTIP, have made little progress in recent years. The 14th round of negotiations between American and EU officials took place in Brussels in July. It was the third round in six months. As always, the French are wary of relenting on agricultural protectionism, all the while accusing TTIP of being too favorable to American multinationals (isn't that always the case with these American-led negotiations?) In contrast, the Europeans supposedly don't gain much access to US government procurement: At the time, the talks were thought to be in trouble after a number of leading European politicians expressed concern about TTIP’s effects and the US’s reluctance to accept changes to the proposed deal. In May, cracks emerged when France threatened to block the deal. President Hollande said he would "never accept" the deal in its current guise because of the rules it enforces on France and the rest of Europe – particularly in relation to farming and culture – claiming they are too friendly to US businesses.

France demands an end to TTIP talks -- France’s trade minister has increased the pressure on the proposed EU-US trade deal by calling for the talks to be called off. Matthias Fekl, the French minister for foreign trade, tweeted that his government demanded negotiations on the Transatlantic Trade and Investment Partnership (TTIP) should cease.François Hollande, the French president, also raised doubts about TTIP and said France would not support a deal this year. In a speech to French ambassadors, Hollande said: “The negotiations are bogged down, positions have not been respected, it’s clearly unbalanced.” He said he would withhold support from any agreement reached before the end of Barack Obama’s presidency in January. France has been sceptical about TTIP from the start and has threatened to block the deal, arguing the US has offered little in return for concessions made by Europe. All 28 EU member states and the European parliament will have to ratify TTIP before it comes into force.Fekl’s statement follows similarly gloomy comments from the German economy minister, Sigmar Gabriel. He said on Sunday: “The negotiations with the United States have de facto failed, even though nobody is really admitting it.” Gabriel’s views were at odds with public comments by the German chancellor, Angela Merkel, who said last month that the proposed US-EU deal was “absolutely in Europe’s interest”.

 The French government wants the EU to stop trade talks with the US - (AP) — France's trade chief says he wants to ask the European Union to end talks with the U.S. on forging a sweeping trade deal that his socialist government sees as too friendly to U.S. business.  Matthias Fekl, France's secretary of state for foreign trade, said Tuesday on RMC radio that "we need a clear, clean, definitive stop" to the negotiations on a proposed Trans-Atlantic Trade and Investment Partnership. He said talks could resume if wider EU-US trade relations improved. Accusing the American side of offering "just crumbs," Fekl said France would ask the European Commission to halt the talks at a trade ministers meeting in Slovakia next month. Germany's economy minister said Sunday that negotiations have effectively collapsed, but a U.S. trade official said they're making steady progress.

Controversial Trade Talks Between U.S. and E.U. Have Failed, German Economy Minister Says  — Free trade talks between the European Union and the United States have failed, Germany’s economy minister said Sunday, citing a lack of progress on any of the major sections of the long-running negotiations.Both Washington and Brussels have pushed for a deal by the end of the year, despite strong misgivings among some E.U. member states over the Trans-Atlantic Trade and Investment Partnership, or TTIP.Sigmar Gabriel, who is also Germany’s vice chancellor, compared the TTIP negotiations unfavorably with a free trade deal forged between the 28-nation E.U. and Canada, which he said was fairer for both sides. “In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it,” Gabriel said during a question-and-answer session with citizens in Berlin. He noted that in 14 rounds of talks, the two sides haven’t agreed on a single common item out of 27 chapters being discussed.Gabriel accused Washington of being “angry” about the deal that the E.U. struck with Canada, known as CETA, because it contains elements the U.S. doesn’t want to see in the TTIP.“We mustn’t submit to the American proposals,” said Gabriel, who is also the head of Germany’s center-left Social Democratic Party.In Washington, there was no immediate comment from the office of the U.S. trade representative.Christian Wigand, a spokesman for the European Commission, the E.U.’s executive arm and which is leading the TTIP negotiations, said Sunday that the institution had no comment or reaction at this time.Gabriel’s ministry isn’t directly involved in the negotiations with Washington because trade agreements are negotiated at the E.U. level. But such a damning verdict from a leading official in Europe’s biggest economy is likely to make further talks between the EU executive and the Obama administration harder. Gabriel’s comments contrast with those of Chancellor Angela Merkel, who said last month that TTIP was “absolutely in Europe’s interest.”

Trade wars: Why the central pillar of global order is in danger of collapse as TTIP disintegrates: The Transatlantic pact intended to unite Europe and North America in a vast free trade zone is close to collapse after France called for a complete suspension of talks, accusing the US of blocking any workable compromise. “Political support in France for these negotiations no longer exists,” said Matthias Fekl, the French commerce secretary. Mr Fekl said his country would request a formal decision by EU ministers at a summit in Bratislava to drop the hotly-contested deal, known as the Transatlantic Trade and Investment Partnership (TTIP). '"The Americans are offering nothing, or just crumbs. That is not how allies should negotiate. There must be a clear and definite halt to these talks, to restart them later on a proper basis,” he said. The project is infinitely more than a trade deal. It is part of a strategic push to bind together the two halves of North Atlantic civilisation at a dangerous moment when the Western liberal order is under threat. The two sides are currently drifting towards divorce. “TTIP was supposed to set the rules for the global trade,” said Rem Korteweg, a trade expert at the Centre for European Reform. “It was to be a central pillar of an alliance of like-minded countries. If it all falls apart in acrimony, what kind of global governance are we going to have?” he said.  The accord clearly raises red flags over who sets the law and holds the whip hand in parliamentary democracies. Critics argue that it creates special tribunals outside the normal court system (investor-state dispute settlements or ISDS) that effectively allows companies to overturn laws passed by elected legislatures. These structures have emerged as the episcopacy of globalisation, a powerful nexus of supra-national bodies accruing powers at the expense of national parliaments, and at the margins of accountability. Some say Brexit was the first primordial scream against this emerging world order. If so, the grass-roots uprising against the TTIP project may be the second.

European Commission says 'ball still rolling' on trade deal with U.S. | Reuters: The European Union's executive said on Monday it had a unanimous mandate from the bloc's 28 members to finalize negotiations on a free trade deal with the United States, a day after Germany's economy minister said the talks had "de facto failed". Sigmar Gabriel of Germany, the EU's biggest economy, said on Sunday that negotiations over the Transatlantic Trade and Investment Partnership (TTIP) had failed because Europe rejected some U.S. demands. Asked to comment on Gabriel's remarks, a European Commission spokesman said: "The ball is still rolling" on TTIP. "Although trade talks take time, the ball is rolling right now and the Commission is making steady progress in the ongoing TTIP negotiations," Margaritis Schinas told a news conference. The White House also disputed Gabriel's contention, saying it was still aiming to reach a deal by the end of the year. "It's going to require the resolution of some pretty thorny negotiations, but the president and his team are committed to doing that," White House spokesman Josh Earnest told reporters in Washington. In Berlin, Germany's leading industry associations were critical of Gabriel's remarks and urged the German government to show greater commitment to free trade deals. The head of industry association BDI, Ulrich Grillo, said it was "astonishing" that Gabriel, who is also vice chancellor and head of the co-governing Social Democrats, had declared the TTIP talks a failure when negotiations were still going on.

Apple Will Reportedly Be Hit With a Record-Breaking Tax Penalty -- Apple will reportedly be hit with a record-breaking tax penalty in the European Union on Tuesday amid a crackdown by regulators there on companies funneling profits through Ireland to avoid bigger tax bills. Two year ago, the European Commission launched probesi nto the corporate taxation of companies in three countries: Apple in Ireland, Starbucks in the Netherlands, and Fiat Finance and Trade in Luxembourg. It subsequently also initiated investigations into Luxembourg’s tax deals with Amazon and McDonald’s. Competition commissioner Margrethe Vestager already decided last year that the Fiat and Starbucks tax deals were illegal because they allowed the companies to underpay and therefore get unfair competitive advantages over their rivals. Each were told to pay back $22 million to $34 million. Now it’s Apple’s turn. According to the Financial Times, Vestager’s department will hit the tech firm with Europe’s largest-ever penalty in a tax case. How much Apple would have to pay is unclear. But JP Morgan recently suggested the bill could be as high as $19 billion while others have pegged the number at around $8 billion. Reuters is reporting that the sum will be in excess of $1 billion. It’s certainly going to be a lot of money, and Apple and Ireland are both very likely to appeal. The Irish governmentsaid Monday that it needed to defend its “international reputation” against the suggestion that it granted illegal aid to Apple. The Netherlands has also appealed in the Starbucks case, and so have both Luxembourg and Fiat in their case.

 EU hits Apple with $14.5 billion Irish tax demand | Reuters: The European Commission ordered Apple Inc to pay Ireland unpaid taxes of up to 13 billion euros ($14.5 billion) on Tuesday as it ruled the firm had received illegal state aid. Apple and Dublin said the U.S. company's tax treatment was in line with Irish and European Union law and they would appeal the ruling, which is part of a drive against what the EU says are sweetheart tax deals that usually smaller states in the bloc offer multinational companies to lure jobs and investment. The U.S. feels its firms are being targeted by the EU and a U.S. Treasury spokesperson warned the move threatens to undermine U.S. investment in Europe and "the important spirit of economic partnership between the U.S. and the EU." Starbucks Corp has been ordered to pay up to 30 million euros ($33 million) to the Dutch state, while Inc and McDonald's Corp are also under investigation by the Commission, the EU's executive arm. Apple's stock fell less than 1 percent. EU Competition Commissioner Margrethe Vestager questioned how anyone might think an arrangement that allowed Apple to pay a tax rate of 0.005 percent, as Apple's main Irish unit did in 2014, was fair. "Tax rulings granted by Ireland have artificially reduced Apple's tax burden for over two decades, in breach of the EU state aid rules. Apple now has to repay the benefits," Vestager told a news conference.Analysts said the size of the claim underlined the Commission's aggressive stance, but since each case involves different circumstances and tax rules, lawyers said it was hard to see if further big claims were any more or less likely.

Greece may face aid-payout delay as EU warns on backsliding - Greece's finance chief said the next international aid payout to the country may be delayed as the European Union stepped up warnings about domestic political meddling in the Greek state. Finance Minister Euclid Tsakalotos raised the possibility of the government in Athens failing to qualify on time for a 2.8 billion-euro ($3.1 billion) disbursement due in September from the euro area. That's what remains of a 10.3 billion-euro tranche that finance ministers approved in principle three months ago. "If there is a delay, it'll be days not weeks," Tsakalotos told Bloomberg News in Brussels on Monday before a meeting with EU Economic Affairs Commissioner Pierre Moscovici. "Part of the reason for the meeting is to discuss the process to ensure there aren't delays." Slipping timetables have been a regular feature of loan payouts to Greece since it first turned to the euro area and the International Monetary Fund for a rescue in 2010. Now in it's third bailout, the country faces continued creditor warnings about backsliding on overhauls that are a condition for aid. The European Commission sent the latest salvo to Athens, saying on Monday that criticism of the former head of Greece's statistical agency by allies of Prime Minister Alexis Tsipras risks undermining the credibility of Greek fiscal data. The commission, the EU's executive arm, said the Greek government must push ahead under its aid program with commitments to curb political interference in administrative matters.

Greece Was the Prologue  --  By now, the story of Syriza’s capitulation to the European creditor institutions is well-known.  Syriza came to power in January 2015 with a mandate to resist the imposition of austerity. Instead, Syriza folded under the pressure of the troika, accepting intensified austerity measures and dashing the hopes of its supporters. In this interview with George Souvlis, economist Elias Ioakimoglou describes the resultant crisis that continues to wreak havoc on Greece a full year after. According to his figures, the Greek depression is now deeper and more severe than the American Great Depression of the 1930s.

Norway Raids Sovereign Wealth Fund To Cover Government Expenses  -- Saudi Arabia isn't the only oil-dependent nation struggling to make ends meet in the wake of weak oil prices.  For the first time since its establishment in 1996, the Norwegian government is starting to withdraw money from its sovereign wealth fund to cover government expenses.  In fact, in the first half of 2016 the government has withdrawn $5.4 billion.  Moreover, withdrawals are expected to accelerate in 2H 2016 reaching nearly $20 billion, a run-rate that would have them exceeding the fiscal limits imposed on fund withdrawals of 4% of assets, or $36 billion.  To put those withdrawals into perspective, Norway's economy is roughly $375 billion and federal spending accounts for roughly 60% or $225BN.  Therefore, a $20BN withdrawal in 2H 2016 represents roughly 18% of total government spending. In an interview with Bloomberg, Egil Matsen, the Deputy Governor at Norway’s Central Bank, said the withdrawals are starting to impact the manner in which the fund manages its risk profile.   "Relevant for how we think about the risk-bearing capacity of the fund.  Say you have a decline in the equity market, and these returns have been partly funding the government, do you want variations in international financial markets to have a direct impact on fiscal policy?” Matsen, among others, has also questioned whether the 4% fiscal limits on withdrawals are the right cap in the current return environment noting that “as the older bonds come to maturity and are reinvested, a big chunk of that will be reinvested in bonds with very low or even negative yields.”

Europe Reels As A New Wave Of Refugees Begins To Flood The Continent - Angela Merkel, and Europe in general, had hoped they had managed to move beyond the unprecedented wave of refugees unleashed on the content in 2015 courtesy of the German Chancellor's open door policy, with the fragile March 2016 refugee deal signed with Turkey. Sadly - for both Europeans who have suffered a surge in terrorist attacks as a result and for Merkel, whose approval rating has subsequently plunged - Europe is once buckling under the weight of a new wave of migrants. According to Reuters, some 3000 migrants were saved in the Strait of Sicily in 30 separate rescue missions just on Tuesday, the Italian coastguard said, bringing the total to almost 10,000 in two days and marking a sharp acceleration in refugee arrivals in Italy. The migrants were packed on board dozens of boats, many of them rubber dinghies that become dangerously unstable in high seas. No details were immediately available on their nationalities. Data from the International Organization for Migration released on Friday said around 105,000 migrants had reached Italy by boat in 2016, many of them setting sail from Libya. An estimated 2,726 men, women and children have died over the same period trying to make the journey.

Some 6,500 migrants rescued off Libya: Italian coastguard - (AFP) - Around 6,500 migrants were rescued off the coast of Libya, the Italian coastguard said, in one of its busiest days of life-saving in recent years. Dramatic images of one operation showed about 700 migrants crammed onto a fishing boat, with some of them jumping off the vessel in life jackets and swimming towards rescuers. A five-day-old baby was among those rescued along with other infants and was airlifted to an Italian hospital, according to Doctors Without Borders (MSF), which took part in operations. "The command centre coordinated 40 rescue operations" that included vessels from Italy, humanitarian organisations as well as the EU's border agency Frontex, saving 6,500 migrants, the coastguard wrote on Twitter. "We've been particularly busy today," a spokesman for the Italian coastguard told AFP. On Sunday more than 1,100 migrants were rescued in the same area. The total number of arrivals in Italy this year now stands at 112,500, according to the UN's refugee agency and the coastguard, slightly below the 116,000 recorded by the same point in 2015.

 French PM suggests naked breasts represent France better than a headscarf  -  The French prime minister has drawn criticism for suggesting that naked breasts are more representative of France than a headscarf, in the latest flare-up of the bitter political row over the burkini. Manuel Valls, who clashed with France’s education minister over his support for mayors who have banned full-body swimsuits from beaches, gave a rousing speech on Monday night in which he hailed the bare breasts of Marianne, a national symbol of the French Republic.  “Marianne has a naked breast because she is feeding the people! She is not veiled, because she is free! That is the republic!” he thundered at a government rally. The inference that bare breasts were a symbol of France while the Muslim headscarf was problematic sparked scorn from politicians and derision from historians and feminists. Mathilde Larrere, a historian of the French revolution and French citizenship, tweeted: “Marianne has a naked breast because it’s an allegory, you cretin!” She then explained in a long series of tweets that images of Marianne with a naked breast harked back to classical allusions.

Some 9,000 refugee children reported to have disappeared in Germany - Germany's Federal Criminal Police Office (Bundeskriminalamt) has confirmed that by July 1, 8,991 unaccompanied refugee children and young people had been reported missing. The figures, which were requested by the German daily "Neue Osnabrücker Zeitung," showed the number of migrants no longer in contact with authorities was already higher than for the whole of last year. The figure has doubled from January, when 4,749 refugees were known to be missing. Although most of those who disappeared are teenagers, 867 of them are under 13 years old. Amid fears that young unaccompanied migrants are vulnerable to grooming by criminal gangs, the BKA said it had no concrete evidence that this was happening in large numbers. "In many cases, it's not like the children left without a plan. They wanted to visit their parents, relatives or friends in other German cities or even other European countries," a BKA spokeswoman told the paper.  In February, the European police agency Europol estimated that at least 10,000 unaccompanied refugee children have gone missing after arriving in Europe. More recently, it said the number is now considerably higher.  The Organization for Security and Co-operation in Europe (OSCE) warned several months ago that unaccompanied minors from conflict zones are "by far the most vulnerable group among the refugees." They are sent first to Europe, with their parents planning to join them at a later day, leaving them to fall prey to criminals.  

 Slowing German inflation puts pressure on ECB - (Reuters) - German annual inflation slowed unexpectedly in August, preliminary data showed on Tuesday, suggesting price pressures in Europe's largest economy remain weak despite the European Central Bank's ultra-loose monetary policy. The euro zone has struggled with little or no inflation for the past year, caused mainly by a plunge in oil prices. The ECB expects the bloc-wide figure to stay below its target of just under 2 percent for some years despite its monetary stimulus. German prices, harmonised to compare with other European countries (HICP), were up by 0.3 percent on the year after rising by 0.4 percent in July, the Federal Statistics Office said. This was below a Reuters consensus forecast for consumer prices to rise by 0.5 percent. DZ bank economist Michael Holstein said the surprisingly weak German inflation data indicated that the euro zone figure, due out on Wednesday, would now also come in weaker than expected. For the bloc, economists polled by Reuters so far expected the rate to inch up to 0.3 percent from 0.2 percent in July.

Negative interest rates could become the norm in downturns, warns ECB - Interest rates could dive into negative territory regularly in future economic downturns, according to a top European Central Bank official, while ultra-low interest rates will become the norm even in boom times. Negative rates are currently thought of as an emergency policy to battle low economic growth and the prolonged aftermath of the financial crisis, but economist and ECB executive board member Benoit Coeure believes they could be here to stay. “[Negative rates] have been very effective in supporting output and inflation and anchoring medium-term price stability. However, they were taken on the implicit assumption that they would be transient,” Mr Coeure told the Jackson Hole meeting of central bankers.If economies are not reformed, however, “we may see short-term rates being pushed to the effective lower bound more frequently in the event of macroeconomic shocks; and the stimulus provided by lowering interest rates to that level would be of course be much weaker.” That means interest rates will not rise back to their pre-financial crisis levels, and may be chopped into negative territory more frequently – while also failing to boost economic growth as much as economists would have hoped in the past. The ECB’s deposit rate for banks’ holdings turned negative in 2014 and currently stands at -0.4pc.  Negative rates have caused alarm among savers and pension funds, as they turn the economic rationale for saving on its head. Traditionally savers are paid interest to put money aside and delay consumption to some point in the future, while borrowers pay interest for the right to have that money today, to spend or invest

Eurozone core inflation fall raises prospect of ECB stimulus measures -- Speculation is growing that the European Central Bank could take action to stimulate the eurozone economy after official figures showed an easing in underlying inflation last month. Pressure on the ECB increased when the European commission’s statistical agency, Eurostat, published figures that showed core inflation in July was lower than in same month last year, despite aggressive action by the Frankfurt-based bank over the past 18 months. With concerns that the eurozone recovery was losing momentum, Eurostat said the headline rate of inflation remained unchanged at 0.2% in August. Core, or underlying inflation, which excludes energy, goods, alcohol and tobacco, fell from 0.9% in July to 0.8%. Separate Eurostat data showed that eurozone unemployment was unchanged at 10.1% in July, the latest month for which figures are available for all 19 countries that use the euro. The jobless rate in the eurozone has fallen from 10.8% over the past year, but financial markets had been expecting the reduction to continue to 10% last month.The ECB has been using negative interest rates and quantitative easing in an attempt to increase activity and push inflation back towards its target of just below 2%. Analysts said the inflation and unemployment figures would be discussed when the ECB meets to discuss policy options next week.

Polish Deflation Extends to Third Year, Amplifying Easing Calls -  For Polish policy makers, it’s just become more difficult to explain ignoring deflation when deciding on interest rates. According to a flash estimate, August consumer prices fell 0.8 percent from a year earlier after a 0.9 percent drop in July, the Warsaw-based statistics office said Wednesday. The median estimate of 24 economists in a Bloomberg survey was minus 0.9 percent. Prices fell 0.2 percent from July, compared with a 0.3 percent estimate in a separate survey. Since they last cut interest rates in March 2015, policy makers at the Polish central bank have resisted calls for further easing, citing economic growth that’s held above a 3 percent annual pace. The August consumer price index, however, arrived on the heels of data revealing a collapse in investment and showing individual consumption below forecasts. “That unfavorable GDP structure, preceded by poor July data and deflation, which is holding firm -- all of that will be driving up expectations for an interest rate cut,” Piotr Kalisz, chief economist at Citigroup Inc.’s Bank Handlowy SA in Warsaw, said by phone. The zloty strengthened 0.1 percent to 4.3561 to the euro as of 2:58 p.m. in Warsaw.The statistics office on Tuesday confirmed that economic growth accelerated to 3.1 percent in the second quarter from 3 percent in the previous three months, the slowest pace since October-December 2013. Investment slumped 4.9 percent in the past quarter, the second consecutive quarterly decline and the deepest since the end of 2012.

 Poland wants to steal Britain’s place at the heart of European finance - Poland is the latest European nation attempting to sell itself as an attractive destination for businesses looking to shift operations away from the United Kingdom in the wake of the country's decision to leave the European Union, according to a report from the Financial Times. The FT reports that, Poland's deputy prime minister Mateusz Morawiecki — a former banker with Santander, and one time chairman of Poland's third largest bank Bank Zachodni WBK — has scheduled meetings with senior bankers from RBS, Barclays, UBS, Credit Suisse, Citibank, and BNP Paribas during a trip to the UK at the end of the week.   He is also reportedly meeting executives from investment funds, including Blackrock, Pimco, and Schroders. Morawiecki will travel to the UK on Thursday with the aim of pitching Poland's capital, Warsaw, as an attractive place for banks worried about the future of the City of London in the aftermath of Brexit, to move staff. "Many of them have approached us. There is clearly increased interest in leaving London," Morawiecki said to the FT. He also reportedly said that Poland has already begun talks with numerous financial institutions about moving middle-office and back-office staff out of London to Warsaw.

Finland Unleashes Helicopter Money In "Greatest Societal Transformation Of Our Time" --Finland is about to launch an experiment in which a randomly selected group of 2,000–3,000 citizens already on unemployment benefits will begin to receive a monthly basic income of 560 euros (approx. $600). That basic income will replace their existing benefits. The amount is the same as the current guaranteed minimum level of Finnish social security support. The pilot study, running for two years in 2017-2018, aims to assess whether basic income can help reduce poverty, social exclusion, and bureaucracy, while increasing the employment rate. Originally, the scope of the basic income experiment was much more ambitious. Many experts have criticized the government’s experiment for its small sample size and for the setup of the trial, which will be performed within just one experimental condition. This implies that the experiment can provide insights on only one issue, namely whether the removal of the disincentives embedded in social security will encourage those now unemployed to return to the workforce or not.   Still, the world’s largest national basic income experiment represents a big leap towards experimental governance, a transformation that has been given strong emphasis in the current government program of the Finnish state. Additionally, the Finnish trial sets the agenda for the future of universal basic income at large. Its results will be closely followed by governments worldwide. The basic income experiment may thus well lead to the greatest societal transformation of our time.

Bank to pay customers €15,000 to take out €500,000 loan: Bank of Ireland is set to increase the amount it is refunding new mortgage customers, as competition in the mortgage market heats up. The bank’s existing 2 per cent cashback on mortgages was due to expire at the end of September, but the bank has now replaced it with a new CashbackPlus offer. While the offer has now become even more attractive, rewarding home buyers with a 2 per cent cashback on their new mortgage at drawdown, along with an extra 1 per cent cashback five years later, customers must also have a current account with the bank to qualify. The improved offer is available to current account customers of the bank who draw down a new first-time buyer, mover or switcher mortgage before March 31st, 2017.If you don’t have a current account with the bank, or don’t want to switch to it, you can still get the existing 2 per cent cash-back offer. Investors, or those looking for equity release mortgages, will also be eligible for the 2 per cent cash-back offer. The new 3 per cent offer means that someone drawing down a mortgage of €150,000 will get €3,000 straight into their account, plus an additional €1,500 after five years. If you’re buying a house on a mortgage of €500,000, you will get a cashback of €10,000 straight away, plus a further €5,000 back after five years. BOI is not the only bank to offer a cashback on mortgages. Permanent TSB is offering its customers 2 per cent cashback until December 31st, while EBS also offers 2 per cent back.

Ireland might decide to keep the $14.5 billion Apple tax windfall after all -- After the European Commission slapped Apple with a staggering €13 billion (£11 billion, $14.5 billion) tax bill over its tax arrangements with Ireland, the Irish government immediately indicated its outrage and intention to appeal. "I disagree profoundly with the commission's decision," Michael Noonan, the Irish finance minister, said. "The decision leaves me with no choice but to seek Cabinet approval to appeal the decision before the European courts."  But that decision to appeal might not be guaranteed.  On Wednesday, Ireland's Cabinet could not agree whether to fight the ruling by the European Commission — the European Union's executive arm — against Dublin's tax dealings with Apple, raising questions over any appeal and the government's stability.  Noonan had insisted Dublin would appeal any adverse ruling ever since the EU investigation began in 2014. But after over five hours of discussion, the Cabinet adjourned undecided until Friday, when the government said a decision would be made.  Dublin has just over two months — at the latest — to make an appeal against the commission's ruling that the US tech giant should give Ireland unpaid taxes of up to €13 billion ruled to be illegal state aid.  But some Irish voters are astounded that the government might turn down a tax windfall that would be enough to fund the country's health service for a year, and this appears to be complicating the Cabinet's decision whether to fight the ruling.  "Following the discussion, it was agreed to allow further time to reflect on the issues and to clarify a number of legal and technical issues with the attorney general's office and with officials," the government press office said in a statement.

Britain hits back: French call for new deal on borders is a 'non-starter', Home Office warns: Britain will on Tuesday hit back at French calls for the border agreement between the two countries to be renegotiated, branding the suggestion a "complete non-starter" ahead of a meeting in Paris. Amber Rudd, the Home Secretary, will meet the French interior minister on Tuesday following the warning that Britain will not negotiate changes to the asylum claims process - a move which would increase the pressure on UK borders. Home Offices sources have made it clear that people in need of protection should seek asylum in the first safe country they enter. The meeting follows demands from French politicians to rip up the current arrangements in the wake of Brexit, a threat that experts said could double asylum claims to 90,000 each year. Nicolas Sarkozy, the former president who hopes to return to power next year, has called for an end to the Le Touquet agreement, which has been in place since 2003 and allows UK border officials based in France to turn away migrants before they reach Britain. On Monday Xavier Bertrand, the president of the Calais region, also warned that France could scrap the agreement unless Theresa May agrees to renegotiate the current system in an attempt to ease pressures on his town. But, a source close to Mrs Rudd told The Telegraph that the government would resist any pressure to enter into border negotiations with France

Germany Warns U.K. That Brexit Talks Will Be Very Difficult  - German Deputy Foreign Minister Michael Roth warned that the U.K.’s negotiations to leave the European Union “will be very difficult” and that Britain won’t be allowed to “cherry pick” the best that the bloc has to offer. “If the British want full market access but want to limit the access of workers from Germany, France or Poland, they will find there is no ala carte cooperation in this direction,” Roth, the government minister responsible for European affairs, said at a Berlin event Saturday. “We’ve told the British they can’t expect to pick the best aspects of the EU and leave matters at that.” Germany is taking a leading role, with Chancellor Angela Merkel having spent the week canvassing opinion across Europe ahead of an EU summit without Britain. She cited the twin challenges of security and economic growth as leaders prepare to meet in the Slovak capital of Bratislava on Sept. 16. Merkel, the leader of Europe’s biggest economy, began the week of shuttle diplomacy by meeting French President Francois Hollande and Italian Prime Minister Matteo Renzi. She then headed to the Estonian capital of Tallinn, Prague and Warsaw before two more rounds of talks with fellow EU leaders in Berlin on Friday and Saturday. “People will accept Europe only if it holds out the promise of prosperity,” Merkel told reporters on Friday in Warsaw. “Britain’s exit isn’t just some event, but rather a deep watershed in the history of European Union integration.”

Brexit ‘will put 75% of workers at risk of pension shortfall -- The Brexit vote is having “terrifying” effects on the pension schemes of millions of British workers, with 75% of people now expected to have a retirement income below the government’s recommended level, City experts warn. Leading pensions consultants Hymans Robertson say the combination of interest rates and weaker projections for growth post-Brexit mean people will have to save far more towards their pensions to receive the level of income they were on course for before Britain voted to leave the EU. A survey by the firm of 600,000 employees, factoring in new economic assumptions post-Brexit, shows that only 25% now have a good chance of meeting the level of retirement income regarded as appropriate by the Department for Work and Pensions (DWP), and that 50% have an extremely low chance of reaching that level. Chris Noon, head of workplace savings at Hymans, said: “It is terrifying that such a large proportion of the population which is due to retire in the next 20 to 30 years will be receiving an income below the level regarded as adequate by the government. “But we are in a post-Brexit world of low yields in which risk-free assets are generating little or no returns. This makes the cost of providing pensions more expensive. “Evidence of this can be seen in the fact that the cost of purchasing an annuity [which provides a guaranteed income for life] is up by as much as 30% since Brexit.”

Pay to stay’ is Robin Hood in reverse for thousands of hard-working people - From April 2017, tens of thousands of people will be hit by rent hikes around the country, particularly in the south east. Under the government’s “pay to stay” programme, households earning more than £40,000 in London, or £31,000 outside the capital, will be forced to pay on average £1,000 extra a year in rent. To reach the threshold, as a Guardian analysis showed, tenants have to earn only one or two pounds more a week than the lowest earning 10% of Britons. This isn’t robbing from the rich to give to the poor: since the money is returned to the Treasury, it’s a reverse Robin Hood move that only entrenches poverty among low-paid workers.  Tom (not his real name) is one of the people likely to be hit by pay to stay. In his late twenties, after multiple bad experiences with private renting, he decided to move into his parents’ flat in north-west London with his wife and baby. The hope is to save for three or four years to get together enough for a deposit, giving his small family some stability. Tom did everything he was supposed to: he opened a Help to Buy ISA, contributes towards the rent and bills, and is keeping an eye on places the couple may be able to afford to buy in the next few years. Now the rug may be pulled from under his feet: the council flat isn’t huge, but the family are happy to focus their efforts on making the situation work for long-term gain. However, from April they will be hit by pay to stay - Tom’s mother works for the NHS and his father is a painter and decorator. Combined, the pay of Tom’s mother and father would be just below the threshold – but non-dependent children are included in calculations for pay to stay, so Tom and his mother’s salary combined takes the household over the threshold. Instead of saving for their own home now, Tom is likely to be forced into trying to plug the rent gap when the measures come in.

Britain could stay in EU if public opinion shifts, says Tony Blair - Tony Blair has claimed Britain could remain in the European Union, despite the referendum result in favour of Brexit, if public opinion shifts in the next few years. The former prime minister told a French radio station that people had the right to change their minds on the result of the June referendum, and said the debate would continue throughout the UK’s exit negotiations.  Theresa May has repeatedly insisted that “Brexit means Brexit”, stressing her determination to respect the result of the referendum by taking the UK out of the EU. But Blair, who wanted the UK to stay in the EU and as Labour prime minister argued for joining the euro, said remain supporters should continue to warn voters about the costs and consequences of Brexit. Speaking to the French radio station Europe 1, Blair said it was probable that the UK would leave the EU but possible it could stay in. Negative economic consequences such as a fall in the value of sterling, damage to the financial services industry, weaker car manufacturing or a reduction in foreign investment in the UK could shift the debate, he suggested. “At the moment, today, it is not probable, but the debate continues and I believe it is possible,” Blair said, adding that there was no reason why remain supporters should simply accept the result of the referendum, in which 52% of people voted to leave and 48% wanted to stay in.

Nigel Farage Warns "The Establishment Is Losing Control Over The People" --"The Empire is befuddled," at Brexit, exclaims Nigel Farage, telling Alex Jones that globalist establishment is clueless on how to regain control. In a wonderfully frank interview, Farage explained that the establishment's "problem is that it’s fighting this argument on several fronts at once.”"We’ve got the American elections going on, we’ve got a big referendum coming up in Hungary on migrant quotas from Germany, we’ve got a rerun of the Austrian presidency where the right-wing candidate was cheated by false votes,” Farage said. “So they’ve got a real problem, they’re fighting us now on a whole series of fronts.” “What will they do to fight back? I don’t know the answer to that yet, and you know something? Nor do they.”“Brexit is the first strike-back against this phenomenon of the big banks, the big businesses, effectively owning politics, willfully destroying nation-state democracy, getting rid of that thing our forbearers actually fought and shed their blood to create and to preserve our liberties and our freedoms,” he continued. “All of that being taken away and suddenly in a referendum that no one said we could win, and we’ve done it.”“What we’ve done is given inspiration to freedom fighters right across the Western World.” Farage then broke down how Hillary is aligned with the globalist agenda and how the US elections are crucial to the fight against globalism. “Hillary represents everything that has gone wrong in our lives over the last couple of decades,” he said. “She is part of that phenomenon where all that seems to matter now is corporatism.”

Theresa May 'acting like Tudor monarch’ over plans to deny parliament Brexit vote -- Theresa May has been described as acting like a “Tudor monarch” over her alleged plans to take Britain out of the European Union without a parliamentary vote on the matter. The attack comes as it emerged the Prime Minister will meet with the Cabinet on Wednesday to discuss her plans for Brexit. Ministers will gather at the Prime Minister's country retreat of Chequers to discuss the next steps in the process amid speculation that Mrs May will implement Article 50 - triggering the two-year period leading to Brexit - without seeking the backing of Parliament.A Downing Street source confirmed Brexit was "top of the in tray" for Mrs May as she begins her first full week back at work in Westminster after her summer holiday in Switzerland. There has been much speculation over whether parliament would be given a vote on the issue, with lawyers and politicians in disagreement over whether the Prime Minister has the authority to trigger Article 50 and begin the process of withdrawing from the European Union without parliament’s approval. The referendum itself was advisory, and not legally binding, but the legislation that was passed in order to hold it didn’t state whether a decision to leave would need parliament’s backing. Theresa May says she has an 'open mind' over Brexit negotiations It has been reported that government lawyers have advised the Prime Minister the procedure could be begun without a vote, but she could still face legal challenges were she to do so. 480 of parliament’s 650 MPs favoured remaining in the European Union, but overturning the result of the referendum would be a dramatic step.

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