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

Saturday, October 15, 2016

week ending Oct 15

 Fed minutes: Fed hawks worry that delay in rate hike could cause recession: Federal Reserve officials who favor hiking interest rates worry that waiting too long could send the country into a recession. At an unusually divisive Federal Open Market Committee meeting in September, hawkish members said history holds a worrisome lesson for a central bank that has kept a historically accommodative monetary policy in place for the past eight years. "A few participants referred to historical episodes when the unemployment rate appeared to have fallen well below its estimated longer-run normal level. They observed that monetary tightening in those episodes typically had been followed by recession and a large increase in the unemployment rate," said a summary of the meeting released Wednesday. The worry is that if the Fed waits too long, it could be forced into having to raise rates aggressively to slow the economy. Following the release of the minutes on Wednesday afternoon, U.S.-traded shares remained higher, with the S&P 500 up about modestly.  Ultimately, the FOMC decided not to hike. The dovish side argued that the economy is still growing slowly — gross domestic product for the first half of the year was around 1 percent — and that inflation remains muted, meaning that the chances for having to change course abruptly is low.  Three members, however, dissented, looking for the Fed to approve a quarter-point hike that would have been only the second increase in more than 10 years. The "no" votes came from Esther George, Loretta Mester and Eric Rosengren.

Fed Watch: Jobs Data Keeps Hawks Sidelined -- Federal Reserve hawks face an array of labor market data that threatens a key pillar holding up their policy view. That pillar is the assertion that monthly nonfarm payroll growth over roughly 100k will soon force unemployment far below the natural rate, thus placing the US economy in grave danger from inflationary forces. By this view, the decline of unemployment long ago justified further rate hikes. Hawks failed to anticipate that the unemployment rate would flatten out at 5 percent despite steady payrolls growth. This outcome does not fit in their worldview. Fundamentally, they were supply-side pessimists. The recent strength in labor force growth suggests their pessimism was sorely misplaced and undermines their argument for immediate rate hikes. The key elements of the FOMC - the permanent voters - now stand as supply-side optimists and are prepared to hold rates at current levels through the next meeting, and perhaps even longer. A December rate hike is still not a foregone conclusion.  In recent speeches, Federal Reserve Chair Stanley Fischer appears to be now fully under the sway of Fed doves. Fischer's take on the employment report, from his speech this weekend: Despite the strong job growth, the unemployment rate, at 5 percent in September, has essentially moved sideways this year as individuals have come back into the labor market in response to better employment opportunities and higher wages. As a consequence, the labor force participation rate has edged up against a backdrop of a declining longer-run trend owing to aging of the population. This increase is a very welcome development.  Four charts deserve attention here. First, "strong job growth: Second, the unemployment rate has "moved sideways": Third: "higher wages": Fourth "labor force participation has edged up": Overall, the October employment report justified the FOMC's decision to hold rates steady in September. The reasoning, according to Fischer: But with labor market slack being taken up at a somewhat slower pace than in previous years, scope for some further improvement in the labor market remaining, and inflation continuing to run below our 2 percent target, we chose to wait for further evidence of continued progress toward our objectives.

FOMC Minutes: "Could be greater scope for economic growth without putting undue pressure on labor markets" -- Different views: Some FOMC members think that waiting might lead to later larger rate increases - and a recession. Other think "there could be greater scope for economic growth without putting undue pressure on labor markets". Most of the key FOMC members are in the second group.  From the Fed: Minutes of the Federal Open Market Committee, September 20-21, 2016 . Excerpts: In their discussion of the outlook, participants considered the likelihood of, and the potential benefits and costs associated with, a more pronounced undershooting of the longer-run normal rate of unemployment than envisioned in their modal forecasts. A number of participants noted that they expected the unemployment rate to run somewhat below its longer-run normal rate and saw a firming of monetary policy over the next few years as likely to be appropriate. A few participants referred to historical episodes when the unemployment rate appeared to have fallen well below its estimated longer-run normal level. They observed that monetary tightening in those episodes typically had been followed by recession and a large increase in the unemployment rate. Several participants viewed this historical experience as relevant for the Committee's current decisionmaking and saw it as providing evidence that waiting too long to resume the process of policy firming could pose risks to the economic expansion, or noted that a significant increase in unemployment would have disproportionate effects on low-skilled workers and minority groups. Some others judged this historical experience to be of limited applicability in the present environment because the economy was growing only modestly above trend, inflation was below the Committee's 2 percent objective, and inflation expectations were low--circumstances that differed markedly from those earlier episodes. Moreover, the increase in labor force participation over the past year suggested that there could be greater scope for economic growth without putting undue pressure on labor markets;

Why it's hard to give good advice to the Fed -  Scott Sumner - This Washington Post story (by Ylan Mui) from a couple months back makes me kind of sad: During the long recovery from the Great Recession, the central bank kept its benchmark interest rate at virtually zero and pumped trillions of dollars into the economy in hopes of fostering faster growth. Republicans lambasted the effort as creating potentially dangerous imbalances in the financial markets. Democrats backed the moves as essential to ensuring the nation did not slip back into recession.  But the dynamic has shifted since late last year, when the Fed, under Yellen's leadership, raised rates for the first time in nearly a decade. Liberal economists -- including some within the central bank -- worried that the move was premature. Democrats who had hoped Yellen would keep the spigot of easy money flowing were getting worried.  So activists at the Center for Popular Democracy, a coalition of liberal groups, organized workers to protest in Washington and at the central bank's regional branches across the country, then reached out to lawmakers and liberal economists to amplify their message. Seeded with money from Silicon Valley, the two-year-old organization has turned the effort, known as Fed Up, into a powerful vehicle for the liberal critique of the central bank.  The left has it all wrong. The period from late 2008 through the early 2010s was when the progressives should have been out marching in the street for easier money. It was an easy call, as money was far too tight. But they were silent.  Today there is a case for easy money, but it's far weaker. The Fed's target is 2% PCE inflation, and an unemployment rate close to the natural rate. Their most recent forecast is that PCE inflation will average 1.9% in 2017, and 2.0% in 2018 and 2019. So they have set policy at a position where they expect to hit their inflation and employment targets.

Stan Fischer has curve upside-down --Edward Lambert -- Stan Fischer, vice-chairman of the Fed, gave a speech yesterday. (link) He said this… “As we noted in our statement, we continue to expect that the evolution of the economy will warrant some gradual increases in the federal funds rate over time to achieve and maintain our objectives. That assessment is based on our view that the neutral nominal federal funds rate–that is, the interest rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel–is currently low by historical standards. With the federal funds rate modestly below the neutral rate, the current stance of monetary policy should be viewed as modestly accommodative, which is appropriate to foster further progress toward our objectives. But since monetary policy is only modestly accommodative, there appears little risk of falling behind the curve in the near future, and gradual increases in the federal funds rate will likely be sufficient to get monetary policy to a neutral stance over the next few years.” Fischer is saying that the current Fed nominal rate is just below the neutral nominal rate. I agree. However, the neutral nominal rate has been falling. It appears he thinks it is rising. Here is a graph explaining what I mean.  The orange line shows the actual Effective Fed rate. The violet line shows my estimate of the neutral nominal rate according to the business profit cycle of effective demand. The graph shows my estimate a bit above the actual Fed rate, but it is trending downward (falling blue arrow).  Fischer also estimates that the neutral rate is a bit above the current Fed rate, so he says that monetary policy is modestly accommodative. However, he believes that the neutral nominal rate is rising (rising red arrow) because he says there is little risk of falling behind the curve. One of us sees the curve upside-down and I believe it is he. He sees the curve going up, while I see it going down. The business cycle is showing signs of coming to an end. Profits are coming down for over a year. Unemployment is flat-lining. Auto sales have peaked. Year-over-year change in non-farm employment is trending down. There are more signals that the business cycle is decaying into a contraction.

 Citi CEO Promotes Version of 'People's QE' for the U.S. -- Speaking on a panel at the Institute of International Finance in Washington D.C. on Saturday, Citigroup Inc. Chief Executive Officer Mike Corbat appeared to propose that a hybrid of monetary and fiscal stimulus could be used to buoy U.S. economic activity — a suggestion that bears a striking resemblance to a policy outlined by leader of the U.K. opposition. "The probably more effective mode of QE going forward is going to be some type of infrastructure projects, here in the U.S.," Corbat said in his remarks. During the Labour Party's leadership contest last summer, eventual victor Jeremy Corbyn proposed the creation of a National Investment Bank that would issue bonds to be purchased by the Bank of England, a plan the self-described socialist dubbed "the People's QE." The funding would be directed at financing infrastructure projects, he said. Although the party leader has been muted about the policy since its announcement, in the meantime the idea of helicopter money has gained traction in a range of unlikely places. The benefit of the People's QE, according to proponents — and comparable policies have been recommended by everyone from the European Commission to Joseph Stiglitz — is that it would have a much more immediate effect on both economic activity and employment, and that benefits would extend beyond wealthy holders of capital-market securities. Traditional quantitative easing relies upon a range of transmission mechanisms to stimulate economic activity, like boosting asset prices to make consumers feel wealthier, pushing investors into riskier asset classes, and reducing borrowing costs for corporates — a “version of trickle-down economics” that exacerbates inequality, Economics Professor Stiglitz has said. Corbyn's Labour team was reported last year to have engaged Stiglitz as an adviser. Arguments against this form of quantitative easing include that it would hamper the inflation-targeting credibility of the Bank of England, while low long-dated nominal bond yields also suggest the U.K. government, in theory, has the ability to finance investment projects through issuing sovereign debt.

A Recession in the Next Four Years? - Bill Mcbride - The WSJ surveyed 59 "academic, business and financial economists" about the possibility of a recession in the next four years: Economists Believe a Recession Is Likely Within Next Four Years The U.S. must face one of two scenarios: Either the next president will face a recession in office, or the U.S. will have the longest economic expansion in its history.... Economists in The Wall Street Journal’s latest monthly survey of economists put the odds of the next downturn happening within the next four years at nearly 60%.That is ... a recognition that throughout its history the American economy has never grown for more than a decade without a recession. Over the course of the next four years, something—whether exhaustion of the economy’s cyclical momentum, a policy mistake from the Federal Reserve or some outside shock—could knock the economy off course.“We do not think expansions die of ‘old age’ but there’s more probability that a shock will hit the U.S. economy further out in the horizon,” said Lewis Alexander, chief U.S. economist at investment bank Nomura.  Four years seems like forever and  I usually only forecast out a year or a little more.  I don't currently see anything that will cause a recession. I don't know about the odds in the next four years, but I doubt there will be a recession in 2017 (and 2018 seems unlikely too - but that is still a long time from now).

US Economy To Grow Just 1.4% In 2016 After Atlanta Fed Slashes Q3 GDP To 1.9%, Half Its Original Estimate -- There was much excitement when just two months ago, the Atlanta Fed revealed that its original Q3 GDP "nowcast" was showing an economy growing at a whopping 3.8% - a welcome reprieve for an economy which has barely been able to "rise above" a stall speed 1% GDP in the first half. Alas, since then things have deteriorated, and quite rapidly in recent days, because just one week after the Atlanta Fed slashed its GDP estimate to a series low of 2.1%, moments ago it just took it down to even less, or the lowest it has been to date, a paltry 1.9% and 50% lower than the original estimate.  Incidentally, after today's major miss in the retail sales control group, this was expected. At what time does the Atlanta Fed cut its Q3 GDP tracker to 2.0% or lower The answer: just about an hour later when the Atlanta Fed said the following:The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 1.9 percent on October 14, down from 2.1 percent on October 7. The forecast of third-quarter real personal consumption expenditures growth fell from 2.9 percent to 2.6 percent after this morning's retail sales report from the U.S. Census Bureau. Putting the Atlanta Fed forecast in the context of the entire sellside, we get this:So taking all the data we have on hand as of this moment, which includes actuals of 0.8% and 1.4% for Q1 and Q2 GDP, together with the Atlanta Fed's 1.9% for Q3 and adding the latest estimate of Q4 GDP by the NY Fed, which as of this moment is 1.6%, we get that the US will grow at just 1.4% in 2016.Good luck w ith that rate hike Janet in a year in which the US economy will grow at the slowest pace since the financial crisis.

Q3 GDP Forecasts --From the Altanta Fed: GDPNow The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 1.9 percent on October 14, down from 2.1 percent on October 7. The forecast of third-quarter real personal consumption expenditures growth fell from 2.9 percent to 2.6 percent after this morning's retail sales report from the U.S. Census Bureau. From the NY Fed Nowcasting Report. The FRBNY Staff Nowcast stands at 2.3% for 2016:Q3 and 1.6% for 2016:Q4. From Merrill Lynch:  Retail sales increased 0.6% in September, as expected. However, "core" retail sales which nets out autos, building materials and gasoline, only increased 0.1%. This was below the consensus expectation of 0.4%. The August data were not revised but July retail sales were lowered to show a decline of 0.2% versus the prior estimate of a drop of 0.1%. As such, despite the fact that we were forecasting 0.1% mom for September core sales, our tracking estimate for GDP declined due to the downward revision to July. We sliced 0.2pp from our tracking, bringing our estimate of 3Q GDP growth to 2.7%.  CR Note: Looks like real GDP growth around 2.0% to 2.5% in Q3.

US Budget Deficit Spikes 34%, Grows For The First Time Since 2009 --One week after the US Treasury revealed that total US debt in fiscal 2016 rose by $1.422 trillion,the third highest annual increase in history, and hitting an all time high of $19.6 trillion..... moments ago it also revealed that in the fiscal year ended September 30, the US budget deficit grew by $587 billion, a 34% spike comapred to the post-crisis low of $439 billion in fiscal 2015, despite the Treasury enjoying a healthy surplus of $33 billion in the month of September.The latest figures show that the government is borrowing 15 cents of every dollar it spends. Government spending went up almost 5 percent to $3.9 trillion in fiscal 2016, but revenues stayed flat at $3.3 trillion.The deficit arose as a result of $3.3 trillion in receipts (of which $1.5 trillion in personal income taxes, and $1.1 trillion in social security and other taxes), offset by $3.9 trillion in outlays, of which Social Security was by far the biggest spending item, at $916 billion.  But more importantly, in fiscal 2016 the deficit was 3.2% of GDP, compared to a deficit of 2.5% of GDP a year earlier, which was the first increase in the deficit as a share of GDP since 2009. It was also the first increase in the deficit in dollar terms since the financial crisis. What was also notable is that while total debt rose by over $1.4 trillion, the deficit that needed debt funding grew only $587 billion, raising questions what the rest of the debt was used for. Indicatively, the ratio in the growth of debt to deficit, was 2.4x, the second highest in history, and second only to the 2007 recorded in the year just prior to the financial crisis.

 The Final Numbers Are In: Trump's Tax Plan Is a Huge Windfall For the Wealthy --  TPC has released its latest—and presumably final—analyses of the Trump and Clinton tax plans. There's nothing surprising in them: Trump's plan features gigantic tax cuts for the wealthy and Clinton's features big tax increases on the wealthy. For the record, here's how they pencil out: TPC estimates that Clinton's plan would raise $1.4 trillion over ten years and reduce the federal deficit by $1.6 trillion. Trump's plan would cost $6.2 trillion and increase the deficit by $7.2 billion. Needless to say, that's just for the tax plans themselves. Clinton's overall budget proposal would be roughly revenue neutral once you account for her spending proposals. Likewise, Trump's plan might be slightly less of a deficit buster if he cuts spending somewhere—though he's ruled out most areas of the budget for spending cuts and hasn't identified any specific cuts in the few areas left. Assuming that Trump has no sizeable budget cuts in mind, his plan would increase the national debt from about 90 percent of GDP to 115 percent of GDP by 2026. In other words, it's fiscally conservative, using the modern definition of the term.

 Obamacare’s working and tax plans from alternative universes --Jared Bernstein --A couple of recent WaPo pieces for your entertainment and hopefully edification. This one’s from a talk I just gave on how Obamacare is providing health coverage to a lot more people, holding down budgetary costs, and not, I repeat not, killing any jobs (see nice pictures, complements of Ben Spielberg). Yes, it needs some recalibration–there are some thin markets and some insurers are seeing a sicker population than they initially priced for. A public option would help a lot, btw, in these regards.  Then there’s this tax analysis of Trump and Clinton’s tax plans based on a) new work by the Tax Policy Foundation and b) Clinton new idea to expand the Child Tax Credit. No, of course neither candidate will get what they’re asking for here. But they’ll likely get something. So I try to think about what that might look like.

Paul Ryan Tells House GOP He Will Not Defend Or Campaign With Donald Trump -- Heading into Monday, there was speculation that Speaker Paul Ryan would rescind his endorsement of Donald Trump after the emergence of the Trump Tapes, following an exodus of his lawmaker peers doing the same over the weekend. The Speaker had a conference call scheduled for 11 a.m. on Monday with House Republican, to assess Donald Trump’s debate performance and advise rank-and-file Republicans on how to deal with fallout from leaked audio. As of last night, no decision had been made, but as Politico adds, "that the speaker of the House has even mulled abandoning his own party's presidential nominee is illustrative of the extraordinarily bizarre political climate in the Republican Party. "I think they all face the same dilemma to varying degrees," a senior House Republican leadership aide said, echoing the sentiment of multiple high-level aides and lawmakers interviewed by POLITICO. "How to express displeasure in a meaningful way... How best to help members in tough races... How to try to rebuild the party post the anticipated apocalypse. I think they are all having individual and group discussions wrestling with this." And while it remains unclear what has been officially agreed upon, moments ago, Politico's Jake Sherman tweeted that while there was no formal decision, Paul Ryan announced that he won't defend Trump and "will focus the next 28 days on keeping the House majority"

Ryan and Trump are both wrong about trade taxes - AEI » Paul Ryan and Donald Trump have, let’s say, a complicated relationship. Ryan has told the congressional Republicans he leads that he will no longer defend Trump — not that he ever really did — and told them to feel free to disavow him. Trump fired off an angry tweet in response, taking Ryan to task on immigration, jobs and the budget. But even their policy disagreements are more complicated than you might think. Ryan would never say, as Trump repeatedly has, that the North American Free Trade Agreement has been a disaster. Yet they are not quite as far apart on trade as they appear to be. Both of them think that the way other countries tax imports and exports gives them a competitive advantage over the U.S., and that we can reduce the trade deficit by addressing the difference between our tax systems. Both of them are wrong. During the first presidential debate, Trump complained that our exports to Mexico are subject to the country’s value-added tax, which is a kind of consumption tax. But: “When they sell into us there’s no tax.” That’s one reason he considers Nafta “a defective agreement.”  House Speaker Ryan agrees with Trump’s description but would solve the problem in a different way: by having the U.S. replace the corporate income tax with a business consumption tax that is “border adjusted” — meaning that the tax applies to imports and exempts exports. Other Republicans have touted border adjustability as an advantage of consumption taxes. So has Bill Clinton. You can see the appeal for free traders like Ryan and Clinton: They seem to have found a way to respond to voter anxieties about trade without protectionism. But they’re wrong about this issue, for three reasons.  First, it’s not unfair for countries to apply their VATs to our exporters. They apply the VAT to their own companies, too. A tariff, which applies to imports but not to domestically produced goods, is different: It pushes consumers to buy the homemade rather than imported product. Second, most economists believe that making taxes border-adjusted causes the currency to appreciate, negating any effect on the value of imports and exports. That means other countries’ VATs don’t affect our trade balance.  Third, the argument rests on the enduring mercantilist fallacy that exports benefit a country and imports harm it — the same fallacy that leads many people to embrace full-blown protectionism. The goal of raising exports and cutting imports is actually a deliberate objective of lowering Americans’ standard of living.

Switzerland Seen Backing Down on Supporting Tax Haven USA  In July we wrote a blog entitled Luxembourg backing down on supporting tax haven USA. Now it’s Switzerland’s turn.  This concerns the OECD’s Common Reporting Standard (CRS,) a global scheme to share banking information. The United States isn’t a participating jurisdiction: it has its own FATCA project, which as we’ve remarked before, is good at ferreting out US taxpayers overseas, but provides relative little information in the other direction to help other countries enforce their own tax laws. Making the United States a giant tax and secrecy haven.For a while, Luxembourg and Switzerland had been insisting that Tax Haven USA is a participating jurisdiction. In a nutshell, their financial industries wanted this because the CRS says that you are supposed to ‘look through’ certain investment entities and report their beneficial owners, if that entity is not in a ‘participating jurisdiction’ in the CRS. If the USA gets classified as a ‘participating jurisdiction’ then those Swiss financial players can chuck their tax-evading stuff into U.S. investment entities and the ‘look-through’ to the beneficial owners won’t happen.Recently, the influential conservative Neue Zürcher Zeitung said that “The US will now be excluded from the Swiss definition of [a participating jurisdiction] as Swiss television reported, and as the federal government confirmed.” This follows a challenge in the Swiss parliament to this effect. Not only that, but it’s just been shown to us that the CRS itself makes it clear that countries have to reassess whether participation in the CRS is genuine. 

Hillary Clinton's Wall St speeches published by Wikileaks - BBC News: Transcripts of private speeches by US Democratic presidential candidate Hillary Clinton have been released by the whistle-blowing site Wikileaks. In one of the extracts, Mrs Clinton told bankers that they were best-placed to help reform the US financial sector. She also said she favoured "open trade and open borders". Mrs Clinton's main opponent, Donald Trump, has said he wants to renegotiate key trade deals. Mrs Clinton had refused to publish the transcripts, from 2013 and 2014. Her rival in the Democratic primaries, Bernie Sanders, had repeatedly called on her to release the text of her speeches, which are thought to have earned her about $26m (£21m).Analysis - Anthony Zurcher, BBC News In some alternate universe, the Clinton Wikileaks story would be dominating the news this weekend, as pundits and analysts speculate on whether the revelations could tilt the election to Marco Rubio, Jeb Bush or even Ted Cruz. Instead, this is Donald Trump's world, and we're all just along for the ride. That doesn't mean the contents of the purloined messages, assuming they are in fact legitimate and undoctored, won't do lasting damage to Mrs Clinton - if not on Election Day, then as she tries to govern a sharply divided nation in the months and years ahead. They provide yet more evidence that Mrs Clinton is pro-open-trade and sympathetic to Wall Street interests, despite her protestations otherwise. They also reveal a decidedly middle-of-the-road, pragmatic political attitude that won't sit well with the populist wing of her own party. After the dust has settled in this election, the divisions within the Democratic ranks will likely re-emerge - and these emails and speech excerpts will be Exhibit A through Z for those on the left who doubt Mrs Clinton's liberal bona fides. Her every attempt to reach across the aisle to Republicans will be viewed with the highest of suspicions.

In paid speeches, Hillary Clinton said she “represented” and “had great relations” with Wall Street - Excerpts of Clinton's paid Wall Street speeches, released by WikiLeaks, show her cozy relationship with big banks.New emails released by the whistle-blowing journalism organization WikiLeaks provide insight into the cozy relationship Hillary Clinton has had with Wall Street. One message in particular, from the Clinton campaign’s research director Tony Carrk, contains excerpts from paid speeches Clinton gave to large banks and other financial institutions. The speeches, for which Clinton was paid hundreds of thousands of dollars each, reflect her neoliberal, pro-corporate ideology. In them, Clinton stresses the importance of free markets and the financial sector for the economy. In a February 2014 speech to the bank Goldman Sachs and financial management company BlackRock, Clinton admitted, “I’m kind of far removed” from the struggles of the middle class, “because the life I’ve lived and the economic, you know, fortunes that my husband and I now enjoy.” She added, “But I haven’t forgotten it.” Clinton also said, “I do think there is a growing sense of anxiety and even anger in the country over the feeling that the game is rigged,” but she stressed, “I am not taking a position on any policy.” In an Oct. 29 2013 speech at a Goldman Sachs summit, Clinton claimed “there is such a bias against people who have led successful and/or complicated lives.”She lamented that rich politicians are forced to divest their assets, sell stocks and be stripped of other positions. “It just becomes very onerous and unnecessary,” she maintained. In an Oct. 24, 2013 speech at a Goldman Sachs investment symposium a few days before, Clinton argued it is “an oversimplification” to say the U.S. banking system caused the 2008 economic collapse, and that blaming banks is “politicizing” the issue. “I think that there’s a lot that could have been avoided in terms of both misunderstanding and really politicizing what happened,” she insisted. In the same speech, Clinton also said, “There’s nothing magic about regulations, too much is bad, too little is bad.” In that same Oct. 24 speech for Goldman Sachs, Clinton told Wall Street, “I represented all of you for eight years.”

WikiLeaks Emails Reveal Hillary Clinton's Presidential Strategy Which Included 'Elevating' Trump In GOP -- WikiLeaks is slowly releasing emails from Hillary Clinton’s campaign chairman John Podesta. The Podesta emails give an inside look into the Clinton campaign and show that Clinton’s presidential strategy has played out exactly as planned, including the campaign’s early initiative to “elevate” Donald Trump and Ted Cruz to the top of the GOP pack.  WikiLeaks released a series of emails from John Podesta that reveals the inner workings of the Clinton campaign. Within the email dump, one particular email showcases the Clinton campaign’s strategy for “elevating” certain GOP candidates to the top of the pack in a bid to discredit “more-established” candidates. The full strategy can be read by clicking the “attachments” section on the WikiLeaks email and downloading the “Strategy on GOP” PDF provided. The Podesta Emails #HillaryClinton #Podesta #imWithHer The email from April 2015 shows exactly how calculated the Clinton campaign was from the very beginning. In fact, Clinton’s campaign strategy was so accurate that a full year before the GOP field would be narrowed to Ted Cruz and Donald Trump, the Clinton campaign had detailed their plans to “elevate” the two candidates, along with Ben Carson, in a bid to split the Republican Party and force the more established candidates to become “more conservative” in speech and discredit themselves with communities of color, women, and millennials.  Clinton team instructed DNC with strategic goal of “elevating” Trump two months before he declared his candidacy

Sanders supporters seethe over Clinton's leaked remarks to Wall St. | Reuters: Supporters of former Democratic presidential candidate Bernie Sanders on Saturday expressed anger and vindication over leaked comments made by Hillary Clinton to banks and big business that appeared to confirm their fears about her support for global trade and tendency to cozy up to Wall Street. Clinton, who needs Sanders' coalition of young and left-leaning voters to propel her to the presidency, pushes for open trade and open borders in one of the speeches, and takes a conciliatory approach to Wall Street, both positions she later backed away from in an effort to capture the popular appeal of Sanders' attacks on trade deals and powerful banks. The excerpts of remarks by the former secretary of state, made in 2013 and 2014 in closed-door meetings where audiences paid to attend, were published online on Friday by WikiLeaks, which sourced them to the email account of John Podesta, Clinton's campaign chairman. "This is a very clear illustration of why there is a fundamental lack of trust from progressives for Hillary Clinton,” said Tobita Chow, chair of the People's Lobby in Chicago, which endorsed Sanders in the primary election. "The progressive movement needs to make a call to Secretary Clinton to clarify where she stands really on these issues and that’s got to involve very clear renunciations of the positions that are revealed in these transcripts,” Chow said. The revelations were quickly overshadowed by the release of an 11-year-old recording of Donald Trump, the Republican presidential nominee, making lewd comments about women.

Newly Leaked Emails Reveal Unprecedented Coordination Between Hillary Campaign And Press -- It is no secret that the mainstream media has a "slight" left-leaning bias in their political reporting.  But newly leaked emails from Guccifer 2.0, obtained exclusively by The Intercept, reveal just how "cozy" and pervasive the Clinton campaign's relationship is with the press.  From "off-the-record dinners with the key national reporters" to feeding pre-written propaganda pieces to "friendly" journalists, the new leaks reveal startling coordination between the Clinton campaign and the mainstream media. The first revelation comes from a January 2015 strategy document written by Hillary's press secretary, Nick Merrill, about how the campaign should approach reporting on Hillary's decision to run for president.  The memo identifies "Maggie Haberman" of Politico as someone who had a "very good relationship" with the campaign and who had "teed up stories" for Hillary in the past.  Other documents revealed by The Intercept, listed those whom the campaign regarded as their most reliable “surrogates” – such as CNN’s Hilary Rosen and Donna Brazile, as well as Center for American Progress President Neera Tanden.  The list also included "David Brock" as a "Progressive Helper"...of course, Brock has made headlines this weekend as the latest WikiLeaks dump of the "Podesta Emails" revealed that the Hillary campaign potentially coordinated directly with Brock's "Correct the Record" Super PAC, which is technically a felony(see "Podesta Emails Reveal Illegal Coordination With David Brock Super PAC")

There’s Going to Be a Locker Room Guy in the White House, No Matter Who Wins -- Pam Martens --As repugnant as the thought is to the majority of Americans, it appears there is no escaping a locker room guy inhabiting the White House for the next four years. If it’s not Donald Trump, it will be Bill Clinton. In 1998, seven years before the then 59-year old Donald Trump said he could get away with grabbing women in the “p—y” because he was a celebrity, as a newly leaked video reveals, high-powered Washington D.C. lawyer Vernon Jordan was asked what he and then President Bill Clinton talked about on the golf course. He answered: “We talk p—y,” as reported by Newsweek and Time Magazine at the time. But Bill Clinton, whose penchant for scandal is that of a moth to a flame, has done a lot more than just engage in sexist locker room banter, according to a long line of accusers. Less than two hours before last night’s presidential debate, Donald Trump held a press conference on Facebook Live with three of the women who allege Bill Clinton is a serial sexual predator: Kathleen Willey, who accused Clinton of sexual assault; Paula Jones who sued Clinton for sexual harassment; and Juanita Broaddrick, who has repeatedly alleged that Clinton raped her. (Also at the press conference was Kathy Shelton, a child rape victim, whose alleged attacker was represented by Hillary Clinton when she was practicing law in the 1970s.)Paula Jones testified under oath in court that Bill Clinton had exposed himself to her in a hotel room. Bill Clinton settled with Jones in 1998, paying $850,000 but failing to make any admission of sexual misconduct. Each of the four women began their brief statements at the press conference by saying that they are supporting Donald Trump for president. Broaddrick made the most pointed charge against Bill Clinton, stating: “Mr. Trump may have said some bad words, but Bill Clinton raped me, and Hillary Clinton threatened me. I don’t think there’s any comparison.” That the women are willing advocates for putting a man in the White House who has joked about his ability to sexually assault women with impunity because he is a celebrity, is an indictment of the current two-party system in the U.S.  Presidential campaigns in America no longer have anything to do with finding an ethical, competent person for high office. They have everything to do with corporations financing the political careers of damaged candidates they can control.

Wikileaks Releases Another 1,100 Emails From John Podesta In Third Data Dump - Moments ago, Wikileaks just released its third data dump from the Podesta Email, which contains another roughly 1,100 emails in what is becoming a true headache for Hillary Clinton and her broad supporter base. RELEASE: The Podesta Emails Part 3 (1190 new emails) #HillaryClinton#PodestaEmails #PodestaEmails3  — WikiLeaks (@wikileaks) October 11, 2016 While we are going through the latest document dump, as usual, we urge readers to flag and point us to any of the more notable emails, starting which yet another beauty from CNBC's own "unbiased" political commentator John Harwood emailed to Hillary's campaign chairman, John Podesta.

John Podesta: "Hillary Has Begun To Hate Everyday Americans" -- It did not take long for the first surprise in today's email. Following recent comments about "deplorable" Americans, it appears that Hillary may have another public relations problem on her hands courtesy of a leaked email from April 19, 2015 by John Podesta to Clinton Campaign Director of Communications, Jen Palmieri and the other members of the Clinton staff, in which he lets it slip that Hillary "has begun to hate everyday Americans." In light of her other recent disclosures that there are two aspects to Hillary, one public, and one private - revealed exclusively in exchange for $225,000 per speech - Hillary may have some more explaining to do how she is indeed a "candidate of and for the people." The key exhange below:

 Behind Closed Doors, Hillary Clinton Sympathized With Goldman Sachs Over Financial Reform - David Dayen - Excerpts of Hillary Clinton’s previously secret speeches to big banks and trade groups in 2013 and 2014 show her exalting the work of her hosts, hardly a surprise when these groups paid her up to $225,000 an hour to chat them up. Far from chiding Goldman Sachs for obstructing Democratic proposals for financial reform, Clinton appeared to sympathize with the giant investment bank. At a Goldman Sachs Alternative Investments Symposium in October 2013, Clinton almost apologized for the Dodd-Frank reform bill, explaining that it had to pass “for political reasons,” because “if you were an elected member of Congress and people in your constituency were losing jobs and shutting businesses and everybody in the press is saying it’s all the fault of Wall Street, you can’t sit idly by and do nothing.”Clinton added, “And I think the jury is still out on that because it was very difficult to sort of sort through it all.”  Clinton praised Deutsche Bank in a 2014 speech for “the work that the Bank has done in New York City on affordable housing.”While Deutsche Bank has given to anti-homelessness campaigns in the past, it was also cited in a New York State Senate report in January for refusing to maintain foreclosed properties in New York City neighborhoods and costing those communities millions in unpaid fines. Deutsche is also about to face a multi-billion-dollar penalty from the Justice Department for defrauding investors with low-quality mortgage securities, leading to the housing meltdown.Those excerpts were among many listed in an 80-page document prepared by the Clinton campaign, listing potentially damaging quotes from the Democratic nominee’s paid but at that point still secret speeches. The report landed in campaign chairman John Podesta’s email, which was hacked, and then posted by WikiLeaks last week.

 WikiLeaks Bombshell: Emails Show Citigroup Had Major Role in Shaping and Staffing Obama’s First Term --  Pam Martens - Citigroup was a financial basket-case. It had already received $25 billion from the government’s bailout program known as the Troubled Asset Relief Program (TARP) in October; it was secretly receiving hundreds of billions of dollars more each month in below-market rate, revolving loans from the Federal Reserve — information which the Fed refused to make public despite multiple Freedom of Information Act requests from the media; and Citigroup was just 19 days from more hemorrhaging, requiring an additional government infusion of $20 billion and asset guarantees of more than $300 billion. Citigroup had been serially charged by its regulators for abusing its customers and targeting the poor and financially uneducated. But key executives at the bank had played major roles in raising funds for the Barack Obama campaign so it was richly rewarded for that.  According to emails released by WikiLeaks yesterday, which came from a hack of the email account of John Podesta, a co-chair of Obama’s 2008 Transition Team,  we learn that despite the obvious fact that Citigroup was both corrupt and derelict in handling its own financial affairs, Barack Obama gave executives of that bank an outsized role in shaping and staffing his first term. In an email dated Saturday, October 18, 2008, Michael Froman, using his official Citigroup email address of, sent the following email to Obama’s advisors:“Review Teams  “Attached is the latest version of the Agency Review teams. It is a closely held document, so please treat it with the same sensitivity as ours. If you all could take a quick look at the lists for the agencies in your area, that would be helpful. I think the hope is that, while there are no guarantees, some of the people on these lists might make their way into the agencies ultimately. Our role, therefore, is to check whether there is much overlap between the names here and the names were seeing/generating for sub-cabinet positions in each agency. There doesn’t need to be total overlap, but if there is a total disconnect, it would probably be better to rectify that now vs. later.  Froman had served in the Clinton administration and moved to Citigroup along with Clinton’s Treasury Secretary, Robert Rubin. (Rubin would collect compensation of $126 million during his decade at the bank after helping to deliver the repeal of the Glass-Steagall Act,   Obama appointed Froman to the position of U.S. Trade Representative in 2013. This is how Politico sums up how trade deals are being deliberated under his command:

"The Most Important WikiLeak" - How Wall Street Built The Obama Cabinet -- Perhaps the most startling discovery of the WikiLeaks dumps so far didn't come from the most recent emails surrounding the various Hillary scandals, though there are many great ones, but from 2008 when John Podesta served as co-chair of President-elect Barack Obama’s transition team.  The email came from Michael Froman, a former Citibank executive, who single-handedly built the entire cabinet of what was supposed to be the "main street" President. The email in question was even sent from Froman's Citibank email address (rookie!) and includes "A list of African American, Latino and Asian American candidates, broken down by Cabinet/Deputy and Under/Assistant/Deputy Assistant level, plus a list of Native American, Arab/Muslim American and Disabled American candidates." Apparently Obama wasn't as worried about placing women in senior-level positions but Froman decided to offer up some suggestions anyway. "While you did not ask for this, I prepared and attached a similar document on women." Froman even went ahead and "scoped out" which people should be appointed to which cabinet positions. "At the risk of being presumptuous, I also scoped out how the Cabinet-level appointments might be put together, probability-weighting the likelihood of appointing a diverse candidate for each position (given one view of the short list) and coming up with a straw man distribution." As New Republic points out, the Froman appointments ended up being almost entirely right. The cabinet list ended up being almost entirely on the money. It correctly identified Eric Holder for the Justice Department, Janet Napolitano for Homeland Security, Robert Gates for Defense, Rahm Emanuel for chief of staff, Peter Orszag for the Office of Management and Budget, Arne Duncan for Education, Eric Shinseki for Veterans Affairs, Kathleen Sebelius for Health and Human Services, Melody Barnes for the Domestic Policy Council, and more. For the Treasury, three possibilities were on the list: Robert Rubin, Larry Summers, and Timothy Geithner. This was October 6. The election was November 4. And yet Froman, an executive at Citigroup, which would ultimately become the recipient of the largest bailout from the federal government during the financial crisis, had mapped out virtually the entire Obama cabinet, a month before votes were counted. And according to the Froman/Podesta emails, lists were floating around even before that.

In The Democratic Echo Chamber, Inconvenient Truths Become Putin Plots --Glenn Greenwald - Donald Trump, for reasons I’ve repeatedly pointed out, is an extremist, despicable, and dangerous candidate, and his almost-certain humiliating defeat is less than a month away. So I realize there is little appetite in certain circles for critiques of any of the tawdry and sometimes fraudulent journalistic claims and tactics being deployed to further that goal. In the face of an abusive, misogynistic, bigoted, scary, lawless authoritarian, what’s a little journalistic fraud or constant fearmongering about subversive Kremlin agents between friends if it helps to stop him? But come January, Democrats will continue to be the dominant political faction in the U.S. — more so than ever — and the tactics they are now embracing will endure past the election, making them worthy of scrutiny. Those tactics now most prominently includedismissing away any facts or documents that reflect negatively on their leaders as fake, and strongly insinuating that anyone who questions or opposes those leaders isa stooge or agent of the Kremlin, tasked with a subversive and dangerously un-American mission on behalf of hostile actors in Moscow.  To see how extreme and damaging this behavior has become, let’s just quickly examine two utterly false claims that Democrats over the past four days — led by party-loyal journalists — have disseminated and induced thousands of people, if not more, to believe. On Friday, WikiLeaks published its first installment of emails obtained from the account of Clinton campaign chair John Podesta. Despite WikiLeaks’ perfect, long-standing record of only publishing authentic documents, MSNBC’s favorite ex-intelligence official, Malcolm Nance, within hours of the archive’s release, posted a tweet claiming — with zero evidence and without citation to a single document in the WikiLeaks archive — that it was compromised with fakes: Official Warning: #PodestaEmails are already proving to be riddled with obvious forgeries & #blackpropaganda not even professionally done.

How Paul Krugman Made Donald Trump Possible - His convention was called “one of the worst ever.” Chris Matthews deemed him “dangerous” and “scary,” Ellen DeGeneres said “If you’re a woman, you should be very, very scared.” His opponent ran an ad against him portraying him as uniquely dangerous for women. “I’ve never felt this way before, but it’s a scary time to be a woman,” said a woman in the ad.  He was frequently called a “bully,” “anti-immigrant,” “racist,” “stupid,” and “unfit” to be president. I’m referring, obviously, to the terrifying Mitt Romney.  Mitt Romney was, of course, far from the first Republican presidential candidate to get this treatment. George W. Bush, John McCain, and any Republican who has the audacity to challenge a Democrat for the presidency are treated to ever more alarmist rhetoric. Every gaffe, every uncorroborated story is blown up by a media seemingly unaware of its extreme bias.  So in 2016 when there is a Republican candidate who might be, actually, dangerous, it’s unsurprising that many mainstream Republicans don’t care. It’s too late for the media to say “no, no, we really mean it this time.” Republican Never Trumpers, like myself, find that when we call Donald Trump scary or unfit, voters have heard it so often before—and about people like mild-mannered, decent, knowledgeable Mitt Romney—that it doesn’t resonate at all. Take Paul Krugman in The New York Times. In Tuesday’s column he wondered how any “rational Republicans justify supporting Mr. Trump.” He concludes it’s about “feelings,” a dismissal of legitimate arguments many people, both Republicans and not, have against Hillary Clinton. But no one is more feelings-based than Krugman when it comes to Republicans. If he wants to know how people can take Donald Trump seriously, he should take a hard look at himself. In 2012, Krugman called Mitt Romney a “charlatan,” pathologically dishonest, and untrustworthy. He said Romney doesn’t even pretend to care about poor people and wants people to die so that the rich could get richer. Romney is “completely amoral,” “a dangerous fool,” “ignorant as well as uncaring.” In March, Krugman had a column called “Clash of Republican Con Artists.” In it, he called Trump’s foreign policy more reasonable than that of Marco Rubio or Ted Cruz and said he’s just as terrified of either of those men in the White House as he is of Trump. He wrote: “In fact, you have to wonder why, exactly, the Republican establishment is really so horrified by Mr. Trump. Yes, he’s a con man, but they all are. So why is this con job different from any other?” Yet a few weeks ago Krugman wondered how Republicans could rally around Trump “just as if he were a normal candidate.” It was exactly Krugman who normalized him! What makes Donald Trump normal to so many is that they’ve heard all the hysteria from people like Krugman before. If you use the most vile language available on a good man like Romney, or on real candidates like Rubio and Cruz, you find you have none left for the Donald Trumps of the world—and no one is listening to you anyway.

Wikileaks Releases Another 1,193 Emails From John Podesta In Fourth Data Dump - And the hits just keep on coming. After the third and latest dump of Podesta Emails released yesterday revealed some unexpected interactions between the "independent press" and the Clinton Campaign, as well as potentially hinting of coordination between the DOJ and Hillary's closest circle, following a similar revelation involving the State Department one day prior, moments ago, Wikileaks just released its lastest, fourth data dump from the hacked email account of Hillary Clinton's Campaign Chair, John Podesta, which continues to be a major headache for Hillary Clinton and her supporter base. There are as many as 1,193 new emails in the latest release, bringing the total to 6,526. Wikileaks founder Julian Assange has claimed he is sitting on as much as 50,000 messages. RELEASE: The Podesta Emails Part 4 (1193 new emails) #HillaryClinton#PodestaEmails #PodestaEmails4 — WikiLeaks (@wikileaks) October 12, 2016 As usual, as we parse through the latest document dump, we urge readers to flag and point us to any of the more notable emails they find.

Wikileaks Releases Another 673 Podesta Emails In Part 5 Of Data Dump -- Just hours after wikileaks released the 4th part of the Podesta emails dump, Wikileaks has unveiled the 5th part, in which is released another 673 emails, assuring that at least one part of the media will be busy digging through hundreds of emails more, while much of the remaining part of the media will be doing all it can to ignore the latest release. RELEASE: The Podesta Emails Part 5 (673 new emails) #HillaryClinton #PodestaEmails #PodestaEmails5 — WikiLeaks (@wikileaks) October 12, 2016

Wikileaks Releases Another 2,000 Podesta Emails In Part 6 Of Data Dump - Just hours after wikileaks released the 5th part of the Podesta emails dump which in turn came shortly after part 4 which together amounted to some 1,866 new email, Wikileaks has unveiled the latest, 6th part in what now is a daily event, which released another 2,000 emails, bringing the total number of emails released to over 9,000 and assuring that at least one part of the media will be busy digging through hundreds of emails more, while much of the remaining part of the media will be doing all it can to ignore the latest release and instead focusing on the latest sexual allegations against Donald Trump. RELEASE: The Podesta Emails Part 6 (almost 2000 new emails) #HillaryClinton #PodestaEmails  — WikiLeaks (@wikileaks) October 13, 2016 As usual, we request readers to send us any notable emails that they find in the latest dump.

Wikileaks Releases Another 1,150 Podesta Emails In Part 7 Of Data Dump: Total Is Now 10,169 -- Another day, another data dump. In what is now a daily routine, moments ago Wikileaks released yet another roughly 1,150 emails in Part 7 of its ogoing Podesta Email dump, which brings the total number of released emails to 10,169. RELEASE: The Podesta Emails Part 7 #HillaryClinton#imWithHer #PodestaEmails #PodestaEmails7— WikiLeaks (@wikileaks) October 14, 2016In a tangent, earlier today, The Hill had a hit piece noting that "Assange grudge against Clinton shapes US election", reporting that the Wikileaks founder's "grudge against Hillary Clinton is playing out on the grandest stage possible." Between now and Election Day on Nov. 8, WikiLeaks is expected to release more than 40,000 more emails about Hillary Clinton that are meant to damage her run for the White House — possibly in batches on a near-daily basis. The emails, from hacks of the Democratic National Committee and Clinton confidante John Podesta’s email account, may be the best chance Republican presidential nominee Donald Trump has of knocking off Clinton, the heavy favorite to win the White House.

Federal Reserve official says shadow banking remains concern | TheHill: The U.S. government lacks sufficient policy tools to address problems that may arise from unregulated parts of the financial system, a top Federal Reserve official said Friday. Stanley Fischer, vice chairman of the central bank, told an industry audience that “shadow banking” poses a challenge for regulators because they have such little information on it. Shadow banking, which includes institutions and activities such as securities lending that are outside the traditional banking system, is subject to little or no oversight by regulators.“I am a little worried that we in the United States do not have very good mechanisms for dealing with the nonregulated sector of shadow banking,” Fischer said at an Institute of International Finance conference in Washington. “That is something that has to be looked at again.” “The public sector does not have a whole lot of information about what is going on in various sectors, which are very adaptive in the shadow banking system,” he added, referring to the way that unregulated parts of the financial industry have been evolving in the post-financial crisis world. Critics have argued that there has been too much regulation in response to the 2008 crisis. Fischer acknowledged that regulators have a playbook of tools, including banking reforms, interest rate policy and measures targeted at promoting stability in the financial system. But he said that regulators are still not prepared for potential shadow banking problems. There is no one area of shadow banking that concerns Fischer the most, but he said it is often difficult to predict where the next big problem could come from, citing the way regulators were blindsided by the 2008 crisis. “Regulators can do a lot, but things will happen,” he said.

What Wells Fargo knew - A Wells Fargo bank manager tried to warn the head of the company’s regional banking unit of an improperly created customer account in January 2006, five years earlier than the bank has said its board first learned of abuses at its branches. In recent months, the discovery of as many as 2 million improperly created accounts has widened into a public scandal for Wells Fargo, one of the country’s largest banks by assets. Some lawmakers, including Sen. Elizabeth Warren of Massachusetts and Rep. Roger Williams of Texas, have called for CEO John Stumpf to step down. A letter written in 2005 and obtained by VICE News details unethical practices that occurred at Washington state branches of the bank, suggesting the conduct began years before previously understood. Dennis Hambek, a former branch manager in West Yakima, Washington, sent a certified letter in January 2006 to Carrie Tolstedt, then Wells Fargo’s head of regional banking, outlining unethical “gaming” activity at area branches. In 2007, Tolstedt was made the company’s head of community banking, the division where many of the unethical practices occurred.

Ex-Wells Fargo worker: Intimidation included no bathroom breaks -  Harassment, intimidation, even bathroom breaks denied. That's some of the "unconscionable behavior" a former Wells Fargo worker drove five hours to confront a bank executive about. Nathan Todd Davis said at a California State Assembly hearing on the Wells Fargo (WFC) fake account scandal that he filed 50 ethics complaints during his decade of working at Wells Fargo -- but nothing was ever done. "I've been harassed, intimidated, written up and denied bathroom breaks," said Davis, who drove 350 miles from his home in Lodi, California, to speak at the hearing. The former Wells Fargo worker directed his complaints to David Galasso, a senior Wells Fargo executive who was filling in at the hearing for CEO John Stumpf. "The sales culture of Wells Fargo needs to be picked apart," he said, standing at the podium but looking to his right to address Galasso. Davis estimated that almost two-thirds of Wells Fargo employees "cheat the system" due to unreasonable sales pressure. After a decade at Wells Fargo, Davis said he was fired in June 2016 for being "90 seconds late to work." The real problem, he said, was that he never "made it to management because I don't cheat."Galasso, who serves as Wells Fargo's head of community banking in Northern and Central California, did not address Davis' comments directly.  Wells Fargo declined to comment on the individual allegations, but said in a statement that it tries to make every employee "feel valued, rewarded and recognized."  The allegations by Davis echo ones made by other former and current Wells Fargo employees to CNNMoney. After regulators accused Wells Fargo of creating as many as 2 million unauthorized accounts, workers reached out to lay the blame on the bank's unrealistic sales goals that led many to cheat. Other former Wells Fargo workers believe they were retaliated against after they called the ethics line. The Labor Department has since said it's reviewing whistleblower retaliation complaints against Wells Fargo.

Wells Fargo Shakes Up Management, Creates Digital Payments Division | American Banker: More top executives at Wells Fargo will report to President and Chief Operating Officer Tim Sloan, the company announced Monday, a move that comes amid the ongoing fake accounts scandal that has led to calls for the resignation of Chief Executive Officer John Stumpf. The company named three new or expanded roles, all of which were added to the bank's operating committee, and the creation of a new business group focused on payments, virtual solutions and innovation. Five members of the bank's operating committee now will report to Sloan, while six members, including Sloan, will report to Stumpf, who leads the committee. The new roles take effect Nov. 1.Modjtabai is a 23-year veteran of Wells and already serves on the bank's operating committee reporting to Sloan. Seven business lines will report to Modjtabai, including consumer credit cards and retail services, deposit products and treasury management and merchant services. Arguably the biggest shift was that of Avid Modjtabai, the head of consumer lending, who has been named chief of the new payments group focused on digital and online offerings, investments in research and development and strategic partnerships. Wells said the group will bring together teams across the company in order to "accelerate the company's focus on delivering the next generation of payments capabilities." "We're not aware of any of our competitors that have anything like this," Sloan said in an interview about the new business group. "Every bank is organized differently. I wouldn't say we've discovered alchemy here and we're going to turn this into gold. We're all competing for the same consumer and commercial customers, and by bringing these together we can be faster and integrate all the payment products."

Wells Fargo CEO John Stumpf is out - Oct. 12, 2016: Embattled Wells Fargo CEO John Stumpf will retire effective immediately, the company announced Wednesday, marking a stunning downfall for one of the banking industry's most powerful figures. The Wells Fargo (WFC) boss is out in the wake of a national uproar that erupted after regulators accused the bank of creating many as two million fake bank and credit card accounts. The company admitted to firing 5,300 workers over several years. A person familiar with the matter said that Stumpf made the decision to retire, which was welcomed by the board. Stumpf's resignation comes after Senator Elizabeth Warren publicly condemned him for "gutless" leadership at a Sept. 20 Senate hearing. "You should resign. ... You should be criminally investigated," Warren told Stumpf during a fiery one-sided exchange. On Wednesday, Warren applauded Stumpf's decision to leave the helm of the company, tweeting "As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He's 1 for 3."

Wells Fargo CEO Stumpf retires with $134M - John Stumpf, the embattled CEO of Wells Fargo (WFC), unexpectedly retired from the company on Wednesday effective immediately. Stumpf's move comes just weeks after he was grilled by two congressional panels over the way the bank handled an alleged scam where upwards of 2 million accounts were created by employees without the knowledge of customers. The accounts were allegedly opened so thousands of employees could meet aggressive sales goals set by management. Stumpf was widely criticized for the way he handled the questioning, pushing the blame to lower-level employees and not holding upper-level executives, including himself, responsible. Stumpf, 63, is resigning as both CEO and chairman. He has been CEO since June 2007 and has worked for the company for 34 years. The fact that Stumpf, the company's top executive, was also the chairman of the board was another point brought up by lawmakers questioning why the bank didn't act sooner to deal with the widening scandal. The roles are split, now. The company's president and chief operating officer, Tim Sloan, 55, will replace Stumpf as CEO. Sloan was head of the Wells Fargo unit that made loans to large corporate customers and not directly tied to the alleged consumer banking fraud. While Stumpf doesn't receive a special retirement payout, executive-pay tracker Equilar estimates he'll walk with $134.1 million. The package remains that large even after Stumpf last month agreed to a $41 million clawback following a grilling he received from the Senate Banking Committee reprimanding him for not taking responsibility. He agreed to give up unvested stock, but still owns shares vested in previous years.

Almost Nobody is Satisfied With Wells Fargo CEO John Stumpf’s Overdue Departure - Yves Smith - As was widely anticipated, Wells Fargo Chairman and CEO John Stumpf resigned yesterday. The bank presented the departure as voluntary, and if so, that speaks volumes about the complacency of the board in the face of an ongoing scandal that has already taken 20% off the market capitalization of the San Francisco bank. The forcing event appears to have been that Wells’ quarterly investor conference call is scheduled for Friday. However, the bank hasn’t taken moves consistent with housecleaning. One of the big themes of the Congressional hearings, particularly the House Financial Services Committee session, was that Wells has a diseased culture. We presented plenty of evidence not just of Wells foreclosure abuses, but also of a peculiar combination of institutionalized bad practices with a bizarre smugness, an unwarranted belief that it was morally superior. In keeping, when Stumpf was hit again and again with the evidence of corporate procedures that would require many employees to cheat to keep their jobs, Stumpf appeared to genuinely believe that his bank had integrity, that any problems, as Ben Bernanke would have put it, were contained.  As expected, Wells elevated an insider, Timothy Sloan, to the role of CEO. It also split the role of chairman and CEO, a long-overdue good governance basic that TBTF banks in America have resisted. However, a current board member, lead director Stephen Sanger, who comes from corporate America, and not the financial services industry, will become chairman. It would have been a more convincing move to have a respected outsider such as Shiela Bair take that role.   Stumpf’s blindness to the disease of an overly-zealous sales culture suggests that the board and Sloan will be in denial about the magnitude of change required. House Financial Services Committee ranking member Maxine Waters has the same doubts. The Financial Times quotes her as saying: Tim Sloan is also culpable in the recent scandal, serving in a central role in the chain of command that ought to have stopped this misconduct from happening. Elizabeth Warren isn’t satisfied either. She tweeted: As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He’s 1 for 3.  Stumpf gave up his severance package but the Financial Times estimates his retirement benefits plus direct and family trust Wells holdings as totaling $138 million; a Wall Street Journal expert puts it at $1210 million. However, the Journal noted: However, the board could decide, depending on the investigation’s outcome, that Mr. Stumpf should relinquish more pay, the person added. This could include as much as $24 million of pension benefits, the person said.

Wells Fargo’s new CEO previously denied that the bank’s sales culture had any problems - Yesterday, Wells Fargo CEO John Stumpf announced his "early retirement" from the scandal-haunted company, with the CEO seat being filled by former COO Tim Sloan.  Sloan is a bizarre pick for the job. With evidence mounting that the fraud goes back to 2008 or even 2005, and that the company's culture ofcoercion through blackballing threats was responsible for millions of criminal acts, Wells has appointed a veteran of the company -- who held senior, responsible roles through the entirety of the scandal -- to the top job.  He's not just any veteran, either: in 2013, Sloan told the LA Times that his company had no "overbearing sales culture" -- that everything was fine and the low-level bankers who were coming forward with early warnings about being pressured to act unethically were imagining things. As the scrutiny over the fiasco grew, Sloan was promoted to President and Chief Operating Officer at Wells. He was the one who gave Carrie Tolstedt — the head of the bank’s retail division — that she would be “retiring” this past summer. But through it all, he maintained that Wells Fargo’s practice of constantly pushing employees to upsell and cross-sell financial products was not going to change.“Because when you think of our vision, it’s to satisfy our customers’ financial needs, and to help them succeed financially,” he explained to American Banker in a June 2016 interview, adding that the “fundamental strategy that we have is not going to change.” [Consumerist]

Why the Wells Fargo Scandal Really Matters (Hint: It’s Not Just the Fraud) - Rana Foroohar -I always thought John Stumpf, the now former CEO of Wells Fargo, would eventually step down amid revelations that bank employees opened millions of credit-card accounts customers hadn’t approved in order to hit profit targets. Let me be clear: I didn’t think he’d resign because the behavior under his watch was egregious — that hasn’t stopped any number of other financial executives from staying in their posts. But rather, I thought he would fall because the fraud in this case was just so easy for average people to understand. Spliced and diced derivatives contracts sold across borders to gullible counterparties? Huh? But straight up fraud — taking customers’ personal information and using it without their knowledge or consent — that’s something everybody can understand. And be justifiably outraged by.  Wells’ easily grasped misdeeds, and the fallout, come at a pivotal time for the reform-minded. I’m hopeful this scandal, which doesn’t require the cleverness of Margot Robbie in the tub to explain, represents an opportunity to reconstruct and refresh the narrative around our financial system. Particularly what still needs to be done to make it safer. Officials did a great job saving the financial system post 2008, but a terrible job reregulating it and putting it back in service to the real economy.  The Wells case is a perfect example. Why was the malfeasance at Wells in the credit-card division? One reason is that Dodd-Frank put certain restrictions on the ability of banks to make money via riskier trading. But absent deeper changes in the business model of finance, banks didn’t take this as an opportunity to channel capital to more productive uses (like, for example, the sort of business lending that made up the majority of their revenue stream 40 years ago). Rather they looked for another place to make a quick buck — this time in consumer debt.  All this is, of course, encouraged by policymakers who are all too eager for constituents to have access to debt to paper over the fact that the recovery is still sluggish, and wage growth has been slow. Wells is only one of any number of banks that have moved into the consumer retail business as a way to try to keep profit margins high. Given the pressure to make the quarterly numbers, but no real culture or mission change, it’s no wonder things turned sour.  The financial sector is supposed to serve business and the public — not the other way around. The Wells saga is a shockingly simple example that we’re not there yet.

OCC Deserves More Scrutiny in Wake of Wells Fraud | Bank Think: In the last few weeks, the top leadership at Wells Fargo has justifiably come under furious criticism over the bank's fraudulent sales practices. Some of that furor should also be directed toward federal regulators. The scale of the fraud at Wells Fargo's retail division was mind-boggling. Wells is accused of having created up to 2 million fake bank accounts or the equivalent of one fabricated account for every 121 adults in the United States. The bank clearly knew about the problem. Over 5,300 employees, or approximately 2% of Wells Fargo's entire workforce, were terminated for engaging in these activities. The Los Angeles Times uncovered the bank's malfeasance in an investigative story published in December 2013. Still, no federal regulator ever stepped up to the plate to initiate a punitive investigation against the bank. In fact, the only reason why the Wells Fargo story is now in the news is because local law enforcement, the Los Angeles City Attorney, spearheaded an investigation that was later joined by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.In recent congressional testimony, Comptroller of the Currency Thomas J. Curry and CFPB Director Richard Cordray acknowledged that their agencies knew about Wells Fargo's shady sales practices before the L.A. Times story broke, yet they failed to initiate any enforcement action on their own. Ultimately, the OCC fined Wells Fargo $35 million and the CFPB imposed its own penalty of $100 million. But it remains unclear whether the agencies would have ever imposed these penalties absent the investigative diligence of Los Angeles prosecutors. Something is clearly amiss when city prosecutors do a better job than federal regulators of policing nationwide banking fraud.

Earth to Regulators: If You’re Going to (Hopefully) Ding John Stumpf, How Did You Miss Henry Kravis, Leon Black, et al.? --  Yves Smith - Now that Well Fargo’s CEO John Stumpf has, by accident, set a precedent of having a top executive at a financial services firm respond to a chorus of calls for him to suffer for overseeing an organization that stole from customers on a widespread basis, why aren’t there more calls for the Stumpf Standard to apply elsewhere? Here are the markers Elizabeth Warren set down in her Senate grilling and recapped on Twitter: A bank teller would face criminal charges & a prison sentence for stealing a handful of 20s from the cash drawer.  As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He’s 1 for 3.  October 12, 2016 Despite Warren being absolutely correct on the gaping disparity between the treatment of small fry and the elites, Corporate America is chock full of devices to protect supposed leaders from suffering any real consequences of profiting from chicanery, such as reporting chains that allow them to throw subordinates under the bus, and the extensive use of outside experts as liability shields (“our lawyers said it was OK”). So while the public should keep up the pressure for a criminal investigation of Stumpf and the executives that ran the business that created all the bogus accounts, Carrie Tolstedt, what about also demanding more accountability from executives and the regulators that impose fines? The OCC is making a gesture in that direction by making a “horizontal review” to see whether other banks engaged in Wells-style hyper aggressive sales and fake account generation.  Recall that Gretchen Morgenson pointed out earlier this month that state and city treasurers who were public pension fund trustees were eager to get their names in headlines by withdrawing their business from Wells Fargo. Yet the actual amount of money that Wells had been ordered to refund to customers was $2.4 million. Yet the amount of fees that Apollo, the focus of her article, had impermissibly takens, as in stole, from its investors was $40.3 million per a recent SEC settlement.1 Were these trustees, who have a much higher standard of care in that role than as treasurers, going to put Apollo in a penalty box as they did Apollo? The answer was either silence, or worse, defenses of investing in private equity. This sort of complacency is sadly typical of badly captured investors, as we’ve documented over the past three years. But in light of the Stumpf Standard, there’s no justification for the SEC failing to fine the executives of private equity firms. To make it easy, we’ll look at two firms that were fined by the SEC, Apollo and KKR, which are also the purest private equity plays among the private equity firms that have gone public.

How Wells Fargo Exemplifies the Drivers of Big Corporate Fraud -By Lynn Parramore - Just about everyone wants to hold Wells Fargo accountable for a scheme in which sales quotas drove employees to set up phony credit card and bank accounts without customer knowledge. A Donald Trump advisor declared the behavior “stupid” and “greedy,” while Hillary Clinton proposes to make it easier for consumers to take companies to court for such behavior. So far, over 5,000 regular workers have been fired at Wells Fargo, and the Consumer Financial Protection Bureau has fined the bank $185 million. “Hold Wells Fargo Accountable” even has its own Facebook page. Will it make any difference? Not much, warns William Lazonick, a leading expert on American corporations and co-author of a new study on CEO pay sponsored by the Institute for New Economic Thinking. Until critics truly understand why companies have strong incentives to create such schemes in the first place, they will go on doing so, hurting workers, customers, and taxpayers. The entire economy will be dragged down and economic inequality will continue to rise.As Lazonick explains, the Wells Fargo cross-selling scandal and other scams that ripple across the headlines are born in a business culture in which executives are focused on jacking up stock prices in the short term so that they can cash in on stock options and awards. As long as this continues, the urge to cheat will be too tempting for most to resist.Here are three things anyone wanting to hold Wells Fargo accountable needs to know.

  • 1) American businesses have become stock manipulation machines
  • 2) Focusing on short-term stock prices leads to corruption
  • 3) Punishment means little until executive pay is understood

 New York Times Writer Suggests Donald Trump is an Anti-Semite for His Reference to Banking Conspiracy - Pam Martens -One would have had to have been in a coma for the past eight years not to realize there has been an ongoing Wall Street banking conspiracy in the United States. The Government Accountability Office (GAO) tallied it up and found it amounted to $16 trillion in secret loans from the Federal Reserve – an unfathomable bailout never approved by Congress. On May 20 of last year the U.S. Justice Department documented a vast conspiracy by global banks in the foreign currency markets with the banks admitting to the felony charges. The former heads of Federal regulatory agencies have written books about the conspiracy. Frontline andSixty Minutes have produced documentaries on it. Banking whistleblowers have organized to fight it in an effort to save the country. A major motion picture, The Big Short, was released this year which put one aspect of the conspiracy into layman’s language and was based on a book by Wall Street veteran, Michael Lewis. Wall Street On Parade has chronicled the ongoing banking conspiracy for the past decade. But yesterday, after Donald Trump made a reference to a banking conspiracy in his speech in West Palm Beach, Florida, a writer at the New York Times quickly pointed the anti-Semite finger at Trump, quoting Jonathan Greenblatt, CEO of the Anti-Defamation League and others. The Times wrote:“The remarks drew criticism from some who said they resembled prejudicial language used by anti-Semites. ‘Whether intentionally or not, Donald Trump is evoking classic anti-Semitic themes that have historically been used against Jews and still reverberate today,’ Jonathan Greenblatt, the chief executive of the Anti-Defamation League, a group that fights discrimination, said in a statement.” The full transcript of Trump’s speech was made available by Time Magazine. There is only one reference to the words “bank” or “banking.” Trump is far from alone in thinking big Wall Street banks have seized our democracy. Senator Bernie Sanders, a Jew from Brooklyn, fired up an entire nation with a presidential campaign calling for a political revolution against the banks and the establishment. He repeatedly, and correctly, stated that the business model of Wall Street had become fraud. Senator Elizabeth Warren also gets this.

SEC Said to Demand That Cooperman Agree to Hedge Fund Suspension - Bloomberg: Wall Street’s top cop demanded that a resolution of its insider-trading case against Leon Cooperman include the billionaire investor accepting a temporary suspension from the hedge fund industry, according to people familiar with the matter. Before suing Cooperman last month, the U.S. Securities and Exchange Commission pushed the outspoken trader to agree to a settlement that would have required him to pay about $8 million in penalties and prevented him for some period of time from managing money for clients, said the people who asked not to be named because the meetings were private. Cooperman has shown no signs of wanting to negotiate, as he’s repeatedly denied wrongdoing and said his firm met with the SEC before it filed the lawsuit to explain why its allegations were “totally unwarranted.”Cooperman, 73, has described his fight against the regulator as a battle for his legacy, arguing that any fine is irrelevant because it would be far less than he annually donates to charity. But an industry suspension could have significant consequences, potentially affecting his role at Omega Advisors Inc., the New York hedge fund he’s built over more than two decades through savvy stock picks. It couldn’t be determined how long Cooperman would have been sidelined had he agreed to the SEC’s proposed suspension, which is one of the stiffest sanctions the agency can levy against individuals. In 2013, Phil Falcone received a five-year prohibition from working in the securities industry and admitted wrongdoing in settling an SEC case that accused him of improperly borrowing money from his fund to pay his personal taxes. Cooperman said in a Tuesday interview with Bloomberg Television that he has no intention of retiring or returning investors’ money. He declined to say whether the SEC’s settlement offer included a demand that he stop managing money for clients.

The SEC Fiddles While the System Burns: Insider Trading Enforcement As Securities Law Theater - naked capitalism by Jerri-lynn Scofield - Bloomberg yesterday reported in the the Securities and Exchange Commission’s (SEC) demands in its investigation of alleged insider trading by noted hedge fund manager and former Goldman Sachs head of research Leon Cooperman. According to Bloomberg: Wall Street’s top cop demanded that a resolution of its insider-trading case against Leon Cooperman include the billionaire investor accepting a temporary suspension from the hedge fund industry, according to people familiar with the matter. Before suing Cooperman last month, the U.S. Securities and Exchange Commission pushed the outspoken trader to agree to a settlement that would have required him to pay about $8 million in penalties and prevented him for some period of time from managing money for clients, said the people who asked not to be named because the meetings were private. Cooperman has shown no signs of wanting to negotiate, as he’s repeatedly denied wrongdoing and said his firm met with the SEC before it filed the lawsuit to explain why its allegations were “totally unwarranted.” Cooperman and SEC spokeswoman Judy Burns declined to comment. The SEC is taking an aggressive line against Cooperman at the same time it is also announced that hedge fund advisory firm Artis Capital Management and a senior research analyst have agreed to settle charges related to their failures to detect insider trading by one of their employees. I should make it clear that I’m taking no position on whether the allegations against Cooperman are true. Nor do I particularly care. What does concern me is the phenomenon of securities law theater. The SEC’s almost exclusive focus on alleged insider trading at the exclusion of far more important systemic abuses is part of the theatrical spectacle that substitutes for effective regulation and coincided with the rot that has overtaken so many aspects of our wider regulatory systems. The following observations may seem to be a bit ad hoc and anecdotal, but that doesn’t mean they don’t contain some kernels of truth. And these musings are no doubt inspired by having spent too many hours in the air earlier this week, travelling from JFK to Kolkata, so the related phenomena of air safety theater, and customs theater, are at the top of mind.

Elizabeth Warren urges Barack Obama to fire SEC chief Mary Jo White - Barack Obama is being pressed by the Democratic party’s left wing to sack Mary Jo White, chair of the Securities and Exchange Commission and one of his most senior appointees. In a blistering letter on Friday, Senator Elizabeth Warren called on Mr Obama to use exceptional powers to eject Ms White, accusing her of standing in the way of greater corporate transparency. Her move lays bare dissatisfaction in the party with the head of the market watchdog and Wall Street reform with barely three months remaining of a presidency that began in the throes of the financial crisis. “I have tried both publicly and privately to persuade Chair White to direct the agency’s resources toward pressing matters of compelling interest to investors and the public,” wrote the outspoken Wall Street critic. “But after years of fruitless efforts, it is clear that Chair White is set on her course.”  Ms White was confirmed in her role in 2013 and is widely expected to be replaced by an appointee of the next president, as is customary when a new administration takes office.  Ms Warren, a Massachusetts senator who has attacked the SEC chair before, accused her of “undermining [the Obama] administration’s priorities and ignoring the SEC’s core mission of investor protection”.  She said Ms White had an “anti-disclosure” agenda and zeroed in on her alleged failure to develop a rule mandating the disclosure of political spending by companies — a hot issue since a loosening of restrictions on US campaign finance in 2010.  “Chair White’s refusal to move forward on a political spending disclosure rule serves the narrow interests of powerful executives who would prefer to hide their expenditures of company money to advance their own personal ideologies,” she wrote.

World's Biggest Hedge Fund Evacuated After Receiving Wednesday Afternoon Bomb Threat  -- While bomb threats to schools and government institutions are a standard feature in this day and age, there was a twist on a familiar theme yesterday afternoon when employees of Bridgewater Associates, the biggest hedge fund in the world, evacuated from the company's Westport headquarters Wednesday after a " nonspecific bomb threat," according to an alert sent out by the company to employees. The evacuation was first reported by the WSJ. The alert, sent out at about 3:30 p.m., instructed staff to “immediately evacuate the building” and wait for instructions from police or Bridgewater security, the alert said. No bomb was found.Bridgewater manages about $150 billion for global pension funds and institutional investors. It has about 1,500 employees as of earlier this year, but is undergoing layoffs, according to a letter sent to investors last month."We had a routine bomb threat and handled it accordance with our well-established protocols," a Bridgewater spokeswoman said. Considering that the trading floor was entirely evacuated and yet there was no impact to the company's P&L, or the market for that matter, one marvels at the level of automation within the world's biggest hedge fund. Alternatively, now that the genie is out of the bottle, one wonders if other hedge, more "hands on" funds won't suffer the same threats in the coming weeks as disgruntled employees seek to punish their former employers in a market in which being present and observing every gyration in this market can mean the difference between profit and a career-ending loss.

Clinton Would Do a 'Look Back' on Regulation: Economic Adviser -- Democratic presidential nominee Hillary Clinton would engage in a review of financial regulations and simplify or eliminate those that are found to be unnecessary if she is elected president, a top adviser said Thursday.

Hillary Clinton Calls for Simplifying Regulations for Community Banks and Credit Unions - Democratic presidential nominee Hillary Clinton called for simplifying regulation for community banks and credit unions while defending postcrisis financial regulation for big banks. In a LinkedIn opinion piece and conference call with small-business owners, Mrs. Clinton called credit unions and community banks the “backbone of small-business lending” and pledged to streamline regulation to increase access to capital for small companies. Her remarks drew a sharp distinction between community banks and large financial institutions. Many small financial firms “face complex regulations that don’t really make sense for their size or their mission,” she said, while pointing out that postcrisis rules were “primarily aimed at the big banks on Wall Street.”  She didn’t go into detail about how regulations would be simplified. Federal Reserve officials, including Chairwoman Janet Yellen and Governor Daniel Tarullo, have expressed support for simplifying capital requirements for small banks. “When it comes to smaller institutions and certainly community banks, anybody, any institution under $10 billion, I think we can and should have a substantially simpler capital system,” Mr. Tarullo said at a Wall Street Journal/WSJ Pro event last month.  Mrs. Clinton’s comments seem to strike a middle ground in the debate over how postcrisis regulations, particularly the 2010 Dodd-Frank financial-overhaul law, have affected community banks.  The White House Council of Economic Advisers released a study earlier this month disputing claims that the law had hurt smaller institutions, pointing instead to more general issues affecting the banking industry, such as branch consolidation.Critics of Dodd-Frank, including congressional Republicans, disputed those claims and pointed to the increased compliance burdens under the law and a declining number of community banks as signs of Dodd-Frank’s negative impact on the industry.

Liberal groups urge Schumer to reject Bayh for Banking gavel - A collection of left-leaning groups are mounting a public campaign to push Senate Democrats to make the Banking Committee less friendly to banks. In a letter sent to Sen. Charles Schumer (D-N.Y.) Thursday, the group specifically urged him to rule out the possibility that Evan Bayh, a former Democrat from Indiana running to regain his old Senate seat, could somehow take control of the panel. The theory that Bayh, who previously served in the Senate from 1999 to 2011 before not seeking reelection, could leapfrog to the top of the committee has been floating in financial circles for weeks. The thinking goes that Bayh could regain his old seniority from his previous term, placing him ahead of Sen. Sherrod Brown(D-Ohio), currently the top Democrat on the GOP-led panel.   If Democrats regain control of the Senate, the seat currently occupied by Brown would become the chairman’s and would dictate the panel’s agenda. And Schumer, who also sits on the committee, is expected to take over as Senate Majority Leader following the retirement of Sen. Harry Reid (D-Nev.).Brown has established a reputation as a strong big bank critic, while Bayh, who took jobs with private equity firm Apollo Global Management and the U.S. Chamber of Commerce after leaving office, is viewed as friendly face for the industry.Such a theory has been dismissed by some committee watchers. One Senate Democratic aide said there is "no doubt" Brown will have the committee's top Democratic spot in 2017.But the groups now want to see Schumer explicitly rule it out. “Granting Bayh seniority from his previous tenure in the Senate and installing him as chair would seemingly be without precedent,” the groups wrote. “The financial industry is floating his name to the media in a brazen, cynical attempt to tilt the Committee’s membership even further toward Wall Street.”

Wall Street Journal’s Greg Ip Makes Counterfactual Argument to Defend Bloated Banking Industry - Yves Smith - Greg Ip clearly spends too much time with bankers.  In his new article, Future of Banking Looks Dark—Why That’s a Problem, he’s issued a big lament in the Wall Street Journal about why it’s so terrible that banking isn’t all that profitable these days and the result is the industry will need to shrink.As we have been saying for years, we need a smaller banking industry. It would have been vastly better, in the wake of the crisis, to have done that much faster by writing down bad debts, in particular, giving viable mortgage borrowers who were in trouble principal modifications, and offset the impact of the losses with fiscal stimulus. The proximate cause of the crisis was too much private sector debt, in particular economically unproductive household debt. A raft of recent economic studies have validated our point of view, consistently finding that large financial systems are a negative for growth. Other studies have taken a dim view of high levels of private debt, which also go hand in hand with overgrown banks. One of the most damning was a 2015 IMF study that found that the optimal level of financial development, in terms of growth, was represented by Poland. It’s remarkable to see the mix of inaccuracies and omissions that Ip relies on in to sell his tale that it would be a terrible thing for banks not to grow or even shrink, and those meanie regulations are a big reason why. Now in fairness to Ip, he’s relying on a study by Natasha Sarin and Larry Summers that relies on the market value of banks as the basis for his conclusion. The key paragraph: They discovered that markets think banks are much more likely now to lose half their market value than before the crisis. They interpret this as a “decline in the franchise value of major financial institutions, caused at least in part by new regulations.” The counterintuitive implication: The bevy of rules designed to make banking safer may, by endangering their long-term viability, ultimately achieve the opposite. This is a perverse interpretation. Since when should the status of banks, right before they would have destroyed the global economy absent extreme interventions by central banks and governments around the world, be considered a sound benchmark?

A $1 Trillion Paradigm Shift Changes Funding Markets Forever - It’s the most sweeping change for U.S. money market funds in over three decades and the biggest operators say it’ll have a permanent effect on the way investors allocate their capital. After years of wrangling with regulators, the $2.7 trillion industry will give up its rock-solid, dollar-for-dollar guarantee for institutional funds that invest mainly in riskier, non-government debt. The impending change has been a boon for the U.S. government and comes at the expense of banks and other corporate borrowers. Already, investors have shifted more than $1 trillion away from so-called prime funds that buy certificates of deposit and company IOUs and flooded into government-only funds, which invest in T-bills and other short-term U.S. debt and are exempt from the change. Assets in those funds, which never exceeded 40 percent before December, now account for 77 percent of all money-market assets, according to Investment Company Institute data going back to 2007. The $1-per-share fixed price, which gave investors the perception these higher-yielding money-market funds were as safe as bank accounts, will give way to floating values on Oct. 14. The intent has been to make the money-market industry safer and more transparent in the wake of the financial crisis, when the collapse of the $62.5 billion Reserve Primary Fund -- which invested in debt issued by Lehman Brothers Holdings Inc. -- sparked a run on other prime funds and led to hundreds of millions in investor losses.

The Day Has Arrived: As Of Today Prime Money Markets Can Suspend Withdrawals - Here Are The Implications -- The big day has finally arrived: starting today, as previewed repeatedly over the summer, the SEC's 2a-7 money fund reform adopted in 2014 officially requires many prime money market mutual funds (those that invest in non-government issued assets such as short-term corporate and municipal debt) to float their net asset value. More importantly, these prime MMFs are allowed to delay client withdrawals under adverse market conditions. The rule aim to prevent the sort of chaos that hit the money market after Lehman Brothers Holdings Inc.’s 2008 bankruptcy, which helped spark the financial crisis. The goal is to give investors a way to monitor a fund’s health by tracking its fluctuating net asset value, and to contain the fallout that could be caused by many investors cashing out at once, the SEC wrote in the final rules.  As as result, many Prime MMFs are and have been converting their assets to government funds, not buying CDs anymore and moving into Treasurys and agencies. As the chart below shows, nearly $1 trillion in assets have rotated out of prime money markets into government funds, as a result sending Libor rates through the roof, to the highest level since the financial crisis, with consequences that have yet to be determined.

How the owners of Fidelity get richer at everyday investors' expense: The billionaire Johnson clan has a private venture capital arm that competes directly for lucrative deals with the Fidelity funds in which millions of Americans put their nest eggs. Corporate governance specialists say the arrangement poses a troubling conflict of interest.The company’s tradition of putting clients’ interests “before our own is a big part of what makes Fidelity special,” the fund firm says in its mission statement. In at least one lucrative field, however, the Johnson family’s interests come first. A private venture capital arm run on behalf of the Johnsons, F-Prime Capital Partners, competes directly with the stable of Fidelity mutual funds in which the public invests. It’s an arrangement that securities lawyers say poses an unusual conflict of interest. That conflict can be seen in the case of Ultragenyx Pharmaceutical Inc, a promising biotech start-up. In 2011 and 2012, the Johnsons’ F-Prime Capital invested a total of $11 million on Ultragenyx before the start-up made an initial public offering of its stock. The pre-IPO investment effectively prevented Fidelity mutual funds from making the same play. If both the private fund and Fidelity’s ordinary funds had invested, they would have violated U.S. securities laws, which prohibit affiliated entities from buying substantial stakes in the same companies at the same time. The managers of Fidelity’s public funds eventually did purchase Ultragenyx shares, but not until after the stock price skyrocketed in the firm’s January 2014 initial public offering. The Fidelity funds bought about 1.1 million Ultragenyx shares in the second quarter of 2014. The average price for the stock was $41.17 during that three-month period - 12 times higher than the $3.55 a share paid by F-Prime Capital.

Fed to Release Blockchain Study This Year, Brainard Says – WSJ - The Federal Reserve plans to release a paper later this year in response to financial firms’ growing interest in using blockchain, the distributed ledger that underpins digital currencies like bitcoin. Fed governor Lael Brainard said Friday that the central bank has set up a working group conducting a “360-degree analysis” of financial innovation, specifically talking to industry stakeholders about the uses of blockchain. Blockchain started out supporting digital currencies, but many see it as having greater potential in transferring and storing monetary transactions, contracts and securities in a faster and more secure way. The Fed is among several federal agencies looking into the technology, specifically as a means of improving the payments system. The Office of the Comptroller of the Currency this spring issued a report laying out principles for governing the financial-technology sector, which includes blockchain. The OCC said regulators should embrace “responsible innovation” in the fast-growing fintech sector, while keeping risk in check. Ms. Brainard, speaking at the Institute of International Finance’s annual meeting in Washington, said the Fed recognizes blockchain “may represent the most significant development in many years in payments, clearing, and settlement.” “We want to maintain public confidence in the payments system, while supporting innovation that provides broadly shared benefits to the public over time, including through the reduction of unnecessary frictions, costs, and delays,” she said. At the same time, Ms. Brainard said the Fed realizes the broader uses of blockchain are still in the experimental stages and are “several years away” from being fully implemented. She called for more collaboration within the industry and urged financial firms to pay close attention to regulatory compliance and system security. “What matters to us as policy makers and regulators is not only whether the migration to a new technological platform increases or reduces risks, but also whether risks are rendered more or less opaque, and how they are distributed among and between financial intermediaries and end users,” she said. “Adverse actors that can take over a participant’s access to the ledger remains a key security concern, as thefts of cryptographic keys in bitcoin continue to demonstrate.”

Fed's Brainard sees blockchain as revolutionary, but still to prove itself | Reuters: The technology behind the controversial bitcoin electronic currency could lead to sweeping improvements in how financial transactions are carried out worldwide, Federal Reserve Governor Lael Brainard said on Friday. But only if it can be safeguarded from hackers and terrorists, and not grind to a halt in a crisis. Those assurances may still be years away, Brainard said, though the Fed is closely tracking the evolution of so-called blockchain systems, and sees it as "the most significant development in many years" in how financial assets trade hands. "We recognize the potential of distributed ledger technology, or blockchain, to transform the way financial market participants transfer, store, and maintain ownership," Brainard said at the Institute of International Finance annual meeting. At the same time, "we want to maintain public confidence." The Fed along with major central and commercial banks around the world are grappling with how blockchain may reshape the financial system. The technology in theory could lower the cost, improve the security and speed the completion of transactions by eliminating intermediaries. It would instead rely on cryptography and computer algorithms to transfer electronic records across a shared ledger. Brainard said common ledgers could simplify the complicated cross-border record keeping involved in trade finance, lower counterparty risk in securities transactions, or even automatically enforce bond payment or other contracts. The downside: it would need to prove itself immune to hacking or other security breaches, use by criminal organizations, and show that it could improve - or at least not damage - financial stability.

G-7 Nations Agree on Cybersecurity Guidelines: The Group of Seven industrial powers on Tuesday said they had agreed on guidelines for protecting the global financial sector from cyberattacks following a series of cross-border bank thefts by hackers. Policymakers have grown more worried about financial cybersecurity in the wake of numerous hacks of SWIFT, the global financial messaging system, including an $81 million theft in February from the Bangladeshi central bank's account at the New York Federal Reserve. "Cyber risks are growing more dangerous and diverse, threatening to disrupt our interconnected global financial systems," according to the guidelines agreed upon by G-7 finance ministers and central bankers. The guidelines, which officials described as nonbinding principles, were in a three-page document posted on the web pages of G-7 government agencies. The G-7 consists of Britain, Canada, France, Germany, Italy, Japan and the United States. U.S. Deputy Treasury Secretary Sarah Bloom Raskin told reporters in a telephone briefing that G-7 officials had surveyed their existing cybersecurity practices and identified potential shortfalls. A Treasury official later said the guidance was an effort to encourage regulators and firms to approach cybersecurity from a risk-management perspective. Fed Vice Chairman Stanley Fischer said in a statement that the guidelines would address the weakest links in global cybersecurity.Cyberthieves have targeted large financial institutions around the world, including America's largest bank JPMorgan, as well as smaller players like Ecuador's Banco del Austro and Vietnam's Tien Phong Bank. The U.S. Federal Reserve's internal security staff detected more than 50 breaches between 2011 and 2015, with several incidents described as "espionage." The guidelines released Tuesday instruct governments to ensure that they police their own cybersecurity readiness as well as that of companies they regulate, and that public and private institutions continually update their defenses.

 Fintech start-ups put banks under pressure - So-called digital garages or labs provide a less corporate environment for the technology experts that banks, insurers and asset managers have hired to help them devise slick new mobile services. Customers increasingly expect to manage their finances on the go, from sending international payments using a phone number to applying for a mortgage via video link. Established financial services companies are investing in these technologies in an attempt to attract customers, cut costs and buoy profits. However, they are coming under increasing pressure from a plethora of more nimble start-ups. Digitally focused fintech companies have attracted billions of dollars of investment. Figures from advisory company KPMG show global investment in fintech companies totalled $9.4bn in the second quarter. Startups have the advantage of being free of legacy technology systems and tough regulation, both of which limit the digital developments of established financial services firms. As a result, start-up companies can more efficiently create mobile-focused services or products that threaten existing financial companies. For example, a number of mobile-based banks such as Atom, Tandem, Starling and Monzo have emerged in the past year with the aim of offering current accounts that help customers to manage their money and lifestyle. Some fintech start-ups pose a direct threat by capitalising on weaknesses and gaps left by established companies. Nutmeg in the UK, for example, provides low-cost online wealth management, which makes investment expertise accessible to millions of people who cannot afford advice but do not have the confidence to go it alone.

Getting Girls Interested in Tech Could Lead Them to Banking - There is little debate that the banking jobs of the future are in digital technology. The question is who will fill them and how many of these jobs will be filled by women. As a result, issues related to women in banking find parallels with the gender gap in the information technology sector. According to research from the National Center for Women & Technology, women held the vast majority of all professional occupations in 2015. However, only 25% of all computing occupations were held by women — a percentage that has, for the most part, been on the decline since 1991. We, as an industry of both bankers and tech specialists, need to help reverse this trend by reaching out to young women well before their college years — a time period when many of them have already formed their interests and intended career paths.The opportunity to spark an interest in technology careers exists at an earlier age, when we can ignite new passions and interests while they are still taking shape. Educators are onboard. The growth and pervasiveness of technology means that there are all kinds of technology jobs out there across multiple industries — from banking to retail, media to nonprofits, and much more. Realizing the opportunities for their students, educators are exploring new ways to bring students into closer contact with the real-world tools and experiences that can show them all of the possibilities technology has to offer. It's here where banks can and should step in to help inspire an interest in a field with a shortage of applicants. Throughout their K-12 education, we need to expose girls and young women to the possibilities and joys of working in technology and break through the myths that "IT is not for me." We can inspire enthusiasm for the profession by demoing the latest gadgets, like the Apple Watch, or helping young girls build robotic projects.

Banks will not adopt blockchain fast = Since the blockchain — the technology underpinning the digital currency bitcoin — first emerged, people have recognised its potential to transform financial services. The banks have been paying attention. Around the world, they have been setting up labs to test blockchain solutions, carrying out proofs of concept and publishing papers. They are also forming or joining blockchain consortiums, like R3 or the Hyperledger Project, to better work together. Regulators have taken a keen, often quite supportive, interest as well. This work is not just theoretical. From Nasdaq to Ripple, we already see live blockchain-based platforms. IBM recently said that 15 per cent of 200 banks it surveyed expect to be live with solutions next year. In September I worked with the Swift interbank payment system on its blockchain and cyber security sessions at Sibos, the world’s largest banking conference. A third of the banks that participated told us they had serious blockchain proofs of concept in the works. So are we about to see blockchain break into the banking mainstream? As a strong believer in the potential of this technology, I truly wish we were. But as the former group chief information officer of UBS, where we championed blockchain early on, and as an adviser to banks and fintech companies today, I am cautious. My experience tells me it may be a while before we see large-scale adoption in the financial industry. Just consider what is really happening at the moment. Yes, Ripple has made fantastic strides with an excellent, market ready, platform. And its network currently includes 12 of the top 50 banks. That’s a great start — but a long way from Swift’s 8,000 members. IBM says 15 per cent of 200 survey recipients may go live next year. That’s 30 banks — hardly a stampede.

With soaring demand come weaker assurances for U.S. municipal investors | Reuters: In July, investors gobbled up $1 billion of bonds from a financially-strapped Catholic hospital system in Illinois called Presence Health Network, even though it offered few contractual guarantees debt buyers typically require. The deal, rated just above junk status, is emblematic of a fever that has swept the $3.7 trillion U.S. municipal bond market: yield-chasing investors not only piling into riskier debt, but also increasingly willing to accept less protection in the event of a default. Some portfolio managers say it has been a decade since they have seen such a strong seller's market. "It's reminiscent of right before the Great Recession, where there was a long period where high-yield rates were low and demand was high," said William Black, senior portfolio manager for the City National Rochdale Municipal High Income Fund. Low and negative sovereign interest rates have contributed to a scramble for relatively higher yielding U.S. municipal debt. Foreign buyers now hold more muni bonds than ever, U.S. Federal Reserve data show. Overall, investors have poured nearly $10 billion into high-yield municipal bond funds so far this year, according to data from Lipper, a Thomson Reuters unit. That is more than any other full year in nearly the last quarter century except 2006, which had $10.1 billion of inflows. (Graphic: Taking advantage of the seemingly insatiable demand, some borrowers are offering weaker or fewer guarantees, so-called covenants, such as debt reserve funds and debt service coverage ratios.  Because they are based on many factors, credit ratings alone may not reflect the quality of covenants, so some investors may be taking on greater risks than they realize.

CFPB Structure Is Unconstitutional, Court Rules: — The single-director structure of the Consumer Financial Protection Bureau represents an unconstitutional concentration of executive power, a federal appeals court said Tuesday. But the court stopped short of disbanding the agency, instead giving the president more power to remove its leader. In a 110-page ruling, the U.S. Court of Appeals for the D.C. Circuit said that executive power vested in the president can be conferred onto heads of lower administrative agencies, but that in doing so there have to be limits to that power. Agency directors may serve at the pleasure of the president, or in the case of independent commissions like the National Labor Relations Board or the Securities and Exchange Commission, directors are limited by the voting power of their fellow board members. Judge Brett Kavanaugh, writing for the majority, said that the CFPB is the first agency to concentrate administrative powers in an independent single director not removable except for cause. "That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case," Kavanaugh wrote. "The CFPB's concentration of enormous executive power in a single, unaccountable, unchecked director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency." As a result, the panel opted to strike the clause in the Dodd-Frank Act that said the CFPB director could be removed "for cause," effectively allowing the president to dismiss the head of the agency at will.;

 U.S. court rules CFPB structure unconstitutional; bureau can still operate | Reuters: A federal appeals court on Tuesday declared the U.S. Consumer Financial Protection Bureau's structure unconstitutional because too much power is vested with its sole director, but said it can continue operating under the president's supervision. The U.S. Court of Appeals for the District of Columbia Circuit threw out the bureau's $109 million penalty against PHH Corp. PHH objected after the CFPB accused the lender in 2014 of referring customers to mortgage insurers who in turn bought reinsurance from one of its units. The bureau, created by the 2010 Dodd-Frank financial reform law, cast the reinsurance payments as improper kickbacks and imposed the penalty in June. Neither the CFPB nor PHH immediately responded to requests for comment. In the ruling, U.S. Circuit Judge Brett Kavanaugh said unlike other independent agencies not accountable to the president whose leaders are instead checked by commissions, the CFPB had a "novel" structure in which a single person headed it. Kavanaugh wrote that the structure "poses a far greater risk of arbitrary decision making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency." As a result, Kavanaugh said the CFPB is unconstitutionally structured. But while PHH argued the agency should be shut down as a result, the court opted for the more narrow remedy of allowing the agency to operate by allowing the president to remove the director at will.

PHH v. CFPB: A Blessing in Disguise for the CFPB --Adam Levitin, Credit Slips - The headlines look pretty bad:  the DC Circuit Court of Appeals held the CFPB's structure to be unconstitutional in a case call PHH v. CFPB, which deals with kickbacks in captive private mortgage reinsurance arrangements allegedly in violation of the Real Estate Settlement Procedures Act.  In fact, however, the ruling is a blessing in disguise for the CFPB. While the 110 page decision is filled with inflammatory rhetoric, it gives the CFPB's detractors very little succor in the end.  The CFPB lost on the decision's rhetoric, but won on the practical implications.  Although the CFPB’s current structure was declared unconstitutional, the court also immediately remedied the flaw by declaring that the CFPB Director is now removable by the President at will, rather than only "for cause" as provided for by the Dodd-Frank Act.  There are four critical implications from this ruling:  

  • First, the CFPB’s existing rule makings and enforcement actions remain valid and unaffected.  That's a huge win for the CFPB.  It's business as usual at the CFPB for all intents and purposes.
  • Second, the CFPB’s Director is now under direct Presidential political control, but that doesn’t have partisan implications:  a GOP-appointed director could be removed as easily by a Democratic president as a Democratic-appointed director could be removed by a Republican president. Now the CFPB Director, instead of running on a five-year term will be on a five-year term that might get curtailed with every change in Presidential administration. That's not a particularly big deal.
  • Third, the CFPB remains budgetarily independent.  The importance of this cannot be over-emphasized.  It means that if anyone wants to affect the CFPB's ability to function it has to be done out in the open. The agency cannot be quietly asphyxiated through the appropriations process as has happened with the SEC and FTC.
  • And finally, the decision takes the wind out of sails of House GOP efforts to gut the CFPB by turning it into an ineffective commission structure and subjecting its budget to appropriations.  The House GOP has been attacking the CFPB as relentlessly as it has attacked Obamacare, and the DC Circuit just took away their leading argument, namely that the CFPB has to be removed wholesale because its structure is unconstitutional.  Not so said the court.  There was a very targeted surgical fix, and now the agency’s structure is kosher. Combine that with the Wells Fargo fake account scandal, which underscored the need for a strong CFPB, and the House GOP's attacks on the CFPB are standing on increasingly shaky ground.

It's not at all clear that this DC Circuit ruling is the last word on the issue. The CFPB could ask for the DC Circuit to rehear the case en banc or petition the Supreme Court for certiorari.  Both are discretionary appeals with the courts, but I would think there'd be a very good chance of either court agreeing to hear the case.  The smart move for the CFPB would seem to be to seek en banc review, in that the particular three-judge panel in this case was an unusually conservative panel that is not representative of the DC Circuit overall.  The reason not to go directly to the Supreme Court is that if the court splits 4-4, then the lower court ruling stands.  Accordingly, it seems better to try and get a favorable ruling en banc from the DC Circuit that could then be reviewed by the Supreme Court than have an unfavorable DC Circuit panel ruling reviewed by the Supreme Court.

CFPB Looks Here to Stay: What Does the Future Hold? -- naked capitalism by Jerri-lynn Scofield - A divided three-judge panel of the U.S. Court of Appeals for the D.C. Circuit in PHH Corporation v Consumer Financial Protection Bureau on Tuesday held that the Consumer Financial Protection Bureau (CFPB) “is unconstitutionally structured.” In addition, the court also concluded that in pursuing an enforcement action against a mortgage lender, PHH Corp., the CFPB violated bedrock due process principles when it misconstrued its statutory authority and attempted to impose its mistaken interpretation retroactively. The court vacated the CFPB ruling and remanded the case to the agency for reconsideration consistent with its opinion rejecting the agency’s interpretation of what the law requires.  But rhetoric aside, the court’s decision was actually quite narrow. Since 1935, the Supreme Court has recognized that Congress can create independent agencies that exercise executive power. One necessary factor making these agencies independent is that the President can only remove their heads for cause, not at will. This means that independent agencies are neither supervised nor directed by the President (at least in theory). These agencies have typically been headed by a commission structure, so as to check the untrammelled exercise of power by the agency’s head. The CFPB structure creates an independent agency, with a single agency head who can only be removed for cause.  It’s worth pointing out that initially the structure of what eventually became the CFTB was designed to resemble that of other agencies. Kavanaugh’s opinion summarizes this history (see pp. 5-6). Those who proposed and support the agency wished to make it free from regulatory capture and to insulate it from some of the extreme pressures Congress can exert– such as squeezing budgets– to limit agency independence and effectiveness. Judge Kavanugh’s principal concern is:  But Congress ultimately departed from the Warren and Administration proposals, and from the House bill. Congress established the CFPB as an independent agency headed not by a multi-member commission but rather by a single Director.  Because the CFPB is an independent agency headed by a single Director and not by a multi-member commission, the Director of the CFPB possesses more unilateral authority – that is, authority to take action on one’s own, subject to no check – than any single commissioner or board member in any other independent agency in the U.S. Government. Indeed, as we will explain, the Director enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.  At the same time, the Director of the CFPB possesses enormous power over American business, American consumers, and the overall U.S. economy. The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law. That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case.

Cheat Sheet: What CFPB Constitutionality Ruling Means for Banks | American Banker: Be careful what you wish for. That's the lesson for banks and other financial institutions that have long sought to win a check against the Consumer Financial Protection Bureau's power after the U.S. Court of Appeals ruled Tuesday that its structure is unconstitutional. Far from a victory for the industry, the court's solution – allowing the president to dismiss a CFPB director for any reason – arguably makes the situation worse by putting the CFPB directly under the control of the White House. As a result, the CFPB is effectively no longer an independent agency. "That's the worst thing that can happen to the banking industry and consumers," said Richard Hunt, president of the Consumer Bankers Association, which has lobbied for changes to the agency's structure. "It leads to a whipsaw effect every four years. We need certainty and stability." But the ramifications for the decision go far beyond just the CFPB's independence, and may have consequences for other federal agencies with a similar structure. It may also hamper the CFPB's ability to pursue certain cases and retroactively apply new rules. Following are four takeaways from the ruling.The court's decision regarding Respa may be an even bigger deal Most of the reaction to Tuesday's ruling has focused on court's ruling to strike language from the Dodd-Frank Act that only allowed the CFPB director to be removed "for cause." But the decision also invalidated the CFPB's $109 million fine levied against the nonbank mortgage lender PHH Mortgage due to alleged violations of the Real Estate Settlement Procedures Act. In pursuing the New Jersey-based PHH, the CFPB provided a novel interpretation of Section 8 of that law, effectively outlawing the practice of steering customers to preferred mortgage insurance providers in exchange for having those providers purchase reinsurance from captive firms of the mortgage originator.The ruling calls into question the constitutionality of the OCC and FHFA In the court's ruling, Judge Brett Kavanaugh argued that the CFPB has a unique setup unlike that of any other federal agency. He concluded that an agency could be independent of the administration only if it had a commission structure or some other limitations on its power, arguing that the CFPB director was more powerful than any other government official absent the president. Yet the CFPB shares a similar structure with two other federal regulators: the Office of the Comptroller of the Currency and the Federal Housing Finance Agency. The outcome of a likely appeal is unclear The CFPB has not said whether it intends to appeal the D.C. Circuit's ruling, but observers said there is little doubt that it will. The ruling will strengthen calls for a bipartisan commission The ruling may accelerate calls to turn the CFPB into a five-member commission, a move that would satisfy the court's definition of an independent agency. Industry representatives have long sought such a change, noting that the five-member structure was originally suggested by the CFPB's founder, Sen. Elizabeth Warren, D-Mass., and the Obama administration. (Both the administration and Warren now oppose a commission structure.)

Ironic Observation of the Day, CFPB Edition -  Adam Levitin - I just want to observe the irony that while the anti-consumer echo chamber was jumping up and down in joy over the ruling in PHH v. CFPB (see, e.g., here, and here), Wells Fargo's CEO resigned over a consumer financial abuse scandal.  Hmmm.   But surely if the CFPB had been a multi-member commission or the Director were subject to at-will removal, all would be well.  (I'd also point out that for all of the self-congratulations in these pieces, they don't seem to have realized how little the PHH ruling actually buys them. Maybe if they actually bothered to understand the agency, rather than just spout rhetoric, they might realize what a manqué victory this was.)

Will CFPB Ruling Spur Banks to Reopen Old Enforcement Actions?: Companies weighing whether to reopen past settlements with the Consumer Financial Protection Bureau after a federal appeals court limited the agency's powers may want to think twice, according to industry experts. A three-judge panel ruled this week that the CFPB must abide by a three-year statute of limitations governing administrative enforcement actions — a timeline the agency has not followed in the past. That theoretically could allow firms that have already agreed to pay heavy penalties for older violations to protest their settlements in court. Yet doing so would bring with it a new set of risks and could ultimately backfire against the institution, experts said. "It would be challenging for an institution to take the position that a settlement with the bureau, which it entered into voluntarily, should be reopened on the grounds that the bureau did not have the jurisdiction or was not constitutional at the time," said Ben Olson, a partner at BuckleySandler and a former CFPB deputy assistant director. Many enforcement actions are similar to settlement agreements in that they are considered settled contracts, whereby a company waives their right to go to court and negotiate a settlement without admitting or denying wrongdoing. Joann Needleman, an attorney at Clark Hill in Philadelphia, said a major bank that was subject to a recent consent order called her asking if there was any chance to renegotiate. She said it was unlikely to prevail."Unless you can show that the CFPB made a material misrepresentation in the settlement or there was fraud, you can't get an enforcement action overturned," Needleman said. "What's done is done."

Why CFPB's Prepaid Card Rule Is a Huge Mistake | Bank Think --The Consumer Financial Protection Bureau just released new rules governing prepaid cards that will significantly disrupt consumer use of these products, drive up costs to consumers and wreak havoc on the fastest growing sector within America's payments industry. Today, over 67 million Americans use some form of prepaid card, and they are expected to load $300 billion onto reloadable prepaid cards in 2016, a tenfold increase from 2009. Many consumers use prepaid cards today because, since 2009, traditional banking has become less feasible given customers' personal financial situations. There are numerous reasons for this, but most originate from the post-bailout Dodd-Frank Act, signed in 2010. This law increased the cost of compliance at all banks and one of its more controversial components, the Durbin amendment, drastically reduced revenue from debit card interchange fees at larger banks by $14 billion annually. The result, outlined in a 2014 Federal Reserve white paper, was that "banks were able to offset approximately 30% of lost interchange revenue with higher fees on deposit services." In other words, free checking offerings declined at banks subject to the Durbin amendment (while they actually increased at banks and credit unions not subject to the rule). Increasing costs for checking accounts priced millions of consumers out of the traditional banking market. At the same time, protections designed to prevent money laundering or the funding of illicit activity made it more difficult for illegal immigrants to open up bank accounts, pushing them further into the informal financial sector.  According to credit rating agency Fitch Ratings, prepaid annual transactions grew by 33.5% per year from 2009 to 2012, "far outstripping similar rates for other types of noncash payment." Now that these cards are so successful, they have attracted the attention of the CFPB. The bureau's new rules are poised to disrupt, if not destroy, this industry and eliminate thousands of prepaid options from retail racks and online stores. Simultaneously, the rules will fundamentally transform the nature of the products themselves, making them function more like the heavily regulated banks they sought to replace. Fee limitations are a hallmark of these rules. The same groups that cheered on the fee-limiting Durbin amendment are applauding these restrictions, refusing to acknowledge the key lesson from the Durbin amendment (and from the long disastrous history of other types of price controls). Price controls, despite good intentions, lead to market distortions, reduced competition and wasted resources. These distortions harm consumers in the long run.

State Regulators Fear CFPB Payday Rule Weakens Consumer Protections | American Banker: In states with strict rules on small-dollar loans, lenders could see an opening in the language of the CFPB rule to actually hike rates, observers say. "The rule may impact provisions in state law that may actually be more favorable to the consumers," said Jim Cooper, senior vice president of policy at the Conference of State Bank Supervisors.

 Financial Literacy Is Still Abysmal Everywhere - John Maynard Keynes advocated setting policies assuming people suffered from “money illusion”—confusing changes in their nominal income with changes in their buying power when prices were rising or falling. A brilliant mathematician himself, Keynes was too optimistic. The bigger problem for policy makers, today at least, appears to be money confusion: the inability of most people to perform basic financial calculations or understand basic investment principles. The OECD has released the results of an international survey of financial literacy, and they are dreadful.Barely more than 40% of the almost 52,000 adult respondents across 30 countries knew whether a $100 savings account compounding at an interest rate of 2% a year would grow to more or less than $110 over five years. Only 60% had any sort of budget, half bothered setting financial goals and trying to achieve them, while only 44% shopped around when selecting a financial product.Out of a maximum score of 21—made up of scores for financial knowledge, attitudes and behavior—the average was 13.2, barely more than a pass. Among the big countries participating, France, Finland and Norway were at the top, with scores near 15, while the Brazilians, Russians and Poles scored around 12 or below. Not surprisingly, the OECD has recommended schools put more emphasis on financial education, and at an earlier age, and try to foster good habits and attitudes. “It is essential that people have a strong foundation in basic calculations such as simple percentages, and rules of thumb that they can apply confidently to help them with financial decisions requiring higher-order mathematics skills such as compound interest,” it said.

Deutsche Bank’s Cryan Doesn’t Reach Accord With U.S. - Deutsche Bank Chief Executive Officer John Cryan failed to reach an agreement with the U.S. Justice Department to resolve a years-long investigation into its mortgage-bond dealings during a meeting in Washington Friday, Germany’s Bild newspaper reported. The meeting was meant to negotiate the multi-billion-dollar settlement the bank will have to pay to resolve alleged misconduct arising from its dealings in residential-mortgage backed securities that led to the 2008 financial crisis, according to a Bild am Sonntag report.The German lender is still considering seeking damages against Anshu Jain and Josef Ackermann, who are both former CEOs of the bank, the newspaper reported. Bild said the bank froze part of the millions in bonus payments to Jain and other former top managers.Concerns about Deutsche Bank’s ability to pay the $14 billion opening settlement bid from the Justice Department sent the lender’s stock to a record low last month. The bank, which set aside 5.5 billion euros ($6.2 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations, including one into a money-laundering probe tied to its Russia operations. Analysts at Barclays Plc speculate that could cost the bank as much as 2 billion euros ($2.2 billion).  Cryan, a Briton who speaks fluent German, has sought for the last three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health. The bank is holding informal talks with Wall Street firms about options to deal with legal costs, including a stock sale that could raise 5 billion euros ($5.6 billion), people with knowledge of the matter said this week. Qatar’s royal family is also considering increasing its stake in Deutsche Bank to as much as 25 percent, according to people with knowledge of the matter.

Deutsche Bank is latest victim of America’s bullying regulatory tactics: I suspect there isn’t a bedside table of a single European bank executive worth their salt that has not been graced by a copy of Treasury’s War by Juan Zarate. It is not hard to see why. It details how US Treasury and White House officials worked out that the dollar’s unrivalled position as the currency of choice for international trade provided them with a unique weapon against America’s enemies – and, increasingly, the world’s banks. “In Treasury, we realised that private sector actors – most importantly, the banks – could drive the isolation of rogue entities more effectively than governments, based principally on their own interests and desires to avoid unnecessary business and reputational risk,” Zarate writes. US officials developed and deployed a variety of financial techniques against terrorist groups, organised criminals and enemy states such as Syria, North Korea and Iran. For example, foreign banks who did not comply with US sanctions, irrespective of what they privately thought of them or the diplomatic stance of their home countries, faced massive fines. They could, in theory, refuse to pay these fines. But they risked being locked out of the dollar-clearing market, which, given that the greenback is the world’s reserve currency, effectively means being locked out of the global financial system. Not so much a carrot-and-stick approach; more like stick-and-stick.So far, so fair enough maybe: after 9/11 the US government was fighting a war against terror, after all. But officials began to realise that these same techniques could be used to more prosaic ends – like, for example, forcing foreign banks around the world to reveal which of their clients were American citizens with more than $50,000 in investments (under the Foreign Account Tax Compliance Act) and to control the behaviour of the banks themselves. Bully-boy tactics or condign punishment? Last year, the US Department of Justice fined General Motors $900m for hiding an ignition switch defect that resulted in at least 174 deaths. Now it proposes to fine Deutsche Bank $14bn for mis-selling mortgage-backed bonds. It doesn't take a moral philosopher to see that something is out of whack here.  We do not know for sure that the $14bn figure was leaked by a US enforcement agency. However, the journalist with the lead byline on the scoop about the fine covers enforcement out of the Wall Street Journal’s Washington bureau and it is pretty hard to see what Deutsche would gain from the leak. It is, however, easy to see what it has to lose – the German bank’s share price fell by a third after the story broke

Deutsche Bank Raises $3 Billion In Debt, As Hedge Fund Explains What Its "Bail-In" Would Look Like --While speculation that Qatar investors may come to Deutsche Bank's rescue came and went on Friday (especially after the market recalled that the alleged "white knight" may himself benursing a massive margin loan from its first rescue of Deutsche Bank which included a $2 billion margin loan), the German lender quietly took advantage of the relentless global appetite for yield and on Friday evening Deutsche Bank issued its first US dollar-denominated bond in five months when its raised $3 billion in five year paper, following reverse inquiry from investors according to IFR. The senior unsecured bond priced just below par with a generous coupon of 4.25% and at a spread of 300bp over Treasuries. The bond is the first sold by Deutsche Bank in the US dollar market since May when it raised $3.6 billion from three and five-year debt, and follows a sharp widening in its spreads.According to Reuters, in the latest example of collecting pennies in front of a steamroller, several investors had asked about the possibility of a new debt issue from Deutsche Bank as they sought to pick up some yield. Deutsche Bank responded to those queries on Friday, and sold the bond to a limited number of accounts after gauging interest on where a new deal would come. However, reflecting concerns about DB's current distressed state, the new bond was sold at a sizable new issue concession of about 50bp over Deutsche Bank's similarly dated outstanding debt.  Its 3.375% senior unsecured 2021 bond, which was priced in May, was trading at a G-spread of around 240bp earlier on Friday, according to MarketAxess, after widening close to 300bp last week.

Deutsche Bank's Borrowing Premium Doubles From 2015 in Bond Sale - Bloomberg: Deutsche Bank AG is paying twice as big a premium to borrow in international debt markets compared with a year ago, as investors demand higher compensation for the risk of future legal costs. The bank agreed to 300 basis points of extra yield above benchmark rates in a $3 billion private sale of senior unsecured bonds on Friday, according to data compiled by Bloomberg. That compares with 143 basis points in a non-private sale of similar notes in August 2015. “They are trying to show they still have sizable access to funding, but they are paying up for it,” said Paul Dilworth, a fixed-income analyst at Kames Capital Plc in Edinburgh, which oversees 50 billion pounds ($62 billion) of assets. The German lender’s shares and bonds have tumbled this year as Chief Executive Officer John Cryan struggles to shore up capital and boost profitability. The bank is also seeking to reach a deal with the U.S. Justice Department to end a years-long investigation into its handling of mortgage-backed securities, after rebuffing an initial claim for a $14 billion settlement.

  Can Fintech Fix Mortgage Servicing?: Servicers are in a bind. While origination is finally getting a break from costly, wide-ranging operational changes, more lie ahead for servicing. Fannie Mae and Freddie Mac are both planning investor reporting overhauls, consumer regulations continue to change for servicers, and a long run of low rates has constrained the value of servicing rights and revenues. Automating processes could, in theory, help. But the sophistication of mortgage automation has lagged other industries and the hurdles to technological advances are particularly high for servicers, whose work is viewed as disconnected from mortgage revenue. "On the origination side, a bad consumer experience or perceived bad consumer experience can drive business away because a consumer has a choice," said Karl Falk, CEO of servicing technology company ShortSave. "On the servicing side, the consumer does not have a choice. They can't pick and choose their servicer even if the loan or its servicing is sold numerous times. So I think the necessity has never really been there to provide many technological innovations." The Consumer Financial Protection Bureau's growing oversight of servicing has changed that by making investment in technology for handling borrower-facing workflows a necessary compliance cost. Despite this, the CFPB has found that automated compliance has come up short in some servicer examinations."There were significant technology issues that were found across the board at a number of different institutions, and it points at a problem that's been there for quite some time,"The bureau's upcoming set of rules will increase the need to fill this technology gap and if it spurs the creation of automation that better standardizes and improves customer contact in servicing, it could prove to be one of a few bright spots that exist in this part of the mortgage business.

Why Mortgage Servicing Is at a Breaking Point - The genesis of this month's National Mortgage News cover story, Can Fintech Fix Mortgage Servicing?, started with a question I jokingly posed to the NMN team: Why does servicing technology suck so much?  That's probably an overly harsh and broad generalization. But the fact remains that on the origination side of the industry, forward-thinking lenders are implementing new automation and fully paperless underwriting. They're envisioning a future where customer relationship management systems integrate with augmented realty to show home shoppers their mortgage options on a property in real time. Meanwhile, servicers would be happy if their customer-facing websites looked like something designed this decade. Necessity, as they say, is the mother of invention. Unfortunately, it's taken years of widespread regulatory upheaval for mortgage servicing to find it necessary to start thinking about technology innovation. But make no mistake; this dilemma doesn't rest solely in the hands of servicers or their technology vendors. There's plenty of blame to go around. After all, what good is it for vendors to develop new products if servicers are unwilling or unable to dedicate the resources to incorporating those technologies into their operations? At the same time, mortgage tech vendors would be wise to embrace the philosophy of the late Steve Jobs when he said, "A lot of times, people don't know what they want until you show it to them."  Perhaps the solution to this predicament is for mortgage companies to stop viewing servicing as a cost center and instead, treat it like a pipeline for profit. Seek out new ways to leverage the monthly interaction they have when borrowers go to make their loan payments and cultivate relationships.

Housing Finance Needs Clean Break from Government Subsidy | Bank Think: It is no accident that doomed housing finance systems developed throughout history produce great results before failing. The government's grand designs on how to finance mortgages don't have much to show for its supposedly good ideas. And this is why the current focus on what to do about Fannie Mae and Freddie Mac is misdirected. The current U.S. homeownership rate of about 63% is no higher than when it was previously achieved a half century ago by a private savings and loan industry, before there was a Department of Housing and Urban Development. The thrift industry largely failed in the 1980s, replaced by the rise of government-sponsored enterprises Fannie and Freddie that produced record homeownership, before they too failed almost a decade ago and were placed in government conservatorships. While producing questionable homeownership gains, GSE dominance of the housing market is even more unprecedented. They fund about 90% of all mortgages — what the Economist recently labeled a de facto nationalization. These systems and others like them have certain things in common. The U.S. financial system is, as Stephen Haber and Charles Calomiris described in their 2014 book, "Fragile by Design." This is due to populist political measures sometimes benefiting borrowers, sometimes savers, but always politicians. Speaking to banking and thrift industry audiences in the 1970s, Preston Martin, a one-time chairman of the Federal Home Loan Bank Board and vice chairman of the Federal Reserve Board, used to tell a joke in which the ironic punchline always brought the house down: "I'm from the federal government and I'm here to help you."At the heart of the failings of our government-back housing systems is a political impulse to protect individual consumers and firms from failure — an impulse which is the primary cause of systemic failure. Federally-sponsored enterprises require as justification a public mission inherently subject to populist political tinkering while at the same time are intrinsically too big to fail. That is a potentially lethal combination when tilted too heavily toward borrowers. Federal chartering and deposit insurance for the savings and loan industry led to the perverse mandate of funding fixed-rate mortgages with short-term deposits to which the industry succumbed by the 1980s. But this failure didn't pose a systemic threat to the entire financial system. The subsequent shift of mortgage-related political risk to federally-insured TBTF commercial banks in the form of Community Reinvestment Act requirements led to $4 trillion in commitments. That spread systemic risk to the real economy.

Ag Lenders Scrambling to Stay Ahead of Stressed Farm Loans: It's been a turbulent year for farmers. Low commodities prices, foreign competition and a strong dollar are cutting into farm income. Lenders, which are starting to see a rise in delinquencies, are turning to government loan guarantees to offset risk and help borrowers with financing. Banks are also working with borrowers to restructure debt. Despite these challenges, farmers and their lenders are well positioned — for now — to weather tough times, industry experts said. That could change if storm clouds linger into 2017. "If this continues for another year or so, you will see a lot of loans suffering," said Steve Apodaca, senior vice president of the American Bankers Association's Center for Agricultural and Rural Banking. "Downgrades will have to be made and restructurings will have to occur." The Department of Agriculture predicted in August that net farm income would be $71.5 billion this year. While up about 30% from earlier forecasts, it is still off significantly from a record $123 billion in 2013. Low commodities prices — the price of wheat, for example, hit its lowest level in a decade earlier this year — are a big reason for the decline. Farmers in other countries, which are benefiting from improved technology and subsidies from their own governments, are producing more crops, spurring competition with U.S. farmers, Apodaca said. A strong dollar is also making it more expensive for U.S. farmers, who export more than a third of their crops, to sell those goods overseas. Costco, for instance, earlier this year had been selling Irish-made butter at a lower price than its own store brand, said John Blanchfield, a principal at Agricultural Banking Advisory Services.

Foreclosure Crisis Gets Final Nail in the Coffin : Attom: Foreclosure filings dropped to the lowest level reported since December 2005, signaling the end of the country's foreclosure crisis, according to Attom Data Solutions. In September, there were 82,972 properties in foreclosure, down 13% from August and 24% from the same time a year earlier. For the third quarter, there were a total of 293,190 properties with foreclosure filings, representing a 4% increase from the previous quarter but a 10% drop from a year ago. But perhaps the clearest indication that the housing market has reached the end of the foreclosure crisis is in the year-over-year decline in the average time to foreclose. Properties foreclosed in the third quarter took 625 days on average to complete foreclosure, down one day from the second quarter and five days from the third quarter of 2015. This is the first time that indicator has decreased year over year since Attom began tracking foreclosure timelines in 2007. "While we've known that the national foreclosure problem has been dying a long, slow death for quite some time, the final nail in the coffin of the foreclosure crisis is the year-over-year decrease in the average foreclosure timeline nationwide that we saw in Q3 2016," Daren Blomquist, senior vice president at Attom Data Solutions, said in a news release. "The decrease in the average foreclosure timeline indicates that banks have worked through the bulk of the legacy foreclosure backlog in most states — with a few lingering exceptions — and that most of the foreclosures being completed now are relatively recent defaults that are more efficiently progressing through the foreclosure pipeline." Additionally, Attom reported that foreclosure starts totaled 34,685 properties, a 13% month-over-month decrease and an 11-year low. Bank repossessions also dropped 12% from August and 32% from September 2015 to 27,514 properties.

Completed Foreclosures Down 42% Year over Year: CoreLogic: The number of completed foreclosures nationwide in August dropped 42% from a year earlier, according to data released Tuesday by CoreLogic. In total, there were 37,000 completed foreclosures in August, down from 64,000 the year before. The country's foreclosure inventory meanwhile posted its largest year-over-year decline since January 2015, according to CoreLogic chief economist Frank Nothaft. "Foreclosure inventory fell by 30% from the previous year, the largest year-over-year decline since January 2015," Nothaft said in a news release. "The large decline in the distressed inventory has been one of the drivers of steady home price growth which helps Americans increase their home equity to support increased spending or cushion future economic risk." As of August, the national foreclosure inventory included approximately 351,000 properties, or 0.9% of all mortgaged homes. August's foreclosure inventory rate was the lowest recorded since July 2007. CoreLogic also noted that the number of mortgages in serious delinquency, which it defines as 90 days or more past due including loans in foreclosure or REO, fell by 20.6% year-over-year in August 2016 to 1.1 million mortgages, or 2.8% of all mortgaged properties.

 Foreclosure Rates Plunge in Michigan, Washington, Minnesota, Colorado - Foreclosure inventory continues to plunge across the nation, with the foreclosure inventory rate at 0.9% in August, down 29.6% compared to last year. However, the drop was much greater in four states that fell over 35% for the month: Michigan (37.2%), Washington (38.6%), Minnesota (36.4%) and Colorado (37.4%) According to the CoreLogic August 2016 National Foreclosure Report:[T]he foreclosure inventory declined by 29.6 percent and completed foreclosures declined by 42.4 percent compared with August 2015. The number of completed foreclosures nationwide decreased year over year from 64,000 in August 2015 to 37,000 in August 2016, representing a decrease of 69 percent from the peak of 118,221 in September 2010. The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6.4 million completed foreclosures nationally, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 8.5 million homes lost to foreclosure. As of August 2016, the national foreclosure inventory included approximately 351,000, or 0.9 percent, of all homes with a mortgage compared with 499,000 homes, or 1.3 percent, in August 2015. The August 2016 foreclosure inventory rate is the lowest it’s been since July 2007. Also: On a month-over-month basis, completed foreclosures increased by 7.7 percent to 37,000 in August 2016 from the 34,000 reported for July 2016.* As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006. On a month-over-month basis, the August 2016 foreclosure inventory was down 3.2 percent compared with July 2016.

 Mortgage Rates at 4-Month Highs -- From Matthew Graham at Mortgage News Daily: Mortgage Rates at 4-Month Highs In and of itself, today wasn't too bad of a day. Mortgage Rates were only slightly higher, and were generally unfazed by the release of the Minutes from the most recent Fed meeting. Market participants were concerned about the Minutes making a clearer case for a rate hike at the next meeting. Ultimately, the Minutes didn't tell us anything we didn't already know and bond markets (which dictate mortgage rates) improved.  Now for the unfortunate aspects of the day! When we consider today in the context of the past 9 days, we see that it prolongs a depressingly long losing streak. Mortgage rates haven't moved lower since September 27th. Moreover, they're roughly a quarter point higher since then! As for today's bond market improvements, they were merely enough to get bonds back near yesterday's latest levels, due to significant overnight weakness. In other words, bonds lost more ground overnight and this morning than they were able to gain back this afternoon. 3.625% is now the most prevalent conventional 30yr fixed quote on top tier scenarios, but several lenders remain at 3.5%.  Here is a table from Mortgage News Daily:  Home Loan Rates  View More Refinance Rates

Lower Interest Rates Could Expand Millennial Buying Power: Interest rates fell in August to the lowest level recorded all year for millennials, which could mean expanded buying power for this segment, according to data from Ellie Mae. Ellie Mae said in its monthly Millennial Tracker report Wednesday that interest rates dipped to 3.763% in August amid talk of a Federal Reserve rate hike. While lower interest rates for the overall population would signal a shift toward refinances, for millennials — many of whom are first-time homebuyers — it increases their buying power, according to Joe Tyrrell, Ellie Mae executive vice president of corporate strategy. Ellie Mae reported that the average loan amount to millennial borrowers rose to $181,326 from July's average of $180,413. "Millennials are really taking advantage of the lower interest rates in terms of buying power," Tyrrell said in a phone interview. He added that there has been a gap between the general population and millennials in terms of loan amount, with millennials taking out much smaller loans than other homebuyers. "That gap is starting to close," he said, noting that lower rates could also push millennials to "move into homeownership before family formation."

 56% Say Rents Too High to Save Enough to Buy a Home: Survey: Higher rental costs and student loan debt continue to prevent many Americans from purchasing a home, according to the results of a survey from NeighborWorks America. NeighborWorks reported Wednesday that 56% of survey respondents said that rents are too high where they live for them to be able to save enough to buy a home. Similarly, 53% of potential homebuyers with student loan debt said that their debt was either somewhat or very much an obstacle to that purchase. Another 30% of respondents said they knew someone who delayed a home purchase because of their student loan debt. And the two issues are interrelated: 29% of people with student loan debt said they expect to rent again when they make their next housing choice, as compared with just 17% of those who have no student loan debt. "With the homeownership rate at the lowest point in decades, and minority homeownership plunging even further, these data signal a weak home-buying market going forward, despite near-record-low mortgage rates and broad-based national income growth," Paul Weech, president and CEO of NeighborWorks, said in a news release. The survey also found that there is a nearly even split in terms regarding affordability: 50% of respondents said homes in their market were affordable to first-time buyers, while 45% said they were not. One area where survey-takers did agree was regarding of down payment assistance programs and student loan debt counseling. NeighborWorks reported that 71% of respondents were not aware or unsure of down payment assistance programs available to middle-class homebuyers. And 77% of people with student loan debt had not heard of or were unfamiliar with loan counseling programs.

Keep Condo Fees Out of Credit Reporting: Equifax, one of the major consumer credit reporting bureaus, announced recently that it will begin including the common area fees and assessments that condominium owners pay in the calculation of consumer credit scores. Sperlonga, a data aggregator that will be collecting this information for Equifax, says the expanded reporting will help consumers improve their credit scores by adding another source of timely payments that will count in their favor. That may be true. But the condominium associations asked to provide this information and the management companies that collect it on their behalf leave themselves open to incur significant, unwanted and unnecessary liability risks. The Fair Credit Reporting Act and the Fair Debt Collection Practices Act impose hefty penalties for inaccurate reports or other violations of the statutes. Managers and attorneys who handle collections for condo associations have argued successfully that the FDCPA, in particular, doesn't apply to them, because they are not collecting a personal debt; they are pursuing a lien enforcement action directly against the property and authorized under applicable state statutes. These lien enforcement actions generally do not target the owner of the property, hence the exemption from the statute. That exemption arguably would not apply to managers who collect and report adverse credit information about homeowners, because they would be perceived to be collecting a debt from the consumer. The FDCPA applies to third parties that collect and report credit information for others; it would not apply to associations that report payment information themselves. But associations would, nonetheless, be vulnerable to lawsuits if they submit erroneous information about owners, and they would have to comply with applicable provisions of the FCRA, which makes no allowances for mistakes.

Hotels: Occupancy Rate on Track to be 2nd Best Year --From STR: US hotel results for week ending 1 October The U.S. hotel industry recorded positive results in the three key performance metrics during the week of 25 September through 1 October 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy increased 1.8% to 70.0%. Average daily rate (ADR) was up 1.3% to US$126.95. Revenue per available room (RevPAR) grew 3.2% to US$88.83.  mThe 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.  Year-to-date, the three best years are:
2015: 67.5% average occupancy.
2016: 67.3% average.
2000: 66.9% average.
For hotels, this is now the Fall business travel season that will continue for another month or so - and then the occupancy rate will decline into the holiday season.

Consumer Spending Deteriorates In September; BofA Finds No iPhone 7-Linked Sales Jump -- Over the past few months, the Bank of America report on internal debit and credit card spending has become arguably the most accurate predictor of any given month's government retail sales print. Recall that last month's report, as noted in "The US Consumer Taps Out: BofA Internal Credit Card Data Shows Retail Spending Tumbles", showed a substantial slowdown in US consumer spending, an observations which was confirmed just days later by a very disappointing retail sales report from the Department of Commerce. As BofA observed one month ago, "the BAC aggregated card data showed that retail sales ex-autos declined 0.1% mom SA in August. This follows the 0.3% mom decline in July and pushes the 3-month average down to -0.2% mom." It was right, as the official, seasonally adjusted data confirmed shortly after. Fast forward to today when we skim the latest aggregated BAC credit and debit card data, and we find that retail sales ex-autos increased 0.4% mom seasonally adjusted in September. This partly reversed the decline over the prior two months. This means that after several disappointing prints in the past few months, the headline retail sales print is likely set to surprise to the upside. However, as BofA also notes, probing further into the data, while Census retail sales ex-autos will likely improve in September, "given that part of the pickup owes to gasoline and building materials, we think the risk is that core control sales (retail ex-autos, gasoline and building materials) are softer." Here are the details:

  • The BAC aggregated card data showed that retail sales exautos increased 0.4% mom SA in September. This reversed the decline over the prior two months, leaving the 3-month average to show a small increase.
  • Contrary to the recent trend, gasoline spending ticked up in September, reflecting higher prices. This contributed to the gain in retail sales ex-autos.
  • Based on the BAC data, we should see Census retail sales ex-autos also improve in September. However, given that part of the pickup owes to gasoline and building materials, we think the risk is that core control sales (retail ex-autos, gasoline and building materials) are softer

US Retailers Blame "Election Preoccupation" For Slumping Sales - While record food-stamps, sinking real wages, and soaring healthcare and shelter costs are all in the realm of peddled fiction; US Retailers are never shy of alternative excuses for their underperformance. It's too-hot, it's too-cold; it's too-low gas prices; it's too-high gas prices; but now, as Bloomberg reports, US retailers and restaurants are floating another excuse to explain their lackluster performance - it's the election, stupid! To hear retail executives tell it, the battle for the presidency between Republican Donald Trump and Democrat Hillary Clinton is causing Americans to put off buying everything from romance novels at Barnes & Noble and jeans from the Gap to burritos at Yum! Brand Inc.’s Taco Bell. They might even be delaying wedding engagements, not good news for companies like Signet Jewelers Ltd.  “The preoccupation with this election is keeping them at home, glued to their TVs and at their desktops,” said Len Riggio, the founder and chief executive officer of Barnes & Noble Inc. This election is “unprecedented in terms of the fear, anger and frustration being experienced by the public.”

Retail Sales October 14, 2016: Retail sales proved solid in September hitting the Econoday consensus across the board: total up 0.6 percent, ex-auto up 0.5 percent, ex-auto ex-gas up 0.3 percent. Auto sales as expected are the highlight of the report, up 1.1 percent to reverse the prior month's 0.3 percent decline. Auto sales, a discretionary category, have been solid this year though down from last year's peak. Restaurants, another discretionary category, are also strong, up 0.8 percent to add to August's 0.7 percent gain. Other positives include two related to housing, furniture which rose 1.0 percent and building materials & garden equipment, up 1.4 percent. This latter reading will give a boost to the residential investment component of the third-quarter GDP report. This whole report in fact will give a lift to GDP, providing a quarter-end pop to consumer spending which was soft in the quarter's first two months. Strength in retail sales ultimately reflects strength in the labor market and today's report will further build expectations for an FOMC rate hike at the December meeting.

Retail Sales increased 0.6% in September --On a monthly basis, retail sales increased 0.6 percent from August to September (seasonally adjusted), and sales were up 2.7% from September 2015.  From the Census Bureau report:The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $459.8 billion, an increase of 0.6 percent from the previous month, and 2.7 percent above September 2015. ... The July 2016 to August 2016 percent change was revised from down 0.3 percent to down 0.2 percent. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 0.5% in September. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Year-over-year change in Retail Sales Retail and Food service sales ex-gasoline increased by 3.3% on a YoY basis. The increase in September was at expectations and the previous two months were revised up; a solid report.

A Welcome Bounce in September Retail Sales DShort - The Census Bureau's Advance Retail Sales Report for September released this morning showed a welcome improvement over the August decline. Headline sales came in at 0.6% month-over-month to one decimal, and August was revised upward from -0.3% to -0.2%. Today's headline number matched the Core sales (ex Autos) came in at 0.5% MoM, which beat the consensus of 0.4%. Here is the introduction from today's report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $459.8 billion, an increase of 0.6 percent (±0.5%) from the previous month, and 2.7 percent (±0.9%) above September 2015. Total sales for the July 2016 through September 2016 period were up 2.4 percent (±0.5%) from the same period a year ago. The July 2016 to August 2016 percent change was revised from down 0.3 percent (±0.5%)* to down 0.2 percent (±0.2%)*. Retail trade sales were up 0.6 (±0.5%) from August 2016, and up 2.2 percent (±0.7%) from last year. Nonstore retailers were up 10.6 percent (±1.6%) from September 2015, while Food services and drinking places were up 6.1 percent (±3.3%) from last year. [view full report] The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.The year-over-year percent change provides another perspective on the historical trend. Here is the headline series. Here is the year-over-year version of Core Retail Sales. The next two charts illustrate retail sales "Control" purchases, which is an even more "Core" view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. The popular financial press typically ignores this series, but it a more consistent and reliable reading of the economy. Here is the same series year-over-year. Note that the current level is fractionally below the highlighted values at the start of the two recessions since the inception of this series in the early 1990s.

Retail Sales Perk Up In September -- US spending in retail establishments rebounded in September, rising 0.6% vs. the previous month—the strongest monthly gain since June, according to this morning’s release from the Census Bureau. The rise more than reverses the 0.2% decline in August. Meanwhile, the upbeat data lifted the year-over-year gain to 2.7%, a three-month high. In short, the worrisome profile of the retail sector in August pulled back from the brink. Headline spending’s annual trend may be improving, but the year-over-year gain less gasoline sales still looks modest vs. the gains posted over the past year or so. Spending ex-gas continued to rise at 3.2% through September, roughly unchanged from August’s pace. That’s a decent advance, but as the chart below shows it’s relatively muted vs. the numbers from last year and it’s not obvious that the deceleration has that’s been in play for some time has ended.The takeaway: headline figures imply that a revival in the growth rate may be unfolding, although stripping out gasoline sales from the data takes some of the shine off of that narrative. Nonetheless, some analysts remain confident that sales will continue to print at healthy growth rates for the near term. “The combination of solid job growth, while slowing, modest pickup in wages, and pretty good measures of household net worth should continue to push consumer spending up over the next year,” advises David Berson, chief economist at Nationwide Insurance.

Preliminary October Consumer Sentiment declines to 87.9 --The preliminary University of Michigan consumer sentiment index for October was at 87.9, down from 91.2 in September. The Sentiment Index slipped in early October to its lowest level since last September and the second lowest level in the past two years. The early October loss was concentrated among households with incomes below $75,000, whose Index fell to its lowest level since August of 2014. In contrast, confidence among upper income households remained unchanged in early October from last month, and more importantly, at a level that was nearly identical to its average in the prior twenty-four months (98.3 vs. 98.2). Perhaps the most concerning figure was a decline in the Expectations Index, which fell to its lowest level in the past two years, again mainly due to declines among households with incomes below $75,000. It is likely that the uncertainty surrounding the presidential election had a negative impact, especially among lower income consumers, and without that added uncertainty, the confidence measures may not have weakened.

Michigan Consumer Sentiment: October Preliminary Slips - DShort - The University of Michigan Preliminary Consumer Sentiment for October came in at 87.9, down from the September Final reading and its lowest since September of last year. had forecast 91.9. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: The Sentiment Index slipped in early October to its lowest level since last September and the second lowest level in the past two years. The early October loss was concentrated among households with incomes below $75,000, whose Index fell to its lowest level since August of 2014. In contrast, confidence among upper income households remained unchanged in early October from last month, and more importantly, at a level that was nearly identical to its average in the prior twenty-four months (98.3 vs. 98.2). Perhaps the most concerning figure was a decline in the Expectations Index, which fell to its lowest level in the past two years, again mainly due to declines among households with incomes below $75,000. It is likely that the uncertainty surrounding the presidential election had a negative impact, especially among lower income consumers, and without that added uncertainty, the confidence measures may not have weakened. Prospects for renewed gains, other than a relief rally following the election results, would require somewhat larger wage increases and continued job growth as well as the maintenance of low inflation. Overall, real personal consumption can be expected to increase by 2.5% through mid 2017. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy. To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 2.9 percent above the average reading (arithmetic mean) and 4.1 percent above the geometric mean. The current index level is at the 47th percentile of the 466 monthly data points in this series. The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3. So the latest sentiment number puts us 18.6 points above the average recession mindset and 0.3 points above the non-recession average. Note that this indicator is somewhat volatile, with a 3.0 point absolute average monthly change. The latest data point saw a 3.3 point change from the previous month. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.

 More Americans Falling Behind on Car Loan Payments, S&P Says - Bloomberg: Subprime borrowers are falling behind on their car loan payments at the highest rate in more than six years, and some bonds backed by these loans are vulnerable to getting downgraded, according to S&P Global Ratings. Competition has spurred lenders to loosen standards and resulted in more delinquencies and default by people with weak credit, the ratings firm said. Subprime borrowers were behind by more than 60 days on about 4.85 percent of auto loans in August, the highest level since January 2010. The rate was 4.14 percent in August of last year, S&P said. For prime loans, delinquencies in August rose to 0.5 percent from 0.41 percent in the same month in 2015. The figures apply to loans that have been bundled into bonds. The ratings firm said it may have to downgrade some subprime auto loan securities that have high-yield grades because of the increased delinquencies and loan losses, a statement it first made last month. Some investors believe that subprime auto loans will continue to deteriorate, and have looked for ways to bet against them. After the financial crisis, mortgage lenders have been required by law to verify that applicants can repay their debt, but car lenders do not have that obligation. In the 12 months ended in June, only 5.2 percent of car loan applications were rejected, down from 11.1 percent in the 12 months ended in October 2015, according to research from the Federal Reserve Bank of New York. Lenders are making longer-term loans than before, and used car prices have fallen, which also could hurt loan recoveries, S&P said on Tuesday.

Weekly Heating Oil Price Update: Season Begins at $2.36 - As the colder months approach, we pick up our heating oil update for the season. Last year's winter was warmer than average and saw a continued drop in heating oil prices, but with a slight uptick toward the season close. Some forecasts predict a very cold and bitter winter. We will be following this closely throughout the season. We've used data based on the Energy Information Administration (EIA), which publishes price data weekly on home heating oil in 38 states by dollar per gallon before taxes. Unlike natural gas and electricity, home heating oil is provided by independent retailers.  The latest price for home heating oil nationwide is $2.36, up from $2.13 at the end of March. EIA's heating oil data is seasonal - from October through March. Here's a look at the series since its inception in 1990.

August 2016 Business Sales and Inventories Data Mixed: --Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales were better than last month - and the rolling averages improved. Inventories grew relative to the previous month but inventory-to-sales ratios remain at recessionary levels. This was an up month for business sales - but inventories remain at recession levels (but moderating). This is a very strange business cycle which does not seem to know whether it wants to go up or down. The rolling averages for sales have remained in contraction for over 18 months - but moderated to 0.4 % contraction year-over-year. As the monthly data has significant variation, the 3 month averages are the way to view this series. Also consider the disconnect between the year-over-year growth of employment in business and business sales - however this month the inversion was broken but the rolling averages are still inverted. Econintersect Analysis:

  • unadjusted sales rate of growth accelerated 7.6 % month-over-month, and up 3.4 % year-over-year
  • unadjusted sales (but inflation adjusted) up 4.5 % year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 1.2 % month-over-month, and is down 0.4 % year-over-year.
  • unadjusted business inventories growth accelerated 0.2 % month-over-month (up 0.7 % year-over-year with the three month rolling averages showing inventory growth now shrinking), and the inventory-to-sales ratio is 1.32 which is at recessionary levels (well above average for this month).

US Census Headlines:

  • seasonally adjusted sales up 0.2 % month-over-month, unchanged year-over-year (it was reported down 0.8 % last month).
  • seasonally adjusted inventories were up 0.2 % month-over-month (up 0.7 % year-over-year), inventory-to-sales ratios were up from 1.38 one year ago - and are now 1.39.
  • market expectations (from Bloomberg / Econoday) were for inventory growth of -0.1 % to 0.2 % (consensus +0.1 %) versus the actual of +0.2 %.

  PPI-FD October 14, 2016: The headlines are promising and year-on-year rates are mostly going in the right direction, but some of the details of the September producer price report are on the soft side. Producer prices rose a solid 0.3 percent to hit Econoday's high-end forecast. Prices rose 0.2 percent when excluding food & energy and rose 0.3 percent when excluding food & energy and also services, which is where the weakness lies. Goods rose 0.7 percent reflecting a monthly swing higher in energy and also a noticeable 0.6 percent rise in consumer foods that reflect an 11 percent jump in vegetables. But there's very little pressure in service costs at the wholesale level, up only 0.1 percent with the closely watched trade services subcomponent down 0.4 percent. The year-on-year rate for this latter reading is unchanged and actually down from plus 0.6 percent in the prior month. But other year-on-year rates are constructive, moving 7 tenths higher overall to plus 0.7 percent. Yet the weakness in service prices, which have had a hard time moving higher all year, points to a stubbornly slow pace for the Federal Reserve's efforts to stimulate inflation toward their 2 percent goal.

September 2016 Producer Price Final Demand Year-over-Year Inflation Is Now 0.7%: The Producer Price Index year-over-year inflation 0.7 %. This is the highest rate seen since December 2014. At the producer level final demand - inflation has been insignificant in 2016. However from the report: On an unadjusted basis, the final demand index increased 0.7 percent for the 12 months ended in September, the largest 12-month rise since advancing 0.9 percent in December 2014. One month is not a trend, but PPI is now at the highest rate of inflation in the last 12 months. As we spend much time watching the price indices - it does seem that a small amount of increase in the rate of inflation is occuring. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate grew from 0.0 % to +0.7 %.  In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower.  Removing food and energy (core PPI) was originally done to remove the noise from the index, however the usefulness in the twenty-first century is questionable except in certain specific circumstance.

September Producer Price Index: Increases and Largest YoY Rise Since 2014 - Today's release of the September Producer Price Index (PPI) for Final Demand came in at 0.3% month-over-month seasonally adjusted, up from last month's 0.0%. It is at 0.7% year-over-year versus the 0.0% YoY last month. Core Final Demand (less food and energy) came in at 0.2% MoM, up from 0.1% the previous month and is up 1.2% YoY. MoM consensus forecasts were for 0.2% headline and 0.1% core. Here is the summary of the news release on Final Demand:The Producer Price Index for final demand rose 0.3 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in August and declined 0.4 percent in July. On an unadjusted basis, the final demand index increased 0.7 percent for the 12 months ended in September, the largest 12-month rise since advancing 0.9 percent in December 2014. (See table A.)In September, over three-quarters of the advance in final demand prices can be traced to a 0.7-percent increase in the final demand goods index. Prices for final demand services inched up 0.1 percent.The index for final demand less foods, energy, and trade services moved up 0.3 percent in September, the same as in August. For the 12 months ended in September, prices for final demand less foods, energy, and trade services rose 1.5 percent, the largest increase since climbing 1.5 percent for the 12 months ended November 2014. More…  The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we support.  Since our focus is on longer term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated. Now let's visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge that began in mid-2014 in headline PPI is, of course, energy related. It is now off its interim low set in April of last year. Year-over-year Core PPI, now at 1.3%, has trended lower from its 2.3% interim high set the middle of last year.

Import and Export Prices October 13, 2016: Progress is the theme in September's import & export price report where emerging pressures may be appearing. Import prices rose 0.1 percent in the month with export prices up 0.3 percent. And year-on-year rates are finally coming up for air, at only minus 1.1 percent for import prices which is the best showing since August 2014. The year-on-year rate for export prices is minus 1.5 percent for their best showing since October 2014. Petroleum prices, which have been pulling down import prices for the last two years, rose 1.2 percent in the month to narrow this year-on-year decline to a modest looking 2.4 percent which is down from the low double digits in the last report. But excluding petroleum, import prices didn't show any life at all, unchanged though the year-on-year rate did improve 1 tenth to minus 0.8 percent. On the export side, farm products fell 1.0 percent in the month for a year-on-year rate of minus 3.2 percent. But non-agricultural prices, in a clear plus, rose 0.4 percent with the year-on-year rate improving 8 tenths to minus 1.4 percent. This report backs Federal Reserve expectations that weakness in import prices is a fading negative for the inflation outlook. Producer prices will be posted tomorrow with marginal improvement the expectation, at least for the headline.

Import and Export Price Year-over-Year Deflation Moderated Again in September 2016.: Import and export prices continue to deflate year-over-year - although the year-over-year rate of deflation again moderated this month. Both import and export price deflation is moderating when looking year-over-year. The month-over-month figures given in the headlines only confuse. At the current rate of moderation of deflation (trend line) - both imports and export prices should start inflating by the end of the year. Import Oil prices were up 1.1 % month-over-month, and export agricultural prices down 1.0 %. with import prices up 0.1 % month-over-month, down 1.1 % year-over-year; and export prices up 0.3 % month-over-month, down 1.5 % year-over-year.. There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.

Cumulative U.S. Trade Deficits Resulting in Net Profits for the U.S. (and Net Losses for China) – Atlanta Fed’s macroblog - The United States has run trade deficits for decades (1976 is the last year with a recorded surplus). To illustrate this, chart 1 depicts the cumulative U.S. trade deficit since 1980, which now surpasses $10 trillion. As a result, a drastic deterioration in the U.S. net foreign asset position—the difference between the amount of foreign assets owned by U.S. residents and the amount of U.S. assets owned by foreigners—has occurred. That is, as Americans borrow from the rest of the world to finance the recurring trade deficits, the national net worth goes deeply into the red. Not long ago, many commentators predicted that as a result of this increasing U.S. foreign debt, the U.S. dollar was set to collapse, which would trigger a stampede away from U.S. assets. Of course, this has not happened.  (enlarge) Much of the rising U.S. deficit is the by-product of deficits with one country in particular: China. Chart 2 shows that U.S. bilateral trade deficits with China have been growing steadily during these years. In 2015, the total U.S. goods trade deficit was about $762 billion, and the goods deficit with China alone made up nearly half of that total ($367 billion). This situation is not unique to the United States, as many countries find themselves in similar trade positions with China. During the last few decades, China has been running protracted trade surpluses with the rest of world and has accumulated a positive and sizeable net foreign asset position. Yet, despite accumulating a positive and sizeable net foreign asset position, China is facing increasing losses in net income on its foreign assets. Put differently, China has been accumulating negative returns on its increasingly large portfolio of foreign assets. Chart 3 shows this observation, made in a paper by Eswar Prasad of Cornell University at a recent conference cosponsored by the Atlanta Fed and the International Monetary Fund.

 Rail Week Ending 08 October 2016: Short Term Rolling Averages Mixed: Week 40 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The weekly data was worse compared to last week. If coal and grain are removed from the analysis, rail has recently been declining around 5% - but this week was -6.5%. Under normal circumstances one should consider this recessionary as trucking tonnages are down also. This also correlates to the contraction in manufacturing and the wholesale sectors - so rail is not an outlier. It does appear that the downward slide in the one year rolling averages will pause shortly as the rate of increase in the rate of decline is continuing to be smaller. But this movement is like watching snails race. Based on the current trends - rail year-over-year rate of contraction should start improving by year end. Still I am grappling with what this contraction actually means as the USA economy is not being pulled into a recession. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 521,789 carloads and intermodal units, down 6.1 percent compared with the same week last year. Total carloads for the week ending October 8 were 264,165 carloads, down 5.9 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 257,624 containers and trailers, down 6.4 percent compared to 2015. Two of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were grain, up 8.2 percent to 26,845 carloads; and motor vehicles and parts, up 6.2 percent to 18,946 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 29.8 percent to 9,587 carloads; nonmetallic minerals, down 9.5 percent to 35,305 carloads; and coal, down 8.3 percent to 90,195 carloads.

‘Nuclear’ Verdicts Have Insurers Running From Trucks - WSJ: Truckers are finding it harder and costlier to line up coverage for their fleets, as a wave of blockbuster payouts over accidents pushes insurers out of the market. The number of people killed in accidents involving large trucks fell 20% in the last decade, according to the Transportation Department, though it ticked higher last year. But a string of so-called “nuclear” verdicts, where juries award tens or even hundreds of millions of dollars to families of accident victims, have made the financial consequences of those crashes harder to predict. The 2014 accident involving a Wal-Mart Stores Inc. WMT 0.32 % truck that injured several people, including comedian Tracy Morgan , and killed another is widely seen as a watershed. That case didn’t go to a jury, but the children of the man who died received $10 million in a settlement, while Mr. Morgan and Wal-Mart settled separately for an undisclosed amount. Unwilling to bear the risk of large settlements and verdicts, Zurich Insurance Group AG and American International Group Inc. AIG 0.45 % dropped coverage of most for-hire fleets earlier this year. Both insurers still cover trucks operated directly by retailers and manufacturers, brokers say. They had been two of the biggest underwriters for the business. Other insurers hiked premiums anywhere from 10% to 30%. AIG stopped covering trucking fleets via its Lexington Insurance Co. unit as part of a wider effort to improve profits in its commercial insurance division, the company said in a statement. Other AIG units continue to cover truckers, the statement said. “When they pulled out, it really triggered a panic,” Mark Brockinton, a broker with Aon AON 0.45 % PLC who works with large trucking companies, said of AIG’s retreat. “Some of these verdicts I think caught them flat-footed.”

NFIB: Small Business Optimism Index "dips" in September -- From the National Federation of Independent Business (NFIB): Small Business Optimism Dips Lower Before Election The net percent of small business owners who expect better business conditions in the next six months jumped 12 points last month, according to the NFIB Small Business Economic Trends Report (SBET), released today, but that gain was erased by significantly weaker inventories and hard-to-fill job openings. .. The Index of Small Business Optimism fell 0.3 points to 94.1, another monthly decline, and four points below the 40 year average of 98. ... Fifty-eight percent reported hiring or trying to hire (up 2 points), but 48 percent reported few or no qualified applicants for the positions they were trying to fill. Seventeen percent of owners cited the difficulty of finding qualified workers as their single most important business problem. This issue ranks second behind taxes but tied with the cost of regulation and red tape.  This graph shows the small business optimism index since 1986.

NFIB: Small Business Survey: "Small Business Owners Deeply Uncertain About Future"  The latest issue of the NFIB Small Business Economic Trends is came out this morning. The headline number for September came in at 94.1, down 0.3 from the previous month's 94.4. The index is at the 21st percentile in this series. Today's number came in below the forecast of 95.2. Here is an excerpt from the opening summary of the news release. The net percent of small business owners who expect better business conditions in the next six months jumped 12 points last month, according to the NFIB Small Business Economic Trends Report (SBET), released today, but that gain was erased by significantly weaker inventories and hard-to-fill job openings. According to NFIB Chief Economist Bill Dunkelberg, small business owners won’t be hiring or building inventories – both of which signify confidence in the economy – until something changes in Washington.“It is quite clear that the top issues for small-business owners will not be addressed this year,” said Dunkelberg. “The presidential election is so divisive that it offers little promise of a bipartisan effort to deal with any of these important issues.” The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings following the Great Recession that ended in June 2009.

Weekly Initial Unemployment Claims at 246,000, 4-Week Average Lowest Since 1973 --The DOL reported: In the week ending October 8, the advance figure for seasonally adjusted initial claims was 246,000, unchanged from the previous week's revised level. The previous week's level was revised down by 3,000 from 249,000 to 246,000. The 4-week moving average was 249,250, a decrease of 3,500 from the previous week's revised average. This is the lowest level for this average since November 3, 1973 when it was 244,000. The previous week's average was revised down by 750 from 253,500 to 252,750.  There were no special factors impacting this week's initial claims. This marks 84 consecutive weeks of initial claims below 300,000, the longest streak since 1970.  The previous week was revised down.  The following graph shows the 4-week moving average of weekly claims since 1971.

Warm Winter Weather Can Skew Jobs Data More Than Hurricanes and Blizzards - Hurricanes and blizzards can have devastating impact on affected areas, but a warm spell in winter can skew national economic data much more significantly. “Most major storms have sizable local effects, but do not move the needle much on a national scale,” said Daniel Wilson, research adviser at the Federal Reserve Bank of San Francisco. “This is a why an unusual warm spell, or other weather anomaly, that is pervasive across the nation can have a bigger impact on national employment than a geographically isolated major storm.” Mr. Wilson, who co-authored a new paper on weather effects on employment data, didn’t make a specific judgement on Hurricane Matthew. Damage from the storm, which made landfall in South Carolina on Saturday, and related flooding are still being assessed. Other economists note that even major natural disasters such as Hurricane Andrew and Superstorm Sandy had a relatively minimal impact on the national economy.The paper, which Mr. Wilson wrote with Catherine van der List, found that a warmup this winter had market-moving implications for May’s jobs report.The Labor Department’s May report showed hiring slowed sharply that month, surprising economists. The report resulted in the dollar losing value and Treasury yields falling to near lows for the year. Many economists cited the weak report as a reason why Federal Reserve policy makers held rates steady at a meeting 10 days after the report was released. The San Francisco Fed researchers say weather—specifically unseasonably warm winter temperatures—were largely responsible for the surprise figure. When adjusting for weather effects, U.S. employers added 162,000 jobs in May, rather than the 24,000 estimated by the Labor Department, according the report. The weather-adjusted figure is more consistent with the prior trend of steady, if slightly slower, job creation during 2016.

Unemployment Rate Uptick Largely Due to Statistical Swings -- Robert Oak - The September 2016 unemployment report shows some fairly wild statistical swings that result in a distorted unemployment picture.  The unemployment rate ticked up 0.1% to 5.0%.  Over 350 thousand more were now considered employed.  Both the labor participation rate and the civilian to employment ratio also ticked up a tenth of a percentage point.  Last month there was almost no movement in the month to month unemployment statistics, taking into account margins of error, so this month seems to be the opposite. This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status.Those employed number 151,968,000, a monthly increase of 354 thousand.  This is statistically unusual, a very large monthly swing.  From a year ago, the ranks of the employed has increased by 3.026 million.  That's a very solid annual gain. Those unemployed increased by 90 thousand for the month, a low figure.  From a year ago the unemployed has decreased by only -14,000, another anomaly. Those not in the labor force is 94.184 million, a -207 thousand monthly decrease.  The below graph are the not in the labor force ranks.  Those not in the labor force has decreased by -274,000 in the past year.  This is probably a better job market and people finally getting jobs after years of not being counted as unemployed.The labor participation rate is 62.9%, a 0.1 percentage point increase  Pre-recession, the January 2008 labor participate rate was 66.2% a far cry from what we see today. Below is a graph of the labor participation rate for those between the ages of 25 to 54.  The rate is 81.5% and this is a 0.2 percentage point increase from last month, a very good sign.  These are the prime working years where people are not in retirement or in school full time commonly, so one should not see record low participation rates In January 2008 the prime working years labor participate rate was 83.3%.The civilian labor force, which consists of the employed and the officially unemployed, increased by 444,000 to 159,907,000.  That is a very large amount for one month.  The civilian labor force has grown by 3,040,000 over the past year.  This is actually very high annual growth, we hope it is not artificial growth since the BLS counts those on guest worker Visas and even illegal workers mixed in with permanent resident and citizen workers.  Below is a graph of those not in the labor force, (maroon, scale on the left), against the noninstitutional civilian population (blue, scale on the right).   Notice how those not in the labor force crisscrosses the noninstitutional civilian population in growth.  The civilian noninstituitonal population is from where all other labor statistics have sprung.

The Ratio of Part-Time Employed Remains High, But Improving --Let's take a close look at the latest employment report numbers on Full and Part-Time Employment. Buried near the bottom of Table A-9 of the government's Employment Situation Summary are the numbers for Full- and Part-Time Workers, with 35-or-more hours as the arbitrary divide between the two categories. The source is the monthly Current Population Survey (CPS) of households. The focus is on total hours worked regardless of whether the hours are from a single or multiple jobs. The Labor Department has been collecting this since 1968, a time when only 13.5% of US employees were part-timers. That number peaked at 20.1% in January 2010. The latest data point, over five years later, is only modestly lower at 18.2% last month. If the pre-recession percentage is a recovery target, significantly more full-time employment is needed. Here is a visualization of the trend in the 21st century, with the percentage of full-time employed on the left axis and the part-time employed on the right. We see a conspicuous crossover during the Great Recession. Since July of 2015, the two cohorts have oscillated in a narrow range around the crossover point.  The two charts above are seasonally adjusted and include the entire workforce, which the CPS defines as age 16 and over. A problem inherent in using this broadest of cohorts is that it includes the population that adds substantial summertime volatility to the full-time/part-time ratio, namely, high school and college students. Also the 55-plus cohort includes a subset of employees that opt for part-time employment during the decade following the historical peak earning years (ages 45-54) and as a transition toward retirement. The next chart better illustrates summertime volatility by focusing on the change since 2007 in full- and part-time employment for the 25-54 workforce. Note that the government's full-time/part-time data for this cohort is only available as non-seasonally adjusted. To help us recognize the summer seasonality, the June-July-August markers are shown in a lighter color. These months are more subject to temporary shifts from part-time to 35-plus hours of employment. The 12-month moving averages for the two series help us identify the slope of the trend in recent years. The moving averages are, so to speak, moving in the right direction, but they have yet to meet.

Over 94 Million Americans Are Outside the Labor Force and That’s Almost Certain to Rise -- At first blush, it’s one of the most startling statistics about the U.S. labor market: Over 94 million Americans over the age of 15 do not have a job and are not looking for work. Republican Presidential candidate Donald Trump has repeatedly highlighted the statistic and Speaker of the House Paul Ryan has hailed it as a sign of economic decline. But here’s the challenge with touting that figure as “too high” or promising to reverse it: The number of Americans outside the labor force is almost certain to climb dramatically in coming decades for the simple reason that the population is getting both larger and older. This week the Labor Department highlighted some of its projections of the labor force through 2060. There’s actually a good deal that can be estimated about the composition of the labor force, especially in the early years of the forecast window. With the exception of new immigrants, of course, the entire labor force of 2030 will be people already born in the U.S. By 2020, the population of people over the age of 16 will likely rise to about 263 million, from 254 million today. The labor force is defined as those people with a job or those actively seeking a job. The controversy over this figure owes to the fact that perhaps a few million Americans do not have a job, and would like a job, but are so discouraged by the economy that they have stopped looking. But the vast majority of Americans outside the labor force are there for a clear reason: They are current high school and college students, caretakers or stay-at-home parents, the disabled or retirees (including Americans deep into their 80s, 90s and even 100s). The Labor Department estimates the number of Americans outside the labor force will grow to over 101 million by 2020. Merely holding the number steady at 94 million would require something confounding—generating millions more jobs than expected and somehow getting far more people to work while they’re in school, or to leave retirement to go back to work, or to recover from disabilities, or to stop caring full-time for families.

How much bigger can the U.S. labor force get?: The U.S. labor market continues to recover from the still lingering effects of the Great Recession, but the question on the minds of many economists and analysts is how long can the healing continue? Or, in other words, has the U.S. economy hit “full employment”...? Understanding trends in the labor force participation rate is key for answering this question. ...Views on labor force participation today vary on the extent to which structural forces or cyclical effects from the Great Recession of 2007-2009 are still affecting the participation rate. Many economists and analysts point to the role of structural forces or trends that long predate the Great Recession. But the long-term trend that gets cited the most is the aging of the working population as the Baby Boomer generation reaches retirement. The estimates on the effects of aging can vary quite a bit, but an estimate by the White House’s Council of Economic Advisers puts about half of the decline in participation from 2007 to 2014 into the “aging” category. When it comes to a policy response, it’s hard to change the age distribution of the population...  The importance of structural forces and demographics might give an impression that labor force participation or other trends are immutable and have to simply be endured. Regardless of how much slack remains in the labor market..., several structural factors can be addressed through policy actions. Consider a new paper by Princeton University economist and former Council of Economic Advisers chairman Alan Krueger. The paper takes a direct look at the labor force participation rate and tries to understand what is depressing participation for men and women who are in prime working ages of 25 to 54. When it comes to prime-age men, health problems seem to be a huge barrier to labor market participation. According to the paper, almost 50 percent of men in this age group are taking medicine to control pain, and about 40 percent of this group say health issues are preventing them from taking a job. This is structural force that is not directly related to the Great Recession, but it certainly is amenable to a policy response.

US Labor Market Conditions Index Declines 2.2 In September: The Labor Market Conditions Index (LMCI) recorded a decline of 2.2 for September following a revised 1.3 decline the previous month, which was originally reported as a 0.7 fall. The index has fallen in seven of the last eight months, which will maintain an underlying tone of doubt surrounding labour-market trends, although there are still important issues of demand and supply. There is an important risk that employment growth is being restricted by supply difficulties and, in this context, there is an important risk that underlying tightness is being under-reported. The index has been undermined to some extent by a slightly weaker than expected US employment report. The impact will, however, be offset by the fact that the data counts private payrolls and this was stronger than the headline increase in payrolls given that there was a decline in government jobs for the month. The LMCI was created by the Federal Reserve to provide a useful snapshot of overall conditions and does have a significant impact on Fed thinking. The relatively subdued readings over the past few months have helped convince Fed Governors that there is still some underlying slack in labour markets and the latest data will maintain the overall tone of caution. The Fed will, therefore, remain committed to only a very slow pace of tightening.

The Labor Market Conditions Index Goes Further Negative - dshort -  Following the somewhat disappointing jobs report for September, the latest update of the Labor Market Conditions Index has slipped further into negative territory. The LMCI is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. The latest LMCI update came in at -2.2. The previous month was revised downward to -1.3 (previously -0.7). The cumulative index (discussed below) peaked nine months ago in December 2015. The indicator, designed to illustrate expansion and contraction of labor market conditions, was initially announced in May 2014, but the data series was constructed back to August 1976. Here is a linear view of the complete LMCI. We've highlighted recessions with callouts for its value the month recessions begin and for the latest index value.

BLS: Job Openings decreased in August -- From the BLS: Job Openings and Labor Turnover Summary: The number of job openings decreased to 5.4 million on the last business day of August, the U.S. Bureau of Labor Statistics reported today. Hires and separations were little changed at 5.2 million and 5.0 million, respectively. ... ... The number of quits was essentially unchanged in August at 3.0 million. The quits rate was 2.1 percent. Over the month, the number of quits was little changed for total private and for government. emphasis added The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. This series started in December 2000. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for August, the most recent employment report was for September. Click on graph for larger image. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings decreased in August to 5.443 million from 5.831 million in July. The number of job openings (yellow) are up 3% year-over-year. Quits are up 4% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). Even with the decline in Job Openings, this is another solid report.

Job Openings & Labor Turnover: Clues to the Business Cycle - The latest JOLTS report (Job Openings and Labor Turnover Summary), data through August, is now available. The first chart below shows four of the headline components of the overall series, which the BLS began tracking in December 2000. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends. The chart below shows the monthly data points four of the JOLTS series. They are quite volatile, hence the inclusion of six-month moving averages to help identify the trends. For the last sixteen months, the moving average for openings has been above the hires levels as seen in the chart below. The most closely watched series is the one for Total Nonfarm Job Openings, the blue line in the chart above. The moving average peaked in mid-2007 and began rolling over to its trough a few months after Great Recession ended. The Openings moving average then trended upward, surpassing its mid-2007 peak in the late summer of 2014. The Hires series has risen at a slower pace. Its moving average had nearly reached its pre-recession peak earlier this year but is now off its post-recession high. Quits have been steadily trending upward and are close to the pre-recession high; they are generally thought to show an economy that supports the flexibility to leave or change jobs. The Layoffs and Discharges series, the red line, has been been essentially flat since early 2013.

JOLTS Shows Job Openings Don't Necessarily Mean Hiring --Robert Oak -- The BLS August 2016 JOLTS report shows once again job openings exceeding the number of hires.  While the number of openings declined for the month, the number of hires stayed below it.  The Job Openings and Labor Turnover Survey history clearly has hires exceeding openings as a trend since February 2015.  For August, job openings were 5.4 million while hires were 5.2 million.  The other bit of news JOLTS brings is that openings declined significantly for the month. At the start of the recession, December 2007, there were 1.8 official unemployed persons per job opening. Below is the graph of the official unemployed per job opening, currently at 1.44 people per opening. This ratio is a tenth of a percentage point uptick from last month. If one takes the U-6 broader measure of unemployment that includes people who are forced into part-time work and the marginally attached, the ratio is 2.87 people needing a job to each actual job opening. In December 2007 this ratio was 3.2. Job openings for August declined by a whopping -388,000 Currently job openings stand at 5,443,000, which is still very high. One month does not a pattern make yet such a large drop is disconcerting. Below is the graph of actual hires, currently 5,210,000. July hires were pretty much the same, 5,258,000. . Hires only near pre-recession levels, which is unbelievable considering that is now eight years ago. In December 2007, the first month of the recession, hires were 4,968,000. These numbers are not adjusted for increased population either, so that's actually worse than it sounds and backed by the still record low labor participation rates. In June 2009, the height of the recession, hires exceeded job openings by 1.2 million.Graphed below are total job separations, currently at 4.954 million. The term separation means you're out of a job through a firing, layoff, quitting or retirement and is also called turnover. From a year ago, separations were 4.951 million, which is about as static as it gets in terms of statistics.

JOLTS, Labor Market Conditions index consistent with late 2017 recession - - I continue to be unimpressed with the Job Openings and Labor Turnover Survey (JOLTS), as showing post-mid cycle deceleration for over a year. I have found what I hope is a better way to present my argument, so that you can see why the report is less than heartening. First, here is a comparison of job openings (blue), hires (red), and quits (green, right scale). Because there is only one compete past business cycle for comparison, lots of caution is required. But in that cycle, hires and quits peaked first, while openings continued to rise before turning down in the months just prior to the onset of the Great Recession: Through today's report for August, 2016 looks very much like 2006, or even early 2007. To better show you my concern, let's look at this same data as expressed in YoY% changes: Although there's lots of noise in the squiggles, the pattern of maximum growth at mid cycle gradually declining under zero prior to the onset of the 2008 recession is evident. Here is a close-up of the years 2005-08 to show you the deceleration of quits and hires from their peaks in late 2005, and the flatness of hires before declining in the months just before the recession: Now let's look at the same time frame up until this month's release: You can see similar peaks of quits and hires in late 2014, and the general flatness in hires over the last year. The rates of YoY change are equivalent to those at the end of 2006. If the same pattern as the last economic cycle were to hold for this one, JOLTS would show continued deceleration before rolling over into an actual recession about 12 months from now. Meanwhile the LMCI has been slightly negative virtually all this year. As shown in the graph below, this is consistent with slowdowns (as in 1985 and 1995) as well as prior to recessions:

 Yellen Will Not Be Pleased: Job Openings Miss Most On Record, Tumble To 2015 Levels -- Considered Janet Yellen's "favorite job market indicator", today's JOLTS report revealed an unpleasant headline print: in August the number of job openings tumbled by 388K, the most in 12 months, to 5.443 million, the lowest print since December 2015, and the biggest miss to expectations on record which stood at 5.727MM. One reason for the disappointing print may be that last month's data was revised substantially higher to 5.831MM. The ratio of unemployed persons per job opening was 1.38 in August 2016. When the most recent recession began (December 2007), the number of unemployed persons per job opening was 1.9. The ratio peaked at 6.6 unemployed persons per job opening in July 2009 and has trended downward since. Among the jobs seectors reporting the biggest drop in job openings were Construction (from 225K to 184K), Manufacturing (379K to 337K), Government (546K to 507K), and mostly Professional and Business services which tumbled by 223K to 989K from 1212K. Aside from the headline openings print, the internals were not too remarkable, as hires dropped from 5,258K to 5,210, offset by a similar drop in Separations which declined from 4.991K to 4.954K. As a result, the net separations series continued to track the monthly payrolls closely. As we have noted previously, absent a substantial rebound in hiring, payrolls may have reached an inflection point, with lower prints expected in the coming months.Putting hires and job opening in context,the number of hires (measured througout the month) has exceeded the number of job openings (measured only on the last business day of the month) for most of the JOLTS history. Since February 2015, this relationship has changed as job openings have outnumbered hires in most months.

 Wolf Richter: Millennials Blamed for Lousy Economy --Over the past few days, the Diamond Producers Association launched its first new ad campaign in five years after watching retail sales of diamond jewelry slow down, as Millennials built on the habit pioneered by prior generations of delaying or not even thinking about marriage, and thus not being sufficiently enthusiastic about buying diamond engagement rings. The campaign, according to Adweek, is designed to motivate Millennials “to commemorate their ‘real,’ honest relationships with diamonds, even if marriage isn’t part of the equation.” Mother New York, the agency behind the campaign, spent months interviewing millennials, according to Quartz, and learned that they associated diamonds with a “fairytale love story that wasn’t relevant to them.” So the premium jewelry industry, seeing future profits at risk, needs to do something about that. A year ago, it was Wall Street – specifically Goldman Sachs – that did a lot of hand-wringing about millennials. “They don’t trust the stock market,” Goldman Sachs determined in a survey. Only 18% thought that the stock market was “the best way to save for the future.” It’s a big deal for Wall Street because millennials are now the largest US generation. There are 75 million of them. They’re supposed to be the future source of big bonuses. Wall Street needs to figure out how to get to their money. The older ones have seen the market soar, collapse, re-soar, re-collapse, re-soar…. They’ve seen the Fed’s gyrations to re-inflate stocks. They grew up with scandals and manipulations, high-frequency trading, dark pools, and spoofing. They’ve seen hard-working people get wiped out and wealthy people get bailed out. Maybe they’d rather not mess with that infernal machine.

Obama Econ Advisor Blames Back Pain And Video Games For Bad Labor Market - Princeton professor and former Obama White House economist Alan Krueger would like for you to know that low labor force participation rates likely have nothing to do with Obama's awful "jobs recovery", stagnant real wages or soaring entitlements that provide massive disincentives to work.  Rather, his "thorough research" indicates that men are more likely dropping out of the labor force due to excessive back pain and/or because video gaming technology has become so amazing that young adults are just choosing to stay home instead.  Sadly, this is a true story. According to The Washington Examiner, Krueger's "research" indicated that 47% of men, between the ages of 25 and 54, reported taking pain medication during the previous day.  Of those men, 40% said their pain prevented them from working.  To summarize, the awful labor market under Obama has nothing to do with his failed economic's pure coincidence that as soon as Obama took office a massive percent of the overall working-age male population came down with severe back pain.  That seems reasonable. Nearly half of working-age men who aren't in the labor force take daily pain medication, according to new research that highlights one alarming possible reason for weak labor force participation in the U.S. Of men between the ages of 25 and 54, 47 percent said that they took pain medication during the previous day in a survey commissioned by Princeton professor and former Obama White House economist Alan Krueger. For two-thirds of those men, the medication was prescribed. Those results line up with what Krueger found in government-conducted surveys, and they add a new explanation for low male labor force participation, namely that many men may be too sick or injured to work. Of the men who reported taking medication, 40 percent said that pain prevented them from working.

 McVisas | The Economic Populist - A number of people have called my attention to the “McDonald’s hires H-1Bs” article in Breitbart. I certainly recommend it, though I would point out that it is actually a meandering article that covers all kinds of interesting facts and numbers beyond McD’s. There is a ton to learn from here. I do have a couple of comments. First, the article uses the word outsourcing a lot, much more than it should. I can hardly blame the author, who is an excellent, very insightful journalist, because terminology has become awfully confusing these days in articles on H-1B and related issues, but it is important to keep things straight. So for instance, when the article says “But American companies are now trying to outsource more varieties of jobs, including accounting, healthcare and design jobs. For example, American universities have hired H-1Bs for 100,000 prestigious jobs, including professors, lecturers, doctors, therapists, scientists and researchers. Engineering giant Caterpillar continues to hire H-1B workers in Illinois as it fires hundreds of American engineers and other white-collar workers, DeLoitte and other U.S. accounting firms have asked for more than 20,000 H-1B visas to replace American business-school graduates.” that term “outsourcing” is incorrect. The universities, for instance, are directly hiring H-1Bs, not “renting” them from an outsourcing firm such as Infosys. They are not “renting” those professors. Mind you, I am not defending the universities at all. Most H-1B hiring, including by universities, represents abuses of the visa program, in both direct and indirect ways. But it is not outsourcing. Similarly, Caterpillar is also not outsourcing, according to another excellent recent piece by the same author. They are directly hiring foreign workers who are studying as foreign students at U.S. universities. Again, that does NOT make it “better”; but it is important to be precise in this complex issue.

Lawsuit filed to block Fair Pay and Safe Workplaces Executive Order - EPI --One of President Obama’s most important contributions to better pay and working conditions in the United States is his executive order on Fair Pay and Safe Workplaces, which he issued two years ago and is finally taking effect this month. The order, which addresses wage theft and on-the-job hazards, including sexual harassment and race discrimination, affects 25 million employees working for businesses that provide goods and services under contract to the federal government – businesses that range from janitorial services to ship builders.The first provisions are set to take effect in two weeks – unless a lawsuit filed in Texas by various business groups succeeds in delaying or blocking enforcement of the rules. The federal government purchases over $500 billion in goods and services from the private sector, and the firms it deals with employ about 20 percent of the nation’s total workforce. It is important that the government chooses to deal with honest employers and that, when given a choice of two otherwise similar contractors, it chooses to do business with the one that demonstrates superior integrity and a greater inclination to obey the law. That is common sense.

How Stronger Unions Could Fix Our Economy — And Our Politics - Of the little we’ve heard, much of this election’s economic policy discussion has focused on what can be done about our historically slow growth, rising inequality, and decreasing social mobility. But neither candidate has focused on one no-brainer solution: strengthening unions.That might seem a contentious statement in a country with decades of fraught relations between corporations and labor. But as a new report from the left-leaning Center for American Progress outlines, a stronger labor movement may be the quickest way to spur the sort of broad-based growth (via wage hikes) that we need to create a more sustainable, robust recovery. “It’s become pretty clear that in order to raise wages and reduce inequality, the number one thing that we could do would be to increase worker power within our economy,” says David Madland, a senior fellow at CAP and the author of the study.Strengthening unions might also have the knock-on effect of decreasing populism. At least some of the ugliness we’ve seen this election cycle has been rooted in rising inequality. Meanwhile, about one-third of the recent increase in wage inequality for American males can be attributed to weakening unions, according to research by Harvard and Washington University academics. A separate IMF study found that countries without unions see a 10% increase in the share of income that goes to the highest earners.By contrast, the social benefits of unions stretch across generations. American children of fathers without a college education earn 28% more if their dad was in a labor union, compared to those whose fathers were non-union. In other words, the demise of American unions — only about 7% of private sector workers currently belong to one — has been a key factor in the rising wealth gap, but also in the sort of horrific, Hobbesian presidential politics we’ve seen over the past year. The big challenge to revitalizing unions is moving beyond today’s system of labor law, which hasn’t been updated since 1935. Unions get a bad rap in the U.S. in part because most collective bargaining can be done only at a firm-by-firm level. That creates a race to the bottom away from higher-wage unionized firms. Yet there is a wealth of research that shows that when bargaining can be done at an industry level — the way it is in most other countries, including Germany, Sweden, Australia, and Canada, among others — you get higher national wages without sacrificing economic competitiveness.

New study casts more doubt on data center subsidies - A new report by Good Jobs First confirms what has been long-suspected: Data center megadeals of over $50 million in subsidies create very few jobs at a cost per job that easily exceeds $1 million. Indeed, the average for 11 megadeals going to tech giants like Google, Apple, Facebook, and Microsoft came to $1.8 million ($2.1 billion/1174) nominal cost per job. As I have discussed before, such a figure far exceeds what a typical automobile assembly plant will receive, even though the latter creates far more, and better-paying, jobs than server farms do. An auto facility will receive something around $150-200,000 per job, and it will bring along suppliers to boot (though, unfortunately, sometimes the suppliers will also receive incentives). The new study finds that by far the most important site location consideration is the cost of electricity and, increasingly, whether the electricity is generated by renewable sources like wind or solar. Thus, many of the biggest data centers are located in states like North Carolina (cheap coal-fired plants), Oregon and Washington (cheap hydropower). States with cheap electricity do not need massive subsidies, but they provide them, anyway. At least, they usually do. As I have related before, American Express in 2010 announced a $400 million data center in North Carolina, without incentives. But fear not, Amex had not forgotten about using the site selection process as a rent-seeking opportunity. The reason it did not seek incentives, as far as anyone can tell (don’t forget about the inherent information asymmetry here), is that the company knew it was going to close a 1900-job call center in Greensboro, which would trigger clawbacks on the data center if it received subsidies for it. So in that case North Carolina gave no incentives for the server farm. Not only that, Google knows how to build and expand data centers without incentives. Of course, that’s in Europe. The study concludes with sensible recommendations: Transparency where it doesn’t exist, capping incentives at $50,000 per job, and knowing when to get out of subsidy auctions for these projects. Maybe simpler still, I would suggest that economic development officials just say no.

Economic Racism: The New Feudalism – Stormy - Open borders in the U.S or outsourcing to China, Vietnam: Is there really a difference. Cheap labor remains cheap.  Free Traders are quick to cite the dangers of protectionism and the advantage of cheap goods. Those whose jobs are lost in the process are the ignorant rabble, bigoted and uneducated, the irredeemable, the basket of deplorables. Even Noam Chomsky makes this argument against Trump and his defenders. Generalized rage…support from people who are angry at everything. “There has been no economic growth for them; there is for other people.” How about blacks, how about Mexicans, Chomsky? How easily Chomsky, likes to slide into comparisons with past immigration influxes: Germans, Irish. They are just complaining about the new workers, just as their predecessors complained about the Germans or the Irish See his talk on Truthout.  What is happening here is a different game. In this game, only the rich get richer. Good paying jobs are not available. Education has become a shut door.  I am not a champion of Trump. Far from it. I find his views on global warming dangerous in the extreme. But he is giving voice to those whose jobs are at risk–because of outsourcing and open border policies. Remember when the U.S. wanted to give trucking licenses to Mexicans? Did you not understand what was happening? Did you not understand who might scream bloody murder? Or you who live in Westchester, NY. The street corners in places like Port Chester are crowded with brown folk looking for jobs…and they will work for almost nothing. If you lived there in the 1960′s as I did, such sights never happened. There was a middle class in Westchester.   Are the open border crowd or the free trade crowd anxious to strengthen collective bargaining here or abroad? I see no inspired economist–free trader–or major newspaper carrying that banner. Who complains about worker rights in China or Vietnam? Who complains about the environment being tossed aside in these trade agreements? What is the result…the unruly mass of peons, white, brown, or black–are mere servants to the upper classes. Now, this is a form of racism…it just happens to span and include all those who are poor, uneducated, ungifted-  In short, all those who because of their government or because of their lack of talent, or because of their boxed-in poverty–all of these are slaves to the upper classes.

Striking new research on inequality: ‘Whatever you thought, it’s worse’ - While Americans have traditionally seen their country as a place where anyone can make through hard work and a stroke of luck, data collected in the past decade have shown otherwise. Compared with many European countries, for example, few Americans end up with an income or educational level that is substantially different than their parents. Research by economists from Harvard and Berkeley found that fewer than 10 percent of people in the bottom fifth of the wealth distribution will make it into the top fifth. Things weren't much better for the middle class: Only about 20 percent of people in the middle fifth would rise into the top fifth over the course of their lives. Now, new research suggests that social mobility in America may be even more limited than researchers have realized. In a new paper, Joseph Ferrie of Northwestern University, et al draw on a newly constructed dataset about American families reaching back to 1910. Unlike past studies, which have mainly compared parents and children, the new work adds data on grandparents and great-grandparents to show just how fixed the fortunes of many Americans have become. In the past, researchers have overestimated the amount of social mobility in American society because they had a limited amount of data to study, Ferrie and his colleagues argue. That limited historical insight is a problem, says Ferrie, because families can see one-generation fluctuations in education and income. For example, suppose you have a banker whose son decided to become a poet, surrendering a huge income in favor of a more fulfilling career. But the poet’s daughter decides to go back to the family business and become a banker.If you just looked at the poet and his daughter, you might think that economic mobility is alive and well in America -- she probably makes a lot more money than her father does. But actually, the daughter might be drawing on much older, preexisting family resources – such as financial resources, personal connections, or knowledge about how Wall Street works from her grandfather – that make it easier for her to become a banker than it is for the average kid.

Police arrest more people for marijuana use than for all violent crimes — combined -- On any given day in the United States, at least 137,000 people sit behind bars on simple drug-possession charges, according to a report released Wednesday by the American Civil Liberties Union and Human Rights Watch. Nearly two-thirds of them are in local jails. The report says that most of these jailed inmates have not been convicted of any crime: They're sitting in a cell, awaiting a day in court, an appearance that may be months or even years off, because they can't afford to post bail. "It's been 45 years since the war on drugs was declared, and it hasn't been a success," lead author Tess Borden of Human Rights Watch said in an interview. "Rates of drug use are not down. Drug dependency has not stopped. Every 25 seconds, we're arresting someone for drug use.”  Federal figures on drug arrests and drug use over the past three decades tell the story. Drug-possession arrests skyrocketed, from fewer than 200 arrests for every 100,000 people in 1979 to more than 500 in the mid-2000s. The drug-possession rate has since fallen slightly, according to the FBI, hovering near 400 arrests per 100,000 people. Defenders of harsh penalties for drug possession say they are necessary to deter people from using drugs and to protect public health. But despite the tough-on-crime push that led to the surge in arrests in recent decades, illicit drug use today is more common among Americans age 12 and older than it was in the early 1980s. Federal figures show no correlation between drug-possession arrests and rates of drug use during that time.

 Facebook, Instagram, and Twitter Provided Data Access for a Surveillance Product Marketed to Target Activists of Color - The ACLU of California has obtained records showing that Twitter, Facebook, and Instagram provided user data access to Geofeedia, a developer of a social media monitoring product that we have seen marketed to law enforcement as a tool to monitor activists and protesters.  We are pleased that after we reported our findings to the companies, Instagram cut off Geofeedia’s access to public user posts, and Facebook has cut its access to a topic-based feed of public user posts. Twitter has also taken some recent steps to rein in Geofeedia though it has not ended the data relationship. Further steps are required if these companies are to live up to their principles and policies by protecting users of all backgrounds engaging in political and social discourse. So today the ACLU of California, the Center for Media Justice, and Color of Change are calling on Twitter, Facebook and Instagram to commit to concrete changes to better protect users going forward. Read our letters here andhere.  We first learned about these agreements with Geofeedia from responses to public records requests to 63 California law enforcement agencies. These records revealed the fast expansion of social media surveillance with little-to-no debate or oversight. But as we continued to comb through thousands of pages of documents, we saw emails from Geofeedia representatives telling law enforcement about its special access to Twitter, Facebook, and Instagram user data. In one message, a Geofeedia representative tells police that the company has arrangements with Twitter and Instagram for user data. Right after that, the representative promotes a product feature that “covered Ferguson/Mike Brown nationally with great success.

ACLU Exposes "1984-Style" Police Surveillance On Twitter, Facebook -- Just when you thought it was safe to selfie you latest WalMart-looting or molotov-cocktail-throwing night out, think again. According to the ACLU, law enforcement officials implemented a far-reaching surveillance program to track protesters in both Ferguson and Baltimore during their recent uprisings and relied on special feeds of user data provided by three top social media companies: Twitter, Facebook and InstagramThe ACLU of California has obtained records showing that Twitter, Facebook, and Instagram provided user data access to Geofeedia, a developer of a social media monitoring product that we have seen marketed to law enforcement as a tool to monitor activists and protesters. We are pleased that after we reported our findings to the companies, Instagram cut off Geofeedia’s access to public user posts, and Facebook has cut its access to a topic-based feed of public user posts. Twitter has also taken some recent steps to rein in Geofeedia though it has not ended the data relationship. Further steps are required if these companies are to live up to their principles and policies by protecting users of all backgrounds engaging in political and social discourse.

Big Pharma’s Manufactured Epidemic: The Misdiagnosis of ADHD - Scientific American -- According to the American Psychiatric Association, about 5 percent of American children suffer from Attention Deficit Hyperactivity Disorder (ADHD), yet the diagnosis is given to some 15 percent of American children, many of whom are placed on powerful drugs with lifelong consequences. This is the central fact of the journalist Alan Schwarz’s new book, ADHD Nation. Explaining this fact—how it is that perhaps two thirds of the children diagnosed with ADHD do not actually suffer from the disorder—is the book’s central mystery. The result is a damning indictment of the pharmaceutical industry, and an alarming portrait of what is being done to children in the name of mental health. He spoke with Mind Matters editor Gareth Cook.

Schools use corporal punishment more on children who are black or have disabilities -In parts of the 19 states where the practice is still legal, corporal punishment in schools is used as much as 50 percent more frequently on children who are African American or who have disabilities, a new analysis of 160,000 cases during 2013-2014 has found. Corporal punishment -- typically striking a child with a wooden paddle -- continues to be a widespread practice in disciplining children from pre-K through high school, according to a new study by Elizabeth Gershoff of The University of Texas at Austin and Sarah Font of Penn State University. The paper is published this week as a Social Policy Report by the Society for Research in Child Development."Some Americans may think corporal punishment is as obsolete as the one-room schoolhouse," says Gershoff, an associate professor of human development and family sciences. "Yet public school personnel in 19 states -- and private school personnel in 48 states -- can legally hit children in the name of discipline." The study found that there are widespread disparities in the administration of corporal punishment by race, gender and disability status. For example:In Alabama and Mississippi, African American children are at least 51 percent more likely to be corporally punished than white children in over half of school districts. In eight states, boys are five times as likely to receive corporal punishment as girls are in at least 20 percent of school districts. Children with disabilities are more than 50 percent more likely to be corporally punished than their nondisabled peers in many southeastern states. ?Disability status is defined as students who qualified as having a disability (physical, cognitive, or emotional) under the Individuals with Disabilities Education Act.

Gender differences on the ACT test: Boys score higher on math and science; girls score higher on English and reading – Mark Perry, AEI - Following up on the recent discussion about the gender differences on the SAT math test, the two tables above provide some additional food for thought based on gender differences on the ACT test. The top table above shows the national test results by gender for the four ACT subject areas (English, reading, math and science reasoning) and the overall composite scores in 5-year intervals from 1995 to 2015 based on data from the Department of Education. Here are some details:

  • 1. At the national level, high school girls have scored consistently higher on the English test over the last 20 years by 0.80 points on average and on the reading test by 0.40 points.
  • 2. High school boys have scored consistently higher on the math test by an average of 1.1 points and on the science test by 0.9 points.

The bottom table shows ACT test scores for high school students for years 2011 to 2015 in the state of Illinois, where all students are required to take the ACT in their junior year. Since that requirement results in an equal number of boys and girls taking the test in most years, that pretty much eliminates the “sampling artifact” explanation (more girls than boys taking the test) of gender differences in test scores. For Illinois:

  • 1. High school girls in Illinois have scored consistently higher on the English test over the last 5 years by 0.80 points on average (same as the national results) and on the reading test by 0.60 points (slightly higher than the national results).
  • 2. High school boys in Illinois score consistently higher on the math test by an average of 0.70 points and on the science test by 0.50 points.

The Skills Delusion - Adair Turner – Everybody agrees that better education and improved skills, for as many people as possible, is crucial to increasing productivity and living standards and to tackling rising inequality. But what if everybody is wrong?  Most economists are certain that human capital is as important to productivity growth as physical capital. But one striking feature of the modern economy is how few skilled people are needed to drive crucial areas of economic activity. Facebook has a market value of $374 billion but only 14,500 employees. Microsoft, with a market value of $400 billion, employs just 114,000. GlaxoSmithKline, valued at over $100 billion, has a headcount of just 96,000.  The workforces of these three companies are but a drop in the ocean of the global labor market. And yet they deliver consumer services enjoyed by billions of people, create software that supports economy-wide productivity improvements, or develop drugs that can deliver enormous health benefits to hundreds of millions of people.   Despite this phenomenon, more people than ever seek higher education levels, evidently motivated by the fact that higher skills bring higher pay. But many higher-paid jobs may play no role in driving productivity improvement. If more people become more highly skilled lawyers, legal cases may be fought more effectively and expensively on both sides, but with no net increase in human welfare.  The economic consequences of much financial trading are similarly zero-sum. But so, too, may be much of the activity devoted to developing new fashions or brands, with high skill and great energy devoted to competing for consumer attention and market share, but none of it necessarily resulting in an increase in human welfare.  More people receiving higher education does not therefore mean that their higher skills in all cases drive productivity growth. And rising university tuition and fees – growing in the US at a trend annual rate of about 6% in real terms – may not indicate that ever-higher skills are needed to perform specific jobs. Rather, future job applicants may simply be willing to spend a lot of money to signal to employers that they have high-value skills.  Universities, in turn, can become caught in a zero-sum competition of ever-increasing expenditure to attract paying students. And rapidly rising student debt – up from $400 billion to $1.3 trillion in the US alone since 2005 – may partly be financing more intense competition for high-paid jobs, not socially required investments in human capital.

 Sheila Bair’s One Weird Trick to Make Her College Less White - When former Federal Deposit Insurance Corp. chair Sheila Bair took over Washington College last year, she immediately started making changes. One of her goals was to find innovative ways to reduce her students’ debt burden. But she also tackled a related and not insignificant problem: the overwhelming whiteness of her campus. Three of every four students on the school's small rural campus in Maryland are white. It's not an unusual statistic at the nation's top schools, where black students in particular rarely make up more than 8 percent of undergraduates, Education Department data show. But for students of color, life at a mostly white college like Washington can be profoundly isolating. “The way people of color process negative racial experiences is having family and friends to talk to about them,” said Deborah Faye Carter, an associate professor at the School of Educational Studies at Claremont Graduate University. When there’s no community, there’s no support. That makes students of color more likely to drop out: As many as 20 percent of college students from historically underrepresented communities who drop out of school do so because they feel like they don’t belong. Bair had spent five years chairing the FDIC, where she had gotten to know Senator Elizabeth Warren (D-Mass.), then a Harvard professor. Before starting her new job, Bair asked Warren for her thoughts on Washington College's diversity problem. What if the school allowed certain students to apply as part of a group? Warren told Bair to check out the Manhattan-based Posse Foundation.   Posse identifies disadvantaged students from urban public high schools who may be overlooked by top colleges—relatively low standardized test scores are often a culprit—but would succeed if they had more support.Posse then organizes students in small groups—“posses”—that meet weekly for eight months during their senior year to help them get ready for college life. They’re then placed at about 57 partner colleges across the country in groups of 10, with four-year scholarships that cover their tuition. Living expenses are covered if students’ families can’t afford it. Ninety percent graduate from college. The program aims to diversify the nation’s most prestigious schools so they’re more representative of the country, Bial said. “The most selective colleges have made an incredible effort, especially over the past couple of decades, to focus on recruiting more diverse student bodies,” Bial said. “But do I think we still have a long way to go? Yes.”

 Professor Slams "Special Snowflakes" Living In "Fantasy World" ‘People now experience the entire world as a form of bullying’ The political correctness movement that has swept college campuses, corporate America and mainstream life can be traced back to a few psychological trends. Howard Schwartz, professor emeritus of Oakland University, has for years studied the psychology underlying political correctness, and in his new book Political Correctness and the Destruction of Social Order: Chronicling the Rise of the Pristine Self, he offers some clarity onwhy the term “snowflakes” is now synonymous with college students today. Schwartz, who taught classes in social and behavioral science within its business school, said the term stems from what he calls “the rise of the pristine self.” Schwartz writes in the book that “this is a self that is touched by nothing but love. The problem is that nobody is touched by nothing but love, and so if a person has this as an expectation, if they have built their sense of themselves around this premise, the inevitable appearance of the something other than love blows this structure apart.”  He added in his interview that “the oversensitivity of individuals today, including political correctness and microaggressions, all stem from this idea that people operating under the notion of the pristine self view you as evil because you are showing them something other than love.”

Teachers are juicing their pensions, and it cost you $1B | New York Post: A little-known pension perk available only to New York City teachers cost taxpayers an astonishing $1.2 billion last year, a watchdog group reported Wednesday. The sweet deal guarantees that teachers who sock away money for retirement in a special Tax Deferred Annuity (TDA) receive a 7 percent annual return. In stark contrast, banks currently pay depositors just 1 percent or less on most savings accounts. And city taxpayers are the de facto guarantors for the high rate of return — on the hook to make up the difference if the annuity falls short of the guarantee. Knowing a good thing when they see it, increasing numbers of teachers are stashing their cash in the no-lose annuity, the Citizens Budget Commission found. It said that there are now 137,000 participants in the plan, including 51,000 retirees. But only 3,000 are drawing on their funds. The rest, according to the commission, are watching their nest eggs grow at a fixed rate available to no other city employee. And that’s over and above the teachers’ regular pensions.

McConnell, Trump hesitate on coal miners' pensions: (AP) — Mitch McConnell says the country must not turn its back on the nation's coal miners — but that's exactly what those miners say the Republican Senate Majority Leader is doing. McConnell blocked efforts late last year to rescue a pension plan and health benefits for 13,000 retired union miners in his home state and has refused to fast-track it this year. That's difficult to understand, said Billy Smith, a coal miner for 39 years, given all the ailments he sees among fellow retirees in his local union. "We're dying like flies," Smith said. Last week, McConnell told a group of business leaders in Pike County — eastern Kentucky's second-largest coal producer — that "the country must not turn its back on Kentucky coal miners." But he says the pension issue is more complicated than just "helping miners," since the proposed rescue would benefit only union miners while doing nothing for non-union workers who also have lost their jobs. A spokesman said McConnell believes the bill should come before the Senate "through regular order" and not be attached to other legislation. The bill cleared the Senate Finance Committee last month, but McConnell has yet to call it for a vote. Workers like Joseph Holland, a retired union coal miner in Owensboro, said the federal government owes them their pensions and health benefits because of a promise former President Harry Truman made in the 1940s that ended a costly strike. Holland said he believes McConnell is punishing the United Mine Workers of America for endorsing his opponent during the 2014 U.S. Senate race, which McConnell won easily. "He says he supports coal, but you know no evidence that he's supported the coal miner,"

Even CalPERS Admits Private Equity Returns Are Fizzling - Yves Smith - ZIRP and QE victims like pensions fund, life insurers, and other long-term investors, responded as central banks knew they virtually had to super-low interest rates: commit even more funds to high risk strategies in the hope of eking out an adequate return.   But as these monetary ministrations merely produced more speculation, rather than investment and resulting growth, all the pursuit of more investment risk has done is bid down returns for strategies like private equity. And that’s before getting to the fact that private equity has generally not been delivering returns commensurate with its risks for the last ten years. Even CalPERS, which like many public pension funds has clung to private equity as a possible salvation from its bleak investment landscape, is having to admit that its great hope was really hopium. From Bloomberg: First it gave up on hedge funds. Now the largest U.S. pension fund isn’t sure how much it can count on private equity.“We anticipate it may be moving from a gusher to a garden hose and then maybe even a trickle,” Wylie Tollette, chief operating investment officer of the $305 billion California Public Employees’ Retirement System, said this week in a telephone interview… The private-equity industry, which makes long-term investments such as leveraged buyouts in operating companies, shows signs of coming off its best years after distributing a record $443 billion to global clients in 2015, according to Preqin. Now investments are shifting to early-stage pools that throw off less cash. At the same time, buyouts, the majority of Calpers’s private-equity portfolio, are rising in cost as firms with an unprecedented $1.47 trillion in stockpiled cash, known as dry powder, compete for acquisitions — a trend that could further crimp returns.  CalPERS moved away from smaller private equity investments as part of a strategic review, deciding to greatly prune its total number of private equity investments so as to invest more in fewer funds. That pretty much rules out early-stage investments. The logic behind CalPERS move presumably is that private equity funds increasingly have tiered pricing, with investors that make larger commitments getting lower management fees.

 Thousands of retired miners, widows receive letters announcing end of health care benefits unless Congress acts  — What thousands of retired coal miners and widows of miners have feared in recent months is now closer to reality after approximately 12,500 beneficiaries linked to Patriot Coal received letters this week telling them the fund that pays their health care benefits will be out of money at the end of the year. The letter, released by the United Mine Workers Union Friday, came from the Patriot Voluntary Employee Beneficial Association. “We’ve been working very hard not to have to send this letter out to retirees,” UMWA spokesman Phil Smith told MetroNews Friday. “It’s unfortunate that we’ve gotten to this point but here we are.” The Patriot VEBA and funds like it face depletion while the union and others push Congress to approve a plan to fund the programs. “America made them a promise 70 years ago: ‘You mine the coal that makes our country strong, and we will see to it that you have retirement benefits in your old age,’” UMWA President Cecil Roberts said in a news release. “That promise has been kept by Congresses and administrations led by Republicans and Democrats from that day to this one. This Congress and this administration have a responsibility to do so once again. This is a life or death matter for thousands in the coalfields.” Congress is considering the Miners Protection Act to fund the programs. It was approved by the U.S. Senate Finance Committee two weeks ago. As proposed, annual transfers in additional funds would come from unspent money in the Abandoned Mine Land Fund until the benefit programs reach actuarially sound levels. Eligibility for health benefits would be extended to UMWA retirees who’ve lost those benefits following bankruptcy or insolvency of a coal company.

 Health costs may gobble up Social Security benefits: Health care costs could drain your Social Security benefits in retirement, especially if you're a woman. The average woman could spend an estimated 70 percent of her retirement check on health care costs, according to a recent study by the Nationwide Retirement Institute. The average man fares better, but still uses nearly half of his benefits to cover medical expenses. Here's how the Nationwide analysis reached its disturbing estimates: It assumed a woman with a life expectancy of 88 married a man who would live to 85 and they both claimed Social Security at 62, which is the earliest and most popular age to file for retirement benefits, regardless of gender.More than half of elderly married couples and nearly 75 percent single retirees depend on Social Security for the majority of their income in retirement. "Women disproportionately rely on Social Security in retirement," said Nancy Altman, co-director of Social Security Works, which advocates for the expansion of the program. In fact, roughly two-thirds of Social Security beneficiaries age 85 and older are women. In the Nationwide's bleak scenario, the man collects a monthly benefit of $1,543 and the woman collects $1,171 per month. (The average monthly benefit for a retired worker is $1,350, according to the Social Security Administration.) Nationwide projects hefty health costs for the hypothetical couple.The man would pay $214,278 in medical costs in retirement and the woman would pay more than $289,682, because of her longer lifespan. The forecast includes what the couple would have to spend on long-term care at a nursing home or in an assisted living center. Though medical costs often greatly increase toward the end of life, the expenses average out to $776 per month for a man and $928 per month for a woman in Nationwide's estimates.

Democratic Minnesota Gov. Blasts Obamacare: "Affordable Care Act Is No Longer Affordable" -- Soaring Obamacare premiums and declining insurer participation rates in exchanges across the country have been a frequent topic of conversation for us (see "Obamacare On "Verge Of Collapse" As Premiums Set To Soar Again In 2017" and "Stunning Maps Depict Collapse Of Obamacare "Coverage" In 2017").  Now, even early proponents of the "Affordable Care Act" are starting to distance themselves from a policy initiative which is, at this point, a complete and obvious failure.  According to CBS, Democratic Minnesota Governor, Mark Dayton, recently called for changes to the healthcare exchanges in his state saying that "the Affordable Care Act is no longer affordable." “Ultimately I’m not trying to pass the buck here but the reality is the Affordable Care Act is no longer affordable,” Dayton said.Dayton says changes to the program are critical, as he stepped away from one of his signature political platforms. “The Affordable Care Act has many good features to it, it has achieved great success in terms of insuring more people, 20 million people across the country and providing access for people who have pre-existing conditions alike, but it’s got some serious blemishes right now and serious deficiencies,” Dayton said.Premiums for 250,000 Minnesotans, or 5 percent of the population, insured under MNsure will skyrocket by 50 percent or more on some health plans. “I think it’s a good step that the governor is now admitting that most Minnesotans can’t afford this and I think that’s a good first step to us now being able to work together to take some action to fix this so that we can find a solution that will get Minnesotans the health coverage they need at a cost they can afford,”  Of course, these comments come just 1 week after Minnesota Commerce Commissioner, Mike Rothman, posted a letter to the state's website saying that the state succeeded in preserving the exchanges for one more year by agreeing to massive rate hikes but warned they are on the "verge of collapse."  The letter goes on to describe Minnesota's healthcare rate environment as "unsustainable and unfair" and notes that "middle-class Minnesotans" are being "crushed by the heavy burden of these costs."

1.4 Million Americans Who "Like Their Healthcare Plan" Set To Lose Them In 2017 - Remember when Obama ran around the country promising Americans that if they liked their doctors and healthcare plans that they could keep their doctors and healthcare plan?  If not, here is a quick refresher: Despite those promises, according to Bloomberg, at least 1.4 mm people are set to lose their current healthcare plans in 2017 as insurers are pulling out of Obamacare exchanges all over the country.  Meanwhile, the losses could mean that total Obamacare enrollees could actually decline in 2017 if enough people fail to choose new policies.At least 1.4 million people in 32 states will lose the Obamacare plan they have now, according to state officials contacted by Bloomberg. That’s largely caused by Aetna Inc., UnitedHealth Group Inc. and some state or regional insurers quitting the law’s markets for individual coverage.Sign-ups for Obamacare coverage begin next month. Fallout from the quitting insurers has emerged as the latest threat to the law, which is also a major focal point in the U.S. presidential election. While it’s not clear what all the consequences of the departing insurers will be, interviews with regulators and insurance customers suggest that plans will be fewer and more expensive, and may not include the same doctors and hospitals.It may also mean that instead of growing in 2017, Obamacare could shrink. As of March 31, the law covered 11.1 million people; an Oct. 13 S&P Global Ratings report predicted that enrollment next year will range from an 8 percent decline to a 4 percent gain. Per the chart below, nearly 1 million people are set to lose their current healthcare plans in just 5 states.

MACRA Proposed Rule Creates More Problems Than It Solves - Health Affairs - In the heat of political gridlock when it seemed impossible for Congress to pass any laws, the Medicare and CHIP Reauthorization Act, commonly known as MACRA, was passed with overwhelming bipartisan support. MACRA, which was signed into law in April 2015, replaces the older fee-for-service payment models with a quality payment program which rewards value rather than volume. It may be the second most important law to reform the United States’ health care system after the Social Security Amendments which created Medicare and Medicaid in 1965. According to the MACRA rules proposed by Department of Health and Human Services (HHS), by January 2017, clinicians should choose to be a part of either an alternative payment model (APM) or a Merit-based Incentive Payment System (MIPS). Most clinicians would automatically qualify to be a part of MIPS which first assigns a “composite performance score” for each clinician based on four domains of quality, advancing care information, clinical practice improvement activities, and resource use as shown in Figure 1. To calculate this score, only the resource use element is directly measured by the Centers for Medicare and Medicaid Services (CMS) based on submitted Medicare claims, and the other three elements are self-reported by clinicians. In 2019, clinicians who outperform their peers will receive a 4 percent bonus while those who don’t, will face a 4 percent penalty. The bonuses and penalties rise to 5 percent, 7 percent, and 9 percent in the subsequent three years. While HHS had the best intentions in creating MIPS, the proposed rules are so abundant with flaws and weaknesses that it is very difficult to imagine the program could ever be successfully implemented.

Not So Wondrous Drugs? – New Warnings about Severe Adverse Effects of New, Heavily Marketed Drugs for Hepatitis C -- In our April, 2014, post we noted how Sovaldi (sofosbuvir), the new antiviral drug made by Gilead for hepatitis C was touted as a “triumph of of medical technology.”  In that, and subsequent posts we discussed how such claims were not buttressed by much good data from clinical research.  We could find only one published randomized clinical trial of sofosbuvir (and ribavirin), which compared it to the older drug used to treat hepatitis C, peg-interferon (and ribavirin).  At best, the new drug showed about the same ability to eliminate detectable virus from the patients’ blood in the short-term as did the older drug.  The new drug also produced fewer unpleasant side effects, but possibly more severe adverse effects.  Just like all previous known published trials of hepatitis C treatments, this trial of sofosbuvir did not follow patients long enough to determine if the drug had any effect on the serious, but not inevitable long-term complications of hepatitis C infection, severe hepatitis, cirrhosis, liver failure, liver cancer, and premature death. I could find no other published trials of sofosbuvir versus either older drugs or placebo.  Most of the subsequently published, and loudly hyped studies of the drug were of highly selected patients, and did not include control groups which did not receive sofosbuvir.  So the very high short term “cure” rates – which were really rates of elimination of detectable virus from the blood, could have been mainly a function of these studies’ highly selected patient populations. Yet the lack of strong evidence that sofosbuvir, and subsequent competing drugs actually made patients better, i.e., feel better, function better, avoid serious subsequent medical problems, or live longer, did not stop tremendous enthusiasm in the media for the new drug.  Much of it doubtless stemmed from huge marketing and public relations expenditures.  Nor did did the lack of evidence stop Gilead and other drug makers from pricing the new drugs in the stratosphere.  Initially a 12 week course of of Sovaldi cost $84,000.

Tenet Healthcare pays $513 million for fraud and kickbacks, whistleblower awarded $84 million - The FCPA Blog - The FCPA Blog: Hospital chain Tenet Healthcare Corporation and two Atlanta-area subsidiaries will pay over $513 million to resolve criminal charges and civil claims for a scheme to defraud the United States and to pay kickbacks in exchange for patient referrals. In the criminal action, two Tenet subsidiaries -- Atlanta Medical Center Inc. and North Fulton Medical Center Inc. -- agreed to plead guilty to conspiracy to defraud the United States and to pay health care kickbacks and bribes in violation of the Anti-Kickback Statute. The plea agreements still need court approval. In the civil settlement, Tenet agreed to pay $368 million to the federal government and the states of Georgia and South Carolina. The civil settlement resolves claims made in United States ex rel. Williams v. Health Mgmt. Assocs., Tenet Healthcare, et al., a lawsuit filed by Ralph D. Williams. Williams is a Georgia resident and an accountant who worked in the healthcare industry for many years. He filed his lawsuit in federal court in Georgia under the federal and Georgia False Claims Acts. The acts permit whistleblowers to file suit for false claims against the government entities and to share in any recovery. The federal share of the civil settlement is $244 million, the state of Georgia will recover almost $123 million, and the state of South Carolina will recover $892,125. Williams’ share of the combined civil settlement is $84.4 million.

I’m a Doctor. If I Drop Food on the Kitchen Floor, I Still Eat It.  Aaron Carroll - You may have read or heard about the study debunking the five-second rule. It said that no matter how fast you pick up food that falls on the floor, you will pick up bacteria with it.  Our continued focus on this threat has long baffled me. Why are we so worried about the floor? So many other things are more dangerous than that. This most recent study was similar in that it tested a variety of foods, a variety of substances, for various periods. And, like those other studies, this one found that food touching the floor, even for a very short amount of time, could pick up bacteria. There’s no magic period of time that prevents transmission. But even though I know bacteria can accumulate in less than five seconds, I will still eat food that has fallen on my kitchen floor. Why? Because my kitchen floor isn’t really that dirty. Perhaps no one in the United States has spent more time investigating the occurrence of bacteria on public surfaces than Charles Gerba. He’s a professor of microbiology and environmental sciences at the University of Arizona, and he has published many papers on the subject.  In 1998, he and his colleagues investigated how well cleaning products could reduce coliform bacteria counts on household surfaces. As part of that research, they measured various locations in the house before any cleaning. They found that the kitchen floor was likely to harbor, on average, about three colonies per square inch of coliform bacteria (2.75 to be exact). So there are some. But here’s the thing — that’s cleaner than both the refrigerator handle (5.37 colonies per square inch) and the kitchen counter (5.75 colonies per square inch). We spend so much time worrying about what food might have picked up from the floor, but we don’t worry about touching the refrigerator. We also don’t seem as worried about food that touches the counter. But the counter is just as dirty, if not dirtier.

Silicon Valley CEOs are buying biohacking implants off eBay to get ahead - Sometimes succeeding in Silicon Valley means sliding metal sensors under your skin to track the amount of sugar in your blood. That’s what a community of biohackers, coders, and CEOs are doing in a 90-day Biohacker Challenge to see how far they can go to successfully track, tweak, and optimize their minds and bodies. The experiment (of sorts), which began in mid-September, is part of the burgeoning biohacking movement that aims to live a longer, more “enhanced” life, says Geoffrey Woo, co-founder of Nootrobox, the company leading the 90-day challenge. Nootrobox primarily sells substances known as nootropics, also known as “smart drugs,” that claim to enhance cognitive function in a variety of ways. “It is using an engineering mindset and systems approach to manipulate the human body and its performance,” he wrote in a post on the company’s website announcing the 90-day challenge. Woo and co-founder Michael Brandt are a little over a month into their public biohacking odyssey. Each week, they measure everything from blood work biometrics to computer productivity while fine-tuning their “optimal” mix of nootropics, food, and routines. The continuous glucose monitors allow them to record their bodies’ sugar levels every 15 minutes in response to fasting, exercise, sleep, and other interventions. The sensors, such as Abbott’s Freestyle Libre, use a thin metal probe to penetrate the skin, and wirelessly relay data to a small external monitor. Although the devices are not yet legal to be prescribed in the US, they are approved in the European Union and freely available on eBay. In the video below, Woo is shown peeling off the sensor.

 Producing Monsters: The Road to Hell -- In general, the universal prohibition on biological weapons is widely supported, and there is healthy concern over how dual-use technologies—those with both beneficial and dangerous applications—might threaten it. The upcoming Eighth Review Conference of the Biological and Toxin Weapons Convention (BTWC), in November will tackle this concern, as have individual countries. The German Ethics Council issued a 2014 report recommending legal regulation of worrisome dual-use biological research, and in 2016, the US National Science Advisory Board for Biosecurity published recommendations on the risks and benefits of so-called “gain of function” research, which aims to identify how pathogens evolve by forcing genetic changes that sometimes make them more dangerous.  That said, most of the attention has concentrated only on dangers posed by microbiology and novel pathogens. This tight focus risks missing other trends in the life sciences that may threaten the norm against biochemical weapons. Advances in cognitive neuroscience, in particular, might have dangerous implications. While neuroscience, which studies the brain and central nervous system, has enormous potential for good, a subset of neuroscience research is dual-use, with the potential to be applied developing incapacitating agents and interrogation tools. Despite their appeal in modern conflicts—particularly those in which enemies are embedded in civilian populations—such “nonlethal neuroweapons” are unlikely to be nonlethal in practice, and they run contrary to both the BTWC and the Chemical Weapons Convention (CWC). Today, calmatives—agents that render individuals calm and compliant—are seen as potentially useful in riot control and counterinsurgency. In 2003, a National Research Council report noted “the theoretical possibility of peacefully incapacitating combatants/agitators, reducing the need for the violence that is frequently associated with many of the current methods.”

Pregnant Women in America Die More Often Than in Iran - Bloomberg: The rate at which American women are dying from causes related to pregnancy or childbirth is on par with Iran, China, and some nations that made up the Soviet bloc. The difference is that in those countries, the prognosis is for improvement. In America, it’s not. The disturbing trend is a counterpoint to global progress on healthy childbirth, according to a comprehensive new study. More than 275,000 women died worldwide last year in pregnancy, childbirth, or complications from it, most of the deaths preventable. In the U.S. these deaths have increased about 2.7 percent a year since 2000, to 26.4 deaths for every 100,000 live births, or 1,063 total, last year. (Iran has a lower rate and saw 281 maternal deaths in 2015). This puts Americans in the same league as a handful of other developed nations that are also moving backwards, including Greece and Luxembourg. Terrible as this is, there’s plenty of good news in the 2015 Global Burden of Disease, Injuries, and Risk Factors study. The average human life span has increased by 10 years since 1980. A key driver has been decreased deaths from HIV/AIDS and malaria, which fell 33 percent and 37 percent respectively since 2005. And children are becoming less vulnerable to diseases that claim them before the age of five, as the world (despite a lack of progress on newborn mortality rates) halved the death rate of children younger than 5, to 5.8 million annually.  Children and women’s health are just two elements of this encyclopedic scientific review that explains the prevalence of 249 causes of death and 315 diseases and injuries documented globally since 1980. The main study was published on Thursday in the Lancet, with several thick accompanying analyses about women's health and childbirth, healthy life expectancy, behavioral and environmental risks, and child mortality. The work was led by the Institute for Health Metrics and Evaluation at the University of Washington and included 1,870 researchers in 127 countries. It was funded by the Bill & Melinda Gates Foundation. 

 A fiery new report makes a convincing case that Big Soda is the new Big Tobacco -- From 2011 to 2015, PepsiCo and the Coca-Cola company gave money to 96 national health groups, including the American Diabetes Association and the Juvenile Diabetes Research Foundation, and lobbied against 29 public-health bills aimed at improving nutrition. That's according to a report published Monday in the American Journal of Preventive Medicine, which provides another window into the myriad ways in which members of the US food industry have bankrolled public-health initiatives to try to make their products appear less harmful than they are. The report is eerily reminiscent of last month's searing New York Times revelation that an American sugar trade group paid Harvard scientists in the 1960s to publish research portraying sugar as less unhealthy than it actually is.  Public-health experts say Pepsi and Coke's strategy harks back to the days of Big Tobacco.  "First, they attack the science. Then, they fund community groups, promote exercise as a solution, and say they're self-regulated and don't need to be regulated by an outside source," Marion Nestle, a New York University professor of public health and nutrition and the author of the book "Food Politics," told Business Insider. The authors of the most recent report seem to agree. "Lessons can be learned from the history of tobacco companies, which have long given money to sympathetic organizations that deal with domestic abuse, hunger, and minority advancement," they write. "Now, most organizations refuse tobacco money. Perhaps soda companies should be treated similarly."  Over the past two years, the American Beverage Association, the soda industry's main lobby group, has invested millions of dollars fighting laws to tax and label sugary beverages. Last year, Coca-Cola was accused of pumping money into misleading research that championed exercise over dietary changes for health and weight loss. The nutrition nonprofit it funded that was part of those efforts has since disbanded.

Farmed Salmon Delivers Half the Omega-3s of Five Years Ago - We now need to eat two portions of farmed salmon to equal the amount of omega-3 intake that we would have gotten just five years ago, says a study from Stirling University in Scotland. The change appears to be due to a reduction in the amount of ground-up anchovies added to their feed. Salmon farming is only about four decades old, but it is the fastest-growing food production system in the world according to WWF. Globally, about 3.5 million tons are caught or raised each year, and salmon accounts for 17 percent of the global seafood trade. About 70 percent of the world's salmon production is farmed.  We prize salmon for its omega-3 fatty acids. National Oceanic and Atmospheric Administration ( NOAA ) says that consumption of eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA), which are key omega-3s found in seafood, may help to prevent high blood pressure, heart disease, certain types of cancer, clinical depression, anxiety and macular degeneration. Of the salmon consumed in the U.S., half is farm-raised.  The greatest concern, though, centers around interbreeding of farmed and wild salmon . In September, a study by Canada's Department of Fisheries and Oceans found that more than 750,000 salmon have escaped from fish farms in Newfoundland since aquaculture began , and that these fish are breeding with wild salmon and producing offspring. A separate study in Norway found that half the wild salmon tested had genetic material from farmed fish. It's unclear which traits might impose themselves on wild salmon, but farm-raised fish are bred to grow big and to grow fast.   Farm-raised and wild caught salmon contain the same amount of cholesterol, but wild salmon have half the fat of farmed in a typical half-filet serving. Farmed fish also deliver three times the saturated fat as wild. But to feed a growing global population and provide the omega-3s they need, wild fisheries may not be up to the job.

FDA Temporarily Backs Down on Food Control Campaign -- Thanks to large-scale organized pressure from the community food sector, including organizations like the Farm-to-Consumer Legal Defense Fund (FTCLDF), the FDA backed down and has issued a final rule under the so-called “Food Safety Modernization Act” (how’s that for an Orwellian jawbreaker?) which is more reasonable in defining a “retail food establishment” which would be exempt from the most onerous regulations under the Act. Artisan producers didn’t fare as well.To recap the history, prior to the FSMA sufficient laws already existed for the USDA and FDA to effectively regulate the big corporate producers, manufacturers, and retailers who are the source of all significant food outbreaks. But the regulators almost never enforce these laws against these corporations, only against the rising community food sector which is challenging corporate agriculture and food. Nor will the FSMA be used against these big corporate actors. The purpose of the FSMA is to give the FDA much greater discretionary power to attack community food.  We see how craven these regulators are where they’d have to take the offensive and are faced with real opposition. (They’re far more comfortable empowering the corporations’ own campaigns and regurgitating corporate lies.) Of course they won’t give up but are now regrouping. But let this partial victory be a lesson in the need to organize and fight. We’ll need to do far, far more. To be clear, food production and distribution naturally have a local/regional basis. So it follows that an alien central government like that of the US could never conceivably have any legitimate authority over community food. Conversely, the kind of globalized commodity systems which would theoretically come under the purview of such a centralized government are clearly unnatural, irrational, anti-ecological, and themselves have no legitimate basis. Nor would we expect such systems, which are designed to produce commodities, not food, to deliver anything other than low-quality, poisoned, and immorally distributed food with resultant mass hunger, malnutrition, other dietary diseases, environmental diseases like cancer and birth defects, and every kind of environmental and socioeconomic pathology. And that’s exactly what the FDA’s notion of food production brings.

Spoiler Alert - Two million metric tons of food passed through the Port of Los Angeles last year, shipped by nearly 8,000 importers from over 100 countries — nations as far-flung as Bahrain, Mauritania, Cambodia, and Senegal. Thailand beat out China as the top importer at the port — but barely. Chile, Guatemala, and Vietnam round out the top five, with India close behind. And from these countries come every food imaginable (along with some you’ve probably never considered to be food): grapes and granola, cobra heads and desiccated camel, all destined for an American table.  But before it gets there, that food will make its way through a byzantine system of regulations and rules proctored by 15 federal agencies. Those idling 18-wheelers will shuttle most of it to a series of local warehouses, where it will sit while whirring computers and overworked inspectors decide if it warrants scrutiny. Some of it may travel to laboratories as far away as Pittsburgh and New Jersey to be tested. The trucks wait there too, while food scientists pulverize and distill it, looking for pathogens and poisons. Then it’s back to the warehouse, on to a distribution center, and, finally, to a grocery store near you — all part of a process to determine whether this food, which has already traveled thousands of miles and passed through untold numbers of hands, is safe to eat. Making that determination is harder than ever. An estimated 48 million Americans become sick each year because of something they ate. Annually, over 3,000 die because of contaminated food. Both numbers are projected to rise in the coming decade, along with our reliance on imported food. And here’s the irony: A big reason for that increase is that we’ve developed healthier eating habits. On average, we eat 14 percent more fruits and vegetables than we did in 1970. We’re eating beet greens with bee pollen and drinking kale-and-date smoothies. And those foods — which is to say fresh foods — are the very hardest to police, particularly when they come from overseas. The two biggest foodborne illness outbreaks of 2015 were caused by tainted produce (cilantro and cucumbers). The third was from deli items made at a natural food co-op in Idaho. Other large outbreaks were caused by tuna, pork, and salads. “There’s a very slim chance potato chips or snack cakes or any other processed foods are going to make you sick,” says Michael Roberts, executive director of the University of California–Los Angeles’ Resnick Program for Food Law & Policy and author of Food Law in the United States. “The food that causes us the most problems is the food Michael Pollan tells us to eat, like meat and fresh produce.”

America’s Dairy Farmers Dump 43 Million Gallons of Excess Milk - WSJ: Farmers in the U.S. are pouring out tens of millions of gallons of excess milk, amid a massive glut that has slashed prices and has filled warehouses with cheese. More than 43 million gallons’ worth of milk were dumped in fields, manure lagoons or animal feed, or have been lost on truck routes or discarded at plants in the first eight months of 2016, according to data from the U.S. Department of Agriculture. That is enough milk to fill 66 Olympic swimming pools, and the most wasted in at least 16 years of data requested by The Wall Street Journal. Desperate producers are working to find new uses for the excess, like getting more milk into school lunches, and in revamped tacos and Egg McMuffins. But many can’t even afford to transport raw milk to market at current prices, which have plunged 36% on average since prices hit records in 2014. “Everyone has dumped milk, from Minnesota to New England,” said Ken Nobis, head of the Michigan Milk Producers Association. Dairy and meat producers in the U.S. and abroad expanded their operations two years ago in response to a shortage, setting the stage for the current global glut.American farmers are in the process of harvesting record-large corn and soybean crops, and meatpackers are now producing the most ever meat and poultry. As a result, food prices in the U.S. have plummeted and farm incomes this year are headed for their third consecutive drop.  On Tuesday, the USDA pledged to buy about $20 million of cheddar cheese to help struggling dairy farmers, the second time it has intervened in the market in less than three months. The Michigan Milk Producers Association, a farmer-run cooperative, has added shifts at its dairy plants in Ovid and Constantine and bought equipment to handle an additional million pounds of raw milk each day. As the market has softened, the group has donated 83,000 gallons of milk to a food bank. Even so, over the summer, the co-op had to dump a batch of excess skim milk into lagoons of manure because it couldn’t find a trucker to haul it to a plant with spare capacity in Wisconsin. “Any milk disposal is a very difficult decision,” said Mr. Nobis. “No one gets any value whatsoever out of it.”

America’s cheese glut is really getting out of hand - Vox - The United States is currently in the midst of an epic cheese glut — with 1.2 billion pounds of cheese sitting in cold storage. If we wanted to patriotically eat through that surplus, every man, woman, and child would have to grab an extra 3 pounds of cheddar, Swiss, or provolone and start gnawing. (That’s over and above the 36 pounds of cheese per year the average American already eats.)  This cheese surplus has been disastrous for dairy producers and farmers, whose incomes have dropped 35 percent over the past two years as prices have collapsed. To help ease the pain, the US Department of Agriculture offered this week to buy up $20 million worth of cheddar cheese and distribute it to food banks. This is the second such purchase in three months. To understand the cheese glut, we have to go back two years. In 2014, China was growing rapidly, its middle class had more cash to toss around, and people started buying more and more milk (particularly powdered milk) from the United States. Dairy profits here soared, and producers decided to expand, buying more cows and churning out more milk to meet what they hoped was skyrocketing demand. This boom in milk production has been aided by relentless consolidation in the dairy industry.  Economies of scale have driven costs down and bolstered output. On top of that, the average cow produces more milk than ever before, thanks in part to better breeding.But then came the crash. China’s economy has slowed of late, driving global milk demand down. At the same time, the European Union decided to lift domestic caps on milk production, greatly increasing supply. Then Russia slapped sanctions on foreign cheese in retaliation for Western sanctions. Meanwhile, the stronger US dollar meant that American dairy farmers had a tougher time exporting their products.It all added up to a surfeit of dairy at home. America’s dairy farms are expected to produce a record 212 billion pounds of milk this year — and there aren’t nearly enough customers to buy it all. Much of this milk is being sent to cheesemakers, who are making tons of feta, cheddar, and mozzarella and storing it for later, hoping for the best. Even that’s not enough to get rid of all the excess milk, which is highly perishable. Some farmers can’t find any takers and are dumping their milk into nearby lagoons, reports Kelsey Gee of the Wall Street Journal. Others are simply going out of business: 53 dairy farms have already closed in California.

 US farmers seek to double ethanol exports  - The US grain industry aims to double exports of ethanol, volumes that could boost demand for corn and aid a struggling farm economy. The US Grains Council, a non-profit export group, is preparing plans to promote American-made fuel ethanol in countries including Mexico, Japan and India, said Tom Sleight, its president. It comes after the council held a series of workshops on ethanol use in China, according to its annual report. The US, the leading biofuel producer, is on track to export 891m gallons of ethanol this year, according to the Renewable Fuels Association. “Two billion gallons is a short-term goal,” Mr Sleight said in an interview. “We know it’s not going to happen overnight”. Fuel ethanol has been embraced by governments as a way to clean tailpipe exhaust. Widening car ownership in emerging markets has also supported demand. The domestic US market is saturated because most vendors sell petrol with no more than 10 per cent ethanol. Most US ethanol is made from corn, and the amount of corn used by the industry has levelled off at an estimated 5.275bn bushels this year after a furious rise in the previous decade. Exports have been an alternative outlet for refineries. Shipments have been strong even though sales to Europe face an antidumping duty. Countries as diverse as Canada, Brazil and the Philippines have been buying ethanol made in the US Midwest, where a glut of corn has driven down its price. US ethanol refiners are likely to produce more than 15bn gallons in 2016. Christoph Berg, managing director of F O Licht, a research company, said: “If you were really able to double exports, that would help them a lot.” But he added: “This would require a huge leap forward”. An extra 1.1bn gallons of US ethanol demand is equivalent to almost 390m bushels of additional corn demand, based on a typical yield of 2.8 gallons of ethanol per bushel of corn.

"The Ethanol Effect" PBS Documentary is Finally Here -- Big Picture Agriculture by K.M. -Finally, the long awaited documentary about Ethanol, "The Ethanol Effect" is beginning to air on PBS. You can view the whole 56 minute show ONLINE HERE and be among the very first to see it.  It is presented by former Scientific American writer, David Biello. Here is a portion from the documentary about how ethanol harms our health because of air quality, something you're unlikely to hear much about in most media:

 By Any Measure, the Corporate Sector Fails to Deliver Seeds - Here’s yet another piece proving the superior productivity of non-GM conventional agriculture to GM-based, and thus the lack of any agronomic rationale for GM varieties. The article describes the great increase in India’s commodity yields over 60 years of non-GM production. Of course it’s all about industrial, poison-based agriculture for commodity export, not agroecology for food production. (Acre for acre the latter is far more productive in terms of calories and especially nutrition, not to mention health and environmental services, than the former.) And of course the establishment insists that normalizing GM deployment will continue to extend the trendline of increase according to this non-food, commodity measure of “productivity”. But the #1 takeaway is here: It was all done with public research and public money. “Expansion of irrigation coverage too helped in increasing production but it was supported by the development of a number of drought and water-logging resistant varieties of seeds in the country’s public research institutions like ICAR, Indian Agricultural Research Institute (IARI) and state\central agriculture universities.  “These institutions, over the years, developed more than 2,000 seed varieties of cereals, including rice, wheat, maize and millet and over 700 varieties of oilseeds, which led to the phenomenal growth in foodgrain production.” These are the same public agricultural research entities which the IMF, at the US government’s command, targeted for destruction around the world. The record is clear throughout modern history: The private sector is far less productive and efficient than the public sector where it comes to seed research and distribution. This includes the currently dominant “public-private” model. Even the USDA has admitted this for years..

Russia Shifts Focus From Oil To Agriculture - Russia’s biggest industry has been oil production historically, but the country appears to be trying to diversify that by putting more emphasis on agriculture. The former soviet state has been relying on the same tractors and silos for decades due to the apparent lack of opportunity for growth before 2013. With Russia’s increased production of wheat, farmers need to find alternative means of storage. As of this year, Russia has officially surpassed the United States in the exportation of wheat.  Even though Russia has pulled ahead of the United States for wheat exports, the country’s farms are still years behind in regard to equipment. Equipment providers will see an abundance of business from the Russians over the next several years. However, these products aren’t cheap.  The devaluation of the ruble along with government subsidies has proven beneficial to farmers and potentially made agriculture more attractive than crude.  Olam International Ltd is one of the largest exporters of grains from Russia. The firm is becoming increasingly interesting as they invest in more export terminals in the region, like their elevation facility at a port in Azov, on the Black Sea. These types of assets will be extremely useful to companies like Olam as Russia continues to export wheat.  This is quite an accomplishment for Russia since they only reentered the wheat market in 2002, having quit in the late 90’s after the collapse of collective farming. Putin restated last December that his goal for Russia is to be 100 percent self-sufficient on food by 2020. But with attention shifting to farming, what does this mean for big oil? Unfortunately, oil is beginning its decline in Russia. The nation is being faced with the issue of how to maintain the current level of crude production, something impossible without upgrading equipment. The soviet-age oil fields have peaked and will soon be unable to produce effectively.

Coffee and climate change: In Brazil, a disaster is brewing -- A new report says that the world's coffee supply may be in danger owing to climate change. In the world's biggest coffee-producing nation, Brazil, the effects of warming temperatures are already being felt in some communities. You can see the effects in places like Naygney Assu's farm, tucked on a quiet hillside in Espirito Santo state in eastern Brazil. Walking over his coffee field is a noisy experience, because it's desiccated. The leaves from the plants are curled up all over the floor, in rust-colored piles. The plants themselves are completely denuded. "We've had no rain since last December," Assu tells me in Portuguese, "and my well dried up. There was nothing we can do, except wait for rain." But the rain doesn't come. In fact, it's been three years of drought here in Sao Gabriel da Palha. This region is part of Brazil's coffee belt. Farmers here have been growing robusta — a coffee bean used in espressos and instant coffee — since the 1950s. Assu says he doesn't know what to do. "I owe the bank, but look at my crop — I have no way to pay." He's lost 90 percent of his coffee crop. And he is not the only one. Production of robusta this year is down 30 percent in the state. "Coffee depends on a lot of water," says Perseu Perdoná, an agronomist with the local coffee cooperative. And coffee plants are already sensitive to temperature. "Climate change is happening," he tells me, "we can see it. Add to that deforestation, which means the ground can't retain water when it rains." He fears that in the near future, unless something drastically changes, coffee will disappear from this region. "This is affecting the production of robusta," he tells me.

Considering the Coming Megadrought in the American Southwest - Gaius Publius: I’ve written in the past about two of the most climate-vulnerable regions of the U.S., Florida and the American Southwest. (A third region, the Pacific Northwest, is vulnerable, but to a non-climate event, a magnitude 9.0 mega-earthquake.) Here I want to look again to the problems of California and the Southwest.Much of the water that sustains California, southern Nevada, Arizona, and surrounding areas comes from the ever-drying Colorado River. Just as it’s now clear that we’ve passed the tipping point for extreme weather, we’re also very likely passed the tipping point for the long-term habitability of the American Southwest. The report is from NASA; the write-up is from EcoWatch: A study released in Science Advances Wednesday finds strong evidence for severe, long-term droughts afflicting the American Southwest, driven by climate change. A megadrought lasting decades is 99 percent certain to hit the region this century, said scientists from Cornell University, the Lamont-Doherty Earth Observatory of Columbia University and the NASA Goddard Institute for Space Studies.“Historically, megadroughts were extremely rare phenomena occurring only once or twice per millennium,” the report states. “According to our analysis of modeled responses to increased GHGs, these events could become commonplace if climate change goes unabated.”Rising temperatures will combine with decreased rainfall in the Southwest to create droughts that will be worse than the historic “Dust Bowl” of the 20th century and last far longer. The Dust Bowl lasted no longer than eight years, and affected 100 million acres around the Texas and Oklahoma panhandles and adjacent lands in Kansas, Colorado and New Mexico. Dust storms swept through large swaths of former farmland, depositing dust as far east as Chicago, New York and Washington. It is estimated that more than half a million people were made homeless, and some 3.5 million Dust Bowl refugees migrated west, in hopes of finding work. Just a few thoughts. First, a megadrought lasting decades is a once- or twice-in-a-millennium event. That’s once every 500 to 1000 years. The American Southeast had two “once in 500 year” storms in the last two years, and that following “Superstorm Sandy” in 2012. Obviously the frequency is changing, perhaps exponentially. Second, about the time frame, obviously there’s a possibility of a once-in-500-year multi-seasonal rainfall, but that’s not expected, to say the least. Will the region recover from this drought? If it lasts two decades, I think its livability, its habitability is finished. And when people figure that out, they’ll move, perhaps in droves, depending on whether something triggers panic-selling.

Hey California, Why Are You Allowing the Use of Oil Wastewater To Irrigate Our Food? - Would you water your garden with the wastewater from an oil field? No. So why does California allow this practice in industrial agriculture?  A new report by researchers at PSE Healthy Energy, UC Berkeley, Lawrence Berkeley National Laboratory, and the University of the Pacific sheds light on a very troubling practice in the field of Big Ag — the use of oil industry wastewater for irrigating food crops.   “This disturbing scientific report identifies dozens of hazardous chemicals used in oilfields supplying waste fluid to water California food crops and recharge drinking water aquifers. People in the Central Valley could be drinking these oil industry chemicals right now, and current water-testing procedures wouldn’t detect these dangerous substances. Given these shocking findings, California regulators should immediately halt the use of oil-waste fluid in any procedure that could contaminate the water we drink or the food we eat,” said John Fleming, a staff scientist with the Center for Biological Diversity.  More from a press release from the Center:  This report – written by researchers at PSE Healthy Energy, UC Berkeley, Lawrence Berkeley National Laboratory, and the University of the Pacific – shares preliminary findings on the chemical additives used in oil fields that provide produced water that is reused for agricultural irrigation of food crops, livestock watering and recharging aquifers. Oil field produced water has been used to irrigate food crops in the Cawelo Water District since the mid-1990s.  That is where they grow the stuff you most likely eat, including:   99 percent of artichokes, 99 percent of walnuts, 97 percent of kiwis, 97 percent of plums, 95 percent of celery, 95 percent of garlic, 89 percent of cauliflower, 71 percent of spinach, and 69 percent of carrots.  This new report helps shed light on the use of oil and gas wastewater in agriculture and helps to highlight what is a growing problem. In the Gulf of Mexico, fracking wastewater is just dumped in the water untreated. In many places they inject it back into the ground, potentially causing earthquakes. In the Northeast they use it to “salt” the icy roads in winter.  But in California they use it on the crops that you eat.

Samsung's Galaxy Note 7 Recall Is an Environmental Travesty | Motherboard: Lost in the hype about Samsung permanently pulling the plug on its exploding phone is this: The failure of the Galaxy Note 7 is an environmental tragedy, regardless of what Samsung decides will happen to the 2.5 million devices it manufactured. Early Tuesday morning, Samsung announced it has permanently discontinued and stopped promoting the Galaxy Note 7, and has asked its customers to return their devices for a refund or exchange. A Samsung spokesperson told me the phones will not be repaired, refurbished, or resold ever again: “We have a process in place to safely dispose of the phones,” the company said. This sounds reasonable, but the fact is that besides sitting in your nightstand drawer for eternity (a fate that will surely befall some of these phones) or being thrown into a garbage dump or chucked into the bottom of a river, being recycled is the worst thing that can happen to a smartphone. There are two main things to consider here: First, though smartphones weigh less than a pound, it was estimated in 2013 by the Institute of Electrical and Electronics Engineers estimated that it takes roughly 165 pounds of raw mined materials to make the average cell phone, a number that is certainly higher for the Note 7, being both one of the largest and most advanced smartphones phones ever created. Second, much of that mined material is going to be immediately lost. This is because we are terrible at recycling smartphones—of the 50-or-so elements that are in a Galaxy Note 7, we can only recover about a dozen of them through recycling. Lost are most of the rare earth elements, which are generally the most environmentally destructive and human labor-intensive to mine. Benjamin Sprecher, a postdoc studying extraction of rare earth metals in recycling at Leiden University in the Netherlands, told me in an email that “smartphones are not really recycled (the rare earth elements, anyway), so you’d lose almost all the interesting stuff in those smartphones.”

 Mighty Mississippi River faces mounting environmental threats - - The Straight River is becoming warmer and more polluted as farm irrigation rigs multiply along its banks. Sorenson fears that the fish huddling in the cooler deep spots are a stark sign that northern Minnesota’s only naturally producing trout stream is in trouble. And the peril is flowing downstream — into the Mississippi River and across a watershed that covers almost half of Minnesota, signaling a new and rising threat to one of the state’s great natural wonders. Like many others across Minnesota, the great river is heading toward an ecological precipice. In the last five years, the Upper Mississippi watershed has lost about 400 square miles of forests, marshes and grasslands — natural features that cleanse and refresh its water — to agriculture and urban development. That’s an area bigger than Voyageurs National Park and represents the second fastest rate of land conversion in the country, according to one national study. That breathtaking transformation is now endangering the cleanest stretch of America’s greatest river with farm chemicals, depleted groundwater and urban runoff. At this rate, conservationists warn, the Upper Mississippi — a recreational jewel and the source of drinking water for millions of Minnesotans — could become just another polluted river. Here, around Park Rapids, potato fields are replacing forests, and drinking wells show rising levels of nitrate contamination from fertilizers. Along the western edge of the vast watershed, soaring demand for irrigation is depleting sensitive aquifers and rivers that feed the Mississippi.

After 12-Day Rampage, Hurricane Matthew Leaves More Than 1,000 Dead - After a devastating 12-day rampage from the Caribbean to the U.S. Mid-Atlantic, Hurricane Matthew was reclassified as a post-tropical cyclone at 5 a.m. EDT Sunday by the National Hurricane Center (NHC). Matthew wasn't exactly slacking off—its top sustained winds remained 75 mph as of NHC's 2 p.m. Sunday advisory —but it no longer had the warm core required for tropical-cyclone status. At 2 p.m. EDT, Matthew was located about 150 miles east of Cape Hatteras, North Carolina, moving east at 15 mph. After days of computer models suggesting a potential loop back toward Florida, it now appears Matthew will continue eastward and gradually dissipate.   It will be some time before we have a more complete sense of Matthew's toll, but we already know that it is the deadliest hurricane in the Western Hemisphere since 2005. In Haiti, Matthew took at least 1,000 lives and left entire towns across southern Haiti almost completely destroyed . A handful of deaths and significant damage were also reported in Cuba, Jamaica, The Bahamas, Colombia, Saint Vincent and the Grenadines, and the Dominican Republic. After Haiti, it was the U.S. that took the worst of Matthew's wrath. At least 17 U.S. deaths have been reported and insured damage is expected to total at least $4 billion.  Matthew traced a path remarkably similar to the coastline of the Southeast U.S. Although its center stayed within about 50 miles of the coast for more than 36 hours and hundreds of miles, Matthew officially came ashore only briefly as a Category 1 hurricane along the South Carolina and North Carolina coast on Saturday afternoon. Matthew's overall path kept its strongest winds just offshore, with few or no reports of sustained hurricane-force winds along the Southeast U.S. coast. Top wind gusts compiled by included 107 mph at Cape Canaveral, Florida (collected on a tower 54 feet above ground level) and 96 mph at Tybee Island, Georgia.

Hurricane Matthew insured U.S. property losses as much as $6 billion: Insured losses on homes and commercial properties damaged by Hurricane Matthew are likely to be in the billions, but well short of the hefty costs caused by Superstorm Sandy and Hurricane Katrina. Property data firm CoreLogic estimated Saturday that insured losses on residential and commercial properties will be between $4 billion and $6 billion. The estimate covers storm surge and wind damage, which CoreLogic anticipates will account for 90 percent of insurance claims related to the hurricane. Matthew's estimated losses are a fraction of those racked up by Superstorm Sandy, which barreled into the Northeast in 2012, and Hurricane Katrina, which swept through Louisiana and nearby states in 2005. Sandy's insured property losses reached up to $20 billion, while Katrina's hit as high as $40 billion, according to CoreLogic.

Hurricane Matthew: Haiti risks 'real famine', says interim president - BBC News: Haiti's interim president has warned his country risks "real famine" following the "apocalyptic destruction" of Hurricane Matthew. Jocelerme Privert said famine could take hold within three to four months if the situation was not managed properly. It comes as UN Secretary General Ban Ki-moon called for a "massive response" to help the country. The category-four storm is believed to have killed as many as 900 Haitians. It has also wiped towns and villages off the map, destroying tens of thousands of homes, crops and food reserves. Mr Privert said the loss was "amazing", saying food, water and medicine was immediately needed. "But the concern is if we don't take action now for the longer impact... three to four months when the foods stop coming we are going to have a real famine."He described seeing "apocalyptic" destruction. "What I saw with my eyes yesterday will take a lot of effort to work on the reconstruction part of what has been destroyed," he said. Matthew was the strongest hurricane to hit the region in a decade. The UN has launched an emergency appeal for nearly $120m (£97m) in aid to cover the next three months. Speaking to reporters on Monday, Mr Ban said: ""Hundreds have died; at least 1.4 million people need assistance at this time. "Some towns and villages have been almost wiped off the map; crops and food reserves have been destroyed; at least 300 schools have been damaged,"

 After hurricane, chaos lingers in water-logged N. Carolina: (AP) — With floodwaters from Hurricane Matthew on the rise, at least one North Carolina city appeared near chaos Monday, its police station shuttered and sporadic gunfire in the air, and authorities worried that more communities could end up the same way. The storm is gone, but it left behind a water-logged landscape where flooding was expected to persist for the rest of the week. At least three rivers were forecast to reach record levels, some not cresting until Friday. In many areas, the scene resembled a repeat of Hurricane Floyd, which caused $3 billion in damage and destroyed 7,000 homes as it skirted the coast in 1999. Officials were concerned that other cities could suffer the fate of Lumberton, a community of 22,000 people about 80 miles from the ocean. The Rev. Volley Hanson worried that stress from the lack of running water and electricity might push people over the edge. Robeson County, which includes Lumberton, had North Carolina's highest violent crime rate in 2014. "The cash is going to be running out. We've already got street vendors hawking water, Cokes and cigarettes. Cigarettes are at seven bucks a pack," Hanson said. "It's nuts here, and it's going to get worse."

Death toll climbs as floods swamp North Carolina after Hurricane Matthew | Reuters: Flooding in the aftermath of Hurricane Matthew has displaced several thousand people in North Carolina, and authorities were helping more evacuate on Tuesday as swollen rivers threatened a wide swath of the state. Governor Pat McCrory warned of "extremely dangerous" conditions in the coming days in central and eastern North Carolina, where several rivers were at record or near-record levels. Matthew, the most powerful Atlantic storm since 2007, killed at least 1,000 people in Haiti last week before barreling up the U.S. southeastern coast and causing at least 30 deaths in Florida, Georgia and the Carolinas. McCrory's office said four additional deaths were confirmed on Tuesday in North Carolina, raising the death toll in the state to 18. One person was reported as missing. An additional U.S. death occurred on Monday night in Lumberton, North Carolina, where officials said a highway patrol officer fatally shot a man who became hostile and flashed a handgun during search-and-rescue efforts in fast-running floodwater. Nearly 4,000 people have taken refuge in North Carolina shelters, including about 1,200 people in the hard-hit Lumberton area, where the Lumber River had crested at almost 4 feet (1.2 meters) above the prior record set in 2004 after Hurricane Frances.Matthew dumped more than a foot (30 cm) of rain in areas of North Carolina already soaked from heavy September rainfall. It has triggered the worst flooding in the state since Hurricane Floyd in September 1999, the National Weather Service said. That storm caused devastating floods in North Carolina, resulting in 35 deaths, 7,000 destroyed homes and more than $3 billion in damages in the state. In Matthew's wake, officials are monitoring a number of overtopped or breaching dams in addition to the threat of inland river flooding, the governor's office said. McCrory warned that the Tar River was expected to crest on Wednesday in Greenville, where a mandatory evacuation order is already in place. Officials remain concerned about Kinston, where significant flooding was already occurring from the Neuse River, which is expected to crest at about 27 feet (8 meters) on Saturday, just shy of the Floyd record.

Millions of Chickens Feared Dead at Factory Farms in Wake of Hurricane Matthew -- Flooding across North Carolina continues in the aftermath of Hurricane Matthew and Gov. McCrory said some rivers are still rising. McCrory also warned that conditions in central and eastern parts of the state remain "extremely dangerous."   After surveying the damage, environmentalists are expressing concerns after they found flooding at factory farms and coal ash sites fearing toxins could spread through miles of waterways.  The Washington Post reports "at least tens of thousands of chickens, hogs and other livestock are feared dead in floodwaters that washed over factory farms and towns in eastern North Carolina following the storm."  According to Donna Lisenby of Waterkeeper Alliance , who is documenting the record-setting environmental impacts in the wake of Hurricane Matthew, "There are tens of thousands of dead animals who remained locked in buildings while operators ignored dire flood warnings and left them to die."  Environmental organizations and government agencies surveying areas in Cumberland and Robinson counties found at least a half-dozen poultry houses completely flooded.  In a briefing Tuesday morning, McCrory said "a lot of poultry and animals—a lot, thousands" already had drowned, the Washington Post reported.  Following a helicopter tour late Tuesday afternoon, Rick Dove of Waterkeeper Alliance told The Washington Post he estimated the number of dead chickens "is probably in the millions" and that he saw thousands of floating carcasses.  In addition to concerns over the potential devastating impacts flooded factory farms could have on the environment and public health, Waterkeeper Alliance is worried that rising water at the Neuse and Cape Fear rivers will continue to breach the coal ash pond dams at the state's power plants and spread toxins throughout the region. These two rivers have the highest concentration of massive industrial sites with waste ponds larger than football stadiums.

Hurricane Matthew May Flood North Carolina with Pig Poop -- Where there is pig, there is poop. In North Carolina, the country’s second biggest pork-producing state, feces from industrial pig farms lie in open-pit lagoons. On a normal day, the lagoons stink and emit toxic fumes. On days like today, as floodwaters from Hurricane Matthew continue to rise, the lagoons pose an even bigger danger: If the flood breaches the lagoons, all the feces would come gushing out. It’s happened before. In 1999, Hurricane Floyd dumped 19 inches of rain on North Carolina. The lagoons overflowed. “Feces and urine soaked the terrain and flowed into rivers from the overburdened waste pits,” wrote the New York Times back in 1999. “The storm killed more than two million turkeys, chickens and livestock in the region, and waste from the farms is expected to keep leaching into the water supply until next spring.” The same thing happened in 1998 (Hurricane Bonnie) and 1996 (Hurricane Fran). Matthew could do just as much damage; the worst is still to come. Flooding after a hurricane can be a slow-moving, if predictable, affair. Rainwater collects into streams that feed into tributaries that feed into rivers, and several days later, all the rainfall over hundreds of square miles is flowing down one swollen river. Post-Matthew, rivers in North Carolina are not expected to crest until as late as Friday or Saturday. Thousands of chicken and pigs have already drowned in their barns in North Carolina. So far, Travis Graves of Sound Rivers, an environmental nonprofit in North Carolina, says he has seen a couple lagoons breached on aerial flights near the Neuse River. After Hurricane Floyd, the state bought out some farms in flood-prone places—to close their lagoons and prevent fecal floods in the event of future hurricanes—but plenty of lagoons remain in the area. “We’ve literally got hundreds of lagoons on the eastern coastal plan,” says Graves. The southeastern corner of North Carolina, where pig farms are concentrated, is unfortunately also the area hit hardest in the latest hurricane.

Billions of Gallons of Animal Waste From Factory Farms Poses Health Risks in Wake of Hurricane Matthew (pictures) Reports emerging Thursday of dead farm animals and breached manure pits highlight a health risk that will linger long after Hurricane Matthew 's floodwaters recede: The threat of pollution from the billions of gallons of animal waste stored at North Carolina's loosely regulated factory farms .  The immensity of the ongoing threat to human health and the environment across a coastal plain clustered with factory farms is demonstrated by the fact that just four counties in the severely flooded lower Cape Fear River basin are home to 36.5 million farm animals, producing more than 40 billion pounds of animal waste annually, according to research by the Center for Biological Diversity.  "Our hearts go out to the tens of thousands of North Carolinians whose lives have been turned upside down by the horrible flooding ," said Hannah Connor, a Center for Biological Diversity attorney specializing in harms caused by factory farming . "Sadly they've been put at additional long-term risk by the threat of pollution of their waterways and groundwater from billions of gallons of largely untreated animal waste at these industrial operations."  Even during more routine weather events, the unchecked growth of massive, poorly regulated factory farms has left the region's high water table and numerous waterways at constant risk of pollution from the industrial hog and poultry production operations that rely on waste management and disposal systems that are highly susceptible to harmful runoff and spills.  The escalating environmental risks posed by poorly regulated animal waste will be highlighted in a forthcoming report from the center identifying the 10 areas across the nation where factory farms produce the greatest amounts of sewage—most of it virtually untreated.

Duke Energy Cooling Pond Dam Collapses in Wake of Hurricane Matthew Flooding [This breaking news is an update to a post earlier today on EcoWatch: Millions of Chickens Feared Dead at Factory Farms in Wake of Hurricane Matthew Waterkeeper Alliance and Upper Neuse Riverkeeper are responding to and documenting the breach of a 1.2-billion-gallon cooling pond dam at Duke Energy's H.F. Lee plant.  The breach occurred today just minutes after Duke Energy issued a statement claiming that the "Ash basin and cooling pond dams across the state continue to operate safely; in fact, we've been pleased with their good performance during the historic flooding Hurricane Matthew brought to eastern North Carolina."  Pete Harrison, staff attorney at Waterkeeper Alliance, and Matthew Starr, Upper Neuse Riverkeeper, released the following statement:  "When families are being threatened by some of the worst flooding in North Carolina's history, they should not also have to worry about Duke Energy's dams collapsing.  "This failure likely happened because the river has begun to recede, which is when structural problems often develop. Like so many of Duke Energy's coal ash ponds across the state, the cooling pond at Lee has a long history of structural problems—these are disasters waiting to happen.   "Minutes before the dam collapsed on the cooling pond, Duke Energy issued a statement declaring it was operating safely. Duke continues to claim the dam of a 120-acre coal ash pond at Lee is operating safely, even though the river has only begun to recede. The same ash pond suffered extensive damage after flooding caused by Hurricane Floyd in 1999. We remain very concerned about the integrity of the ash pond dams at Lee as the river recedes over the next week.  "It has been more than two years since the Dan River disaster, and Duke's coal ash continues to sit behind rickety dams on the banks of flood-prone rivers all across the state. Three ash ponds at the Lee plant, totaling 160 acres, have been completely submerged since Sunday."

Duke Energy said a break has been found in a cooling water pond at the HF Lee power plant in Goldsoboro | The Charlotte Observer: Duke Energy says a 50-foot break has been found in an earthen wall around a 545-acre cooling water pond at its retired H.F. Lee power plant in Goldsboro. Water from the flooded Neuse River is flowing into the pond through a spillway, Duke said, and is now flowing out through the crack. Duke said it expects the break to add less than an inch to the already-elevated river level. The actively-operated ash pond at Lee is not affected, it said, but the Neuse has flowed across three inactive ponds.Two environmental advocates, the Waterkeeper Alliance and Upper Neuse Riverkeeper, said the ash ponds have been submerged since Sunday. They said breaches are most likely as water recedes, as it is beginning to do Wednesday. “We remain very concerned about the integrity of the ash pond dams at Lee as the river recedes over the next week,” they said in a statement. Duke announced the break at Lee two hours after saying in a release that “ash basin and cooling pond dams across the state continue to operate safely.” In that release, Duke accused environmental advocates of trying to mislead the public about the safety of Lee’s ash ponds. The U.S. Geological Survey said peak streamflow records have been broken for at least 14 sites in North Carolina, including the Neuse River, after heavy rainfall from Hurricane Matthew and rains before the weekend storm.

Duke Energy 'Asleep at the Switch,' Takes News Station to Inform Them of Dam Breach - The embarrassment continues for Duke Energy who is dealing with the breach of a 1.2-billion-gallon cooling pond dam at its H.F. Lee plant due to flooding from Hurricane Matthew . It all began Wednesday morning when Duke Energy issued a statement claiming that the "ash basin and cooling pond dams across the state continue to operate safely," but then helicopter footage from Raleigh's local television station WRAL showed that one of the dams had been breached. In the statement, Duke Energy also attacked Waterkeeper Alliance for raising what Duke consideredinaccurate and inappropriate concerns about the safety of coal ash ponds in the wake of Matthew.On Thursday, Duke spokeswoman Erin Culbert confirmed to the Charlotte Business Journal that the company found out about the breach after WRAL contacted Duke about a half-hour after their statement came out and shared its video . Culbert said a Duke inspection crew had flown over the area earlier in the morning and, at the time, the dam was intact and showed no signs of stress. After they saw the video, the company put out an update acknowledging the damage at the dam.  Donna Lisenby of Waterkeeper Alliance said this incident proves Duke Energy was "asleep at the switch when it was supposed to be monitoring the safety of dams at the H.F. Lee facility during record setting floods." "They weren't aware of a 50-foot wide breach in the cooling pond dam until notified by a TV crew. How is it possible for a company with helicopters actively flying over dams and hundreds of engineers to miss a 50-foot-wide breach? Apparently, one small WRAL news crew is more competent and better at monitoring the safety and integrity of Duke Energy dams than all the hundreds of Duke Energy employees and contractors combined," Lisenby exclaimed.

Drownings push hurricane death toll to 19 in flooded North Carolina | Reuters: Rivers swollen by rainfall from Hurricane Matthew rose dangerously higher in North Carolina on Wednesday, prompting officials to go door to door urging residents to leave as a wide swath of the state faced its worst flooding in 17 years. Floodwaters have swamped areas across the central and eastern part of the state, where drownings in recent days have brought the death toll to 19. That figure represents more than half of the deaths in the U.S. Southeast linked to the fierce Atlantic storm, which killed around 1,000 people in Haiti and displaced hundreds of thousands as it tore through the Caribbean last week. Matthew caused an estimated $10 billion in total U.S. property losses, about $5 billion of which are insured, according to a preliminary estimate by Goldman Sachs. The damages continue to mount in North Carolina. Flooding has killed up to 5 million poultry birds, most of them chickens, in a blow to the local economy, said North Carolina Department of Environmental Quality Secretary Donald van der Vaart. The floodwaters have forced more than 3,800 residents to flee to shelters, closed down stretches of major interstate highways and shuttered 34 school systems, North Carolina Governor Pat McCrory told reporters in Raleigh. Emergency officials rescued dozens of people on Wednesday from flooded homes in areas including Robeson and Pender counties. There were no official estimates as to the number of people and homes still in harm's way in the state.

Blue skies in N.C. – but the worst flooding is yet to come: The sun has been shining in the blue skies over North Carolina for days since Hurricane Matthew roared across the Atlantic and slammed into the Southeast coast, but for some areas the storm's worst is yet to come. Matthew dumped up to 18 inches of rain in central and eastern North Carolina last week. The rain and runoff poured into the state's rivers that are now rushing toward the coast, leaving destruction in their wake. More flooding and evacuations are on the way, Gov. Pat McCrory warned Wednesday. "This was a huge event," National Weather Service hydrologist Todd Hamill said of Matthew and its collateral damage. "This isn't just going to go away this weekend. There is a lot of water out there, and it will take time for communities to recover." Stretches of I-95 and I-40 remain swamped and closed to traffic. More than 300,000 North Carolinians are without power, and 3,800 were in shelters Wednesday. Clean water is a problem for tens of thousands. Thirty-four schools systems are closed, and "our whole court system is paralyzed," McCrory said. "It's almost like a surreal environment because since Monday we have had Carolina-blue skies," McCrory marveled. "While we are having beautiful days, people are suffering." Some of the worst flooding has rocked Lumberton, a city of about 20,000 people about 80 miles from the Atlantic Ocean, after the Lumber River smashed its crest record by 4 feet. Helicopters swept up residents from rooftops while rescue boats motored down flooded streets to liberate residents stranded in swamped homes. On Wednesday, the Neuse River flooded Goldsboro and the Tar River spilled into Princeville. Both cities had been under at least partial evacuation orders. In Greenville, 25 miles downriver from Princeville, thousands of residents were urged to evacuate ahead of the Tar River's crest late Thursday. "Water will overflow into the city, all the major roads will become impassable," Hamill warned. On Saturday, the Neuse River is forecast to set a record when it crests in Kinston.

A flood disaster in N.C.: Satellite photos before and after Hurricane Matthew Washington Post (Oct 14) The flooding in North Carolina hasn’t ended — far from it. Water will continue above flood stage in many cities and towns through next week, and we’re finally getting a chance to see exactly how much these rivers have grown since Hurricane Matthew swept through on Saturday.

Historic town swamped, 22 dead in North Carolina flooding: (Reuters) - Floodwaters inundated the historic black town of Princeville, North Carolina, on Thursday, leaving homes submerged to their roof lines as the state's death toll in the aftermath of Hurricane Matthew climbed to 22. Flooding from the Tar River had been expected in Princeville, which was founded in 1885 and believed to be the oldest U.S. town incorporated by freed slaves, and most of its 2,000 residents evacuated. North Carolina Governor Pat McCrory described a dramatic rise in the water level in the town, long been plagued by flooding and devastated by floods after Hurricane Floyd in 1999. Areas that had about a foot of water on Thursday morning were covered in up to 12 feet by afternoon, he said. "Princeville is basically under water at this time," McCrory told a news conference after flying over the town. "You gotta see it to believe it." The governor praised the town's residents for heeding evacuation orders, saying no one there had died. However, McCrory announced two additional fatalities after the storm death toll rose to 20 late on Wednesday. The latest victims included someone who drowned in Lenoir County after driving around a barricade for a washed-out roadway. Most of the state's deaths from the hurricane have been drownings, he said. "Stay off the roads," McCrory said. "Stay out of the water." More than 30 deaths in the United States have been blamed on Matthew, with a fourth death announced in South Carolina by that state's governor on Thursday. Before hitting the southeast U.S. coast, the fierce storm killed around 1,000 people on its rampage through Haiti last week.

Cholera In Haiti On The Rise After Hurricane Matthew; What To Know About Relief Efforts: Last week, Haiti was devastated by Hurricane Matthew, which killed at least 1,000 people and left many more homeless. Now, the Caribbean nation has a new threat, a cholera outbreak spurred by the recent natural disaster. According to Christian Aid, the situation in Haiti is now critical, but unfortunately, disease outbreaks such as these are extremely common after natural disasters. On Sunday morning there were 39 cases of cholera at the country's Port-a-Piment hospital, and by early afternoon, there were nearly 60, and four people had died of the disease, Sky News reported. Health experts expect this number to continue to rise as the serious flooding and water shortages brought on by the hurricane have drastically increased the transmission of this water-borne illness.According to the World Health Organization, the association of water-borne illnesses and natural disasters is well known. Cholera is an intestinal infection caused by the bacteria Vibrio cholerae. It spreads through water, usually when the feces of an individual infected with cholera contaminate a water system. For this reason, it is common in areas with inadequate water treatment, poor sanitation, and inadequate hygiene — all of which are common in Haiti. The hurricane has not only caused flooding, which increased the likeliness that an individual would come in contact with contaminated water, but it also cut off water sources, meaning that some people have no choice but to drink and bathe in contaminated water. According to the Centers for Disease control and Prevention, cholera infections can range from mild to severe, and the bacteria causes diarrhea, vomiting, and rapid dehydration. Without treatment, death can occur quickly.  While epidemics are known to occur after natural disasters, according to a 2007 study on the subject, the risk factors for disease following disaster are more highly influenced by factors such as the availability of safe water and sanitation facilities, the degree of crowding, the underlying health status of the population, and the availability of healthcare services. For this reason, these outbreaks are far more common in poor, less industrialized areas. According to eyewitness reports in Haiti, bodies can been seen floating down the river, and many survivors are currently without food, water, and shelter, Sky News reported. For now, the country is relying on foreign aid support to help them pull through this devastating situation. The country is in need of help, but news reports warn that if you are to donate, its best to send money to "Haitan-led" organizations, rather than foreign aid groups, such as The Red Cross, The Washington Post reported. Local organizations are better able to mobilize quickly and more effectively than foreign aid groups.

Subsidizing Disaster | The American Conservative - Sometimes it seems like everything is underwater. In Galveston, Texas, sea levels have risen by more than a foot since 1983. So-called “superstorms” like Hurricanes Sandy and Katrina have caused hundreds of billions in damage and lost economic output. While the media are quick to pin the blame for these events on climate change—and some experts do believe, for example, that higher temperatures are providing “fuel” for hurricanes in the North Atlantic—both the Intergovernmental Panel on Climate Change and the National Oceanic and Atmospheric Administration have been reluctant to endorse such claims. But if that sounds reassuring, it shouldn’t. Climate change is expected to increase storm intensity over the long term, and sea-level rise will leave coastal areas more vulnerable even to ordinary storms. And the IPCC did find an increase in damage from storms—concluding that “Economic growth, including greater concentrations of people and wealth in periled areas and rising insurance penetration, is the most important driver of increasing losses.” In other words, storms are doing more damage not because they are more powerful but because more people are living in storm-prone areas. Fortunately, there’s something policymakers can do to reduce the damage: they can stop subsidizing population growth in high-risk areas. About one-third of Americans—more than 100 million people—now live in low-lying coastal regions. Analysis by the Risky Business Project forecasts that between $48.2 billion and $68.7 billion worth of existing coastal property in the Southeast alone will be below sea level by 2050. Parts of Louisiana are expected to be at least 4.3 feet below sea level by the end of the century. It may seem odd for people to be moving into these vulnerable areas. But one major explanation for this trend is simple: government is paying for it.

Japan sees 60 percent chance of La Nina continuing through winter | Reuters: Japan's weather bureau said on Tuesday that it estimated that a La Nina weather pattern has emerged and that there was a 60 percent possibility that the phenomenon would last through the winter months December to February. But there was a 40 percent chance that it would return to normal conditions during the winter, it added. La Nina, which tends to occur unpredictably every two to seven years, is characterized by unusually cold temperatures in the equatorial Pacific Ocean. The outlook is in contrast to a U.S. government weather forecast, which said last month that La Nina conditions were no longer likely to develop during the Northern Hemisphere fall and winter of 2016/17, saying neutral conditions were more likely.

Titanic-style disaster warning over luxury Arctic cruises: Experts are warning there could be a Titanic-style disaster and serious environmental damage unless controls are brought in for cruise ships in the Arctic Ocean. The first luxury ship sailed through the Arctic's remote Northwest Passage this summer, prompting fears more could follow suit before safety concerns have been addressed. Some 1,700 passengers paid a minimum of $19,755 (£15,961) for a berth on the Crystal Serenity, which left Anchorage in Alaska on 15 August. It cruised through the Passage along the northern coast of North America, before docking in New York a month later. There is no port on the journey between Alaska and Greenland.The ship, owned by American operator Crystal Cruises, traversed an isolated route first navigated by Norwegian explorer Roald Amundsen in 1903. Although climate change means the region is iceberg free in summer, two shipping executives fear a disaster unless guidelines are brought in to protect passengers and the environment. Tero Vauraste, boss of Finnish shipping firm Arctia, warned there would be little authorities could do if a ship got into distress there, due to the lack of infrastructure. "The Northwest Passage is thousands and thousands of nautical miles with absolutely nothing," he said. "Navigation in icy waters is made more difficult by poor satellite imagery. An ice field might move at a speed of 4-5 knots, but a ship will receive a satellite picture of it that is 10-20 hours old. "There is a need to discuss possible regulation … so we must do everything we can do to prevent this." A problem with a ship in the Arctic could also be especially serious for the environment, the experts say. Cruise ships usually use a type of fuel known as "heavy oil" that takes longer to break down in the event of a spill in cold conditions and which can get trapped under the ice. Although Crystal Serenity's operator said the ship did not use such fuel during its trip, Daniel Skjeldam, CEO of cruise ship operator Hurtigruten, fears a tragedy unless regulations are tightened.

Massive Iceberg Breaks Off Glacier in 'Biggest Calving Event in North America' in 33 Years -- A nearly three-quarter-square-mile chunk of ice broke off the Porcupine Glacier in British Columbia this summer, but it was only detected recently when the National Aeronautics and Space Administration posted a satellite image of the area. Glaciologist Mauri Pelto called it "the biggest calving event in North America" that he has ever seen.  The Porcupine Glacier, a 12-mile-long tongue of an ice field in the Hoodoo Mountains of Northern British Columbia, has been studied for many years. From 1985 to 2005, researchers saw a reduction of 0.3 percent a year. The glacier has also been thinning, at a rate of about 2.5 inches per year. As it melts, it grows a lake at the end of the glacier.  "The volume loss has been speeding up in these glaciers," Pelto told The Globe and Mail.  The Landsat 8 satellite passed over Porcupine Glacier on Aug. 27 revealing the breakaway ice as compared to an image made two days earlier. Dr. Pelto, who has been analyzing satellite imagery of the area's glaciers since the 1980s, said the Porcupine Glacier event is part of a broader trend in which glaciers are retreating rapidly. This summer's sudden calving event shrunk the glacier back a full mile.  "Without the images, we would just have the isolated point measurements of ground truth at specific times," Pelto said.   This calving event would have been unlike those often seen in Alaska , where a large section of ice crashes dramatically into the sea. The Porcupine Glacier features a low slope, so the iceberg would have simply slid into the lake.  "It would have been more like if you're pushing off from the shore in a canoe. It didn't break off and fall in," Pelto explained.

 Greenland is melting from above and below — and scientists say they’re connected - There were no scientists around circa 11,000 years ago, when the great Laurentide Ice Sheet, which once covered much of present day North America, began to collapse in numerous stages and eventually dwindled into a collection of much smaller ice caps across Alaska and Canada, raising seas by tens of feet. Today, though, scientists studying the ice sheet covering Greenland — which survived when the Laurentide Ice Sheet didn’t — are watching something that may be highly analogous. And this time, they’re taking measurements. As a result, what is coming into focus is that there appears to be a crucial interaction between ice melting on an ice sheet’s surface, forming into pools and lakes, and ice falling directly into the ocean where glaciers, extending out from the ice sheet’s center, terminate in often extremely deep waters. But precisely how they work together — and how much they could speed Greenland’s melt — is only beginning to reveal itself. And they do so by studying two apparently connected phenomena: The formation of sometimes vast lakes of meltwater on the ice sheet’s surface, and the release of huge “plumes” of meltwater beneath outlet glaciers that themselves are mostly submerged in the ocean. One of the most remarkable features of Greenland’s melting — and this is probably true of all ice sheets — is the formation of what scientists term “supraglacial lakes” on its surface. In Greenland, these lakes can be very large — with an area of 2 square miles in one case — and can also suddenly disappear, draining down into the depths of the ice sheet below. That’s very bad, because researchers suspect that this drainage has what they often refer to as a lubricating effect on the bottom of the ice sheet, helping it slide toward the sea..

SAR #16285  Seriously. -  On October 7th, The Telegraph wrote a particularly misleading article on the continuing retreat of Arctic Ice cover, with a seriously misleading headline - Experts said Arctic sea ice would melt entirely by Sept '16... It was picked up and bandied about by Drudge, among others, as a supposed refutation of global warming.  The “experts' were actually just Peter Wadhams, an Arctic Ice expert at Cambridge University who had given interviews on the September 1st publication of A Farewell to Ice - his detailed but highly readable account of the science involved in the demise of Arctic ice and the rather nasty things that will follow. After discussing the science and the trend of Arctic Ice cover, he did not say that the ice would be gone by 2016 but that “a Blue Ocean Event may well happen earlier than the trend, e.g. in September 2017. But more likely at 2022 and certainly by 2027.”  Was the Arctic ice-free this September? No, it was tied for the second lowest extent in recorded history at 4.7 million square kilometers – just 54% of the September average in the 1980's. And the ice is now just 1.9 meters thick instead of the 3.64 meters back in 1980. So there's less of less.The National Snow and Ice Data projects there to be no ice by about 2038. But to climate scientists, 'no Arctic ice” means less than 1 million square kilometers, and that date will certainly show up by 2030Why have I taken the time to investigate this and then bother you with it?   Because the 2014 Intergovernmental Panel on Climate Change Fifth Assessment Report did not. The IPCC does not factor in any warming from the decreased albedo – ice and snow reflect back into space about 90% of the sun's incoming radiation, dark open ocean water reflects back only abut 20%. That change in albedo has the same effect as “adding 20 years of CO2 emissions.”  Nor does their latest report address the methane release that a warming Arctic guaranteesAnother feedback is water vapor. A warmer atmosphere carries more water vapor. Since water vapor is a potent greenhouse gas, this further accelerates warming over the Arctic.  These feedback loops will greatly increase the warming of not just the Arctic, but of the world. Quite possibly to unlivable levels, possibly long before 2100.  Sleep well.

Record Warmth Helps Shrink U.S. Carbon Emissions -- As the first half of 2016 blew away temperature records, it also blew away some carbon dioxide emissions from burning fossil fuels in the U.S., a new U.S. Department of Energy report shows. Energy related carbon dioxide emissions hit their lowest point since 1991 during the first six months of 2016 because of mild weather, declining coal use and increased use of wind, solar and hydropower. By the end of the year, 2016 is expected to see the lowest level of energy related carbon emissions of any full year since 1992, according to the report, released Wednesday. Carbon emissions from generating electricity, mostly at coal-fired power plants, are the largest single contributor of greenhouse gas emissions driving climate change. U.S. climate policies, such as the Obama administration’s Clean Power Plan, are encouraging utilities to shift away from coal as a way to cut greenhouse gas emissions. Countries that signed the Paris Climate Agreement are trying to limit emissions to prevent global warming from exceeding 2°C (3.6°F) above pre-industrial levels.

Just How Hard Is It To Cut US Greenhouse Gases? -- It isn’t easy to diet and it may be even harder to reduce the nation’s greenhouse gas emissions (GHGs). A new study from Lawrence Berkeley Labs, published in Nature Climate Change, makes that abundantly clear. It argues that after implementing the administration’s current and proposed policies, the U.S. greenhouse gas emissions will miss the 2025 goal by 20 percent. Roughly, the USA now emits 7 billion metric tons of greenhouse gases per year. The plan is to get the num-ber down to about 5 billion metric tons in 2025. The Environmental Protection Agency’s Clean Power Plant initiative could reduce emissions by a substan-tial 240 million metric tons if it’s not overturned by the courts. This constitutes a big piece of the package. The Berkeley researchers then looked for additional reductions in GHGs. They identified 121 million metric tons fewer of GHG emissions by restricting methane emissions (which are greater than previously thought), 67 million from changes in refrigerator chemicals and 29 million from efficiency measures. That still does not get us even close to attaining the 2 billion metric tons of GHG reductions targeted by our government. Even a more coal-restrictive stance by the EPA might “only” reduce GHGs by an estimated 407 million tons. That still leaves a big gap.  Electricity production in the U.S. accounts for roughly 30 percent of the nation’s annual greenhouse gas emission “budget”, about 2.1 billion tons. Existing and enhanced EPA restrictions would reduce that number to about 1.5 billion tons. Assuming the new data is correct, electric power generators may see increasing pressures for emissions reductions. The industry is just too big a piece of the nation’s carbon footprint. To us, the implications are an accelerated capital replacement cycle, more efforts at carbon capture and sequestration and higher electricity prices.  These pressures are likely to occur as sales growth in much of the electric utility industry has been flattish in recent years. An added push for more renewables, due to a perceived shortfall in efforts to reduce greenhouse gas emissions, could “crowd out” existing fossil fueled generation. This is already happening in Texas where a temporary abundance of wind power displaces fossil and nuclear in the electric grid. Their solution? Build more transmission and move power from West Texas to cities like Dallas further east. In California, solar power can displace considerable fossil resources until demand peaks every evening. It’s not that electric companies can’t adjust to this. But the systems were never built to compete on a price basis. They were strictly a cost plus operation and fully regulated to boot. Now they are forced to compete in wholesale power markets against sellers with zero fuel costs. They can’t.

 Explainer: Paris Agreement on climate change to ‘enter into force’ -- The Paris Agreement will formally come into force next month, legally binding countries that have ratified the deal to act on the pledges made last year. This includes a commitment by every country to prepare increasingly ambitious pledges to tackle greenhouse gas emissions every five years, known as Nationally Determined Contributions.  There were two thresholds that had to be crossed before the deal could come into force: at least 55 countries covering at least 55% of global emissions had to ratify the deal. The first of these thresholds was passed on 21 September. As of today, 74 countries have ratified the deal. The EU’s fast-tracked ratification, which concluded on 4 October with the European Parliament’s vote in favour, has now pushed the deal over the second threshold.  The deal won’t come into force instantly. The Paris Agreement stipulates that this will happen 30 days after both the thresholds have been crossed. The UN says this will be on 4 November. But it does mean that it will be in force before countries meet again for their first major UN climate meeting since Paris — and before the US elections on the 8 November.

India under pressure on HFCs as world seeks third climate accord | Reuters: India will face pressure to speed up its plans for cutting greenhouse gases used in refrigerators, air conditioning and aerosols when governments meet this week to hammer out what would be a third key deal to limit climate change in a month. About 150 nations meet in Rwanda, from Oct. 10-14 to try to agree a phase down of factory-made hydrofluorocarbon (HFC) gases. U.S. Secretary of State John Kerry will be among those attending. A quick phase-down of HFCs could be a big contribution to slow climate change, avoiding perhaps 0.5 degree Celsius (0.9 Fahrenheit) of a projected rise in average temperatures by 2100, scientists say. But India wants a peak in poor nations' rising emissions only in 2031, to give industries time to adapt. More than 100 other nations including the United States, the European Union and African states, favor a peak in 2021. "It really does matter how early the agreement kicks in," said Jake Schmidt, of the U.S. Natural Resources Defense Council, which reckons India's proposal would add the equivalent of almost a year of global carbon emissions to the atmosphere. "We must get enough time before the phasing out period starts. We are very clear," Indian Environment Minister Anil Madhav Dave said on Oct. 1, according to the Times of India.Use of HFCs, which can be 10,000 times more powerful than carbon dioxide as greenhouse gases, is already declining in many rich nations.

Emerging climate accord could push A/C out of sweltering India’s reach — A thrill goes down Lane 12, C Block, Kamalpur every time another working-class family brings home its first air-conditioner. Switched on for a few hours, usually to cool a room where the whole family sleeps, it transforms life in this suffocating concrete labyrinth where the heat reached 117 degrees in May. “You wake up totally fresh,” exulted Kaushilya Devi, a housewife, whose husband bought a unit in May.   But 3,700 miles away, in Kigali, Rwanda, negotiators from more than 170 countries gathered this week to complete an accord that would phase out the use of heat-trapping hydrofluorocarbons, or HFCs, worldwide, and with them the cheapest air-conditioners that are just coming within reach of people like Ms. Devi. Millions of Indians might mark the transition from poverty with the purchase of their first air-conditioner, but as those purchases ease suffering in one of the planet’s hottest countries, they are contributing profoundly to the heating of the planet.HFCs function as a sort of supergreenhouse gas, with 1,000 times the heat-trapping potency of carbon dioxide. While they account for just a small percentage of greenhouse gases in the atmosphere, scientists say a surge in the use of HFC-fueled air-conditioners would alone contribute to nearly a full degree Fahrenheit of atmospheric warming over the coming century — in an environment where just three degrees of warming could be enough to tip the planet into an irreversible future of rising sea levels, more powerful storms and deluges, extreme drought, food shortages and other devastating impacts. The emerging HFC ban, nearly seven years in the making, has not drawn the same kind of attention as last year’s Paris agreement on climate change. And the Kigali talks are focused on a narrow slice of the economy — just the HFCs in air-conditioners and refrigerators. But the deal, which could be completed this weekend, could have as much or more of an effect on climate change. Unlike the Paris accord, the emerging Kigali agreement will have the force of international law, a legal requirement that rich countries give poor countries money to help them comply, and trade and economic sanctions against countries that do not.  But there is no guarantee that Mr. Modi will give Mr. Obama the deal he wants. The president’s rapid timeline pits the planet’s richer, cooler countries against poorer, hotter ones. And among the latter, none has more at stake than India, whose strong economic growth means tens of millions of families will soon be able to afford air-conditioning.

Flexibility shown by India at Montreal Protocol to help nation for climate benefits - -Supporting India's proposal of advancing its baseline to 2024-26 for phasing down Hydrofluorocarbons, a leading advocacy group from the country today said the flexibility shown by India at the Conference on Montreal Protocol would help the world double its climate benefits.  As talks by nearly 200 nations progressing in Rwandan capital on phasing down of harmful refrigerant gas reaches mid-way, New Delhi-based Centre for Science and Environment (CSE) released an analysis to support India's proposal as general consensus seems to be emerging within the A5 parties (developing nations) at the Conference here to have a dual baseline for climate damaging gas Hydrofluorocarbons (HFCs).  Chandra Bhushan, deputy director general of the CSE, said the analysis reveals that when India had taken 2028-2030 as it's baseline, the climate benefit of Indian proposal was only equivalent to 26 billion tonnes of CO2 emissions (Co2e).  "Now by having a new baseline of 2024-26, it is becoming 52 billion tonnes CO2e. Despite showing this much flexibility, developed countries still want India and other developing countries to move to a baseline of 2020-22," he said.  The baseline is the year against which each country's consumption of HFCs is capped.

World got cannier at using energy last year: IEA | Reuters: Global energy efficiency, or the amount of gross domestic product squeezed from a given unit of energy, improved by 1.8 percent last year, the International Energy Agency said in a report on Monday. Measures to improve energy efficiency include car fuel economy standards, lighting technologies and building standards. Despite progress last year, global energy efficiency needs to improve by at least 2.6 percent a year to put the world on track to meet targets to move away from fossil fuels, the report added. Countries are under pressure to improve energy efficiency as part of a global agreement to limit global warming which will formally come into effect on Nov. 4. The more efficient use of energy was more than the 1.5 percent gain made in 2014 and was triple the annual average rate between 2003 and 2013, the IEA said. Last year, oil prices weakened substantially. In the United States, the retail price of gasoline fell by 38 percent and inefficient light-duty truck sales reached an all time high of 9.5 million vehicles, the IEA said. However, fuel economy standards meant that these vehicles were 9 percent more efficient than in 2010. Globally, car fuel economy standards saved 2.3 million barrels a day of oil last year, or 2.5 percent of global oil supply, it added.

 Energy-related CO2 emissions for first six months of 2016 are lowest since 1991 – EIA - U.S. energy-related carbon dioxide (CO2) emissions totaled 2,530 million metric tons in the first six months of 2016. This was the lowest emissions level for the first six months of the year since 1991, as mild weather and changes in the fuels used to generate electricity contributed to the decline in energy-related emissions. EIA’s Short-Term Energy Outlook projects that energy-associated CO2 emissions will fall to 5,179 million metric tons in 2016, the lowest annual level since 1992.  In the first six months of 2016, the United States had the fewest heating degree days (an indicator of heating demand) since at least 1949, the earliest year for which EIA has monthly data for all 50 states. Warmer weather during winter months reduces demand for heating fuels such as natural gas, distillate heating oil, and electricity. Overall, total primary energy consumption was 2% lower compared with the first six months of 2015. The decrease was most notable in the residential and electric power sectors, where primary energy consumption decreased 9% and 3%, respectively.   Coal and natural gas consumption each decreased compared to the first six months of 2015. However, the decrease was greater for coal, which generates more carbon emissions when burned than natural gas. Coal consumption fell 18%, while natural gas consumption fell 1%. These declines more than offset a 1% increase in total petroleum consumption, which rose during that period as a result of low gasoline prices. Consumption of renewable fuels that do not produce carbon dioxide increased 9% during the first six months of 2016 compared with the same period in 2015. Wind energy, which saw the largest electricity generating capacity additions of any fuel in 2015, accounted for nearly half the increase. Hydroelectric power, which has increased with the easing of drought conditions on the West Coast, accounted for 35% of the increase in consumption of renewable energy. Solar energy accounted for 13% of the increase and is expected to see the largest capacity additions of any fuel in 2016.

Vermont Wind Project Needs Support, So Company Offers to Pay Voters - : To many residents in this tiny town in southern Vermont, the last-minute offer of cash was a blatant attempt to buy their votes.To the developer that offered the money, it was simply a sign of how attentively the company had been listening to voters’ concerns.The company, Iberdrola Renewables, a Spanish energy developer, wants to build Vermont’s largest wind project on a private forest tract that spans Windham and the adjacent town of Grafton. The project would consist of 24 turbines, each nearly 500 feet tall, and generate 82.8 megawatts of power, enough to light 42,000 homes for a year if the wind kept blowing, though the houses could be in Connecticut or Massachusetts.Residents of the two towns will vote Nov. 8 on whether to approve the project, which has pitted neighbor against neighbor. No one knows which way the vote will go.AdvertisementContinue reading the main story That same day, residents statewide will be voting for governor. Wind development has become an issue in that race, which The Cook Political Report rates a tossup, and sentiment here could be decisive in the outcome. Facing the possibility that voters here may reject the proposal, putting a damper on large-scale wind development in Vermont, Iberdrola last week put cash on the table for individual voters.Many residents called the offer an attempt at undue influence, if not an outright bribe. But after a review, the state attorney general’s office said that the offer did not appear to violate state law. Still, the individual payments — a total of $565,000 a year to 815 registered voters in both towns, or $14.1 million over 25 years — on top of millions more to the towns, suggest how much is at stake for the company. Iberdrola has been trying to persuade voters here for more than four years to approve the project, in a state that is actively seeking clean-energy development.

Iowa wind farm generates more tax credits than electricity - After reaching a settlement with some of its biggest customers this summer, the Warren Buffett-owned utility company MidAmerican Energy may soon build a massive new wind farm in Iowa. The thing is, electricity is far from the only thing it will generate. Known as “Wind XI,” the proposed 2,000 megawatt wind farm—Iowa’s largest ever—has the potential to produce a lot of electricity, but even more tax credits. In total, Wind XI could generate up to $1.8 billion in tax credits for its backers over the next decade. The winners? Warren Buffett; MidAmerican Energy’s other investors; and Facebook, Microsoft, and Google—MidAmerican’s biggest customers, who will receive tax benefits of their own for using wind energy. The losers? Taxpayers and other ratepayers footing the bill.  Unfortunately, this is part of an ongoing trend in wind energy across the country. It’s not the demand for more electricity that’s driving construction, but rather the government’s preferential tax treatment and counterintuitive energy mandates. The demand for electricity in the U.S. has been nearly flat over past decade, due to slow economic growth and gains in energy efficiency. Despite the lack of new demand, new wind farms are popping up across the country because of the tremendous tax credits they generate for their owners. Warren Buffett has admitted as much. In 2014 he explained: “I will do anything that is basically covered by the law to reduce Berkshire's tax rate [. . .] We get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.”

 Germany takes steps to roll back renewable energy revolution  - Germany is taking steps to curb its booming windfarm sector in what it claims is a necessary move to stop the renewables revolution from undermining its own success. Critics, however, say the step will deal a blow to the country’s reputation as a leader in green energy. According to leaked plans from the German federal network agency, published on Tuesday in the Süddeutsche Zeitung, the government has had to halve its original target for expanding its windfarms in the gale-beaten northern flatlands because it cannot extend its power grid quickly enough to the energy-hungry south. When Angela Merkel announced in May 2011 that Germany would seek to phase out its fleet of nuclear reactors by 2022, questions arose as to whether renewable sources of energy, such as wind or solar, could grow quickly enough to meet the requirements of German industry. Yet five years later, windfarms in the northernmost states are producing so much energy that in some cases the state has to pay renewable energy companies to switch off their turbines to stop congesting the power grid. In theory, the manufacturing sector in southern states like Bavaria or Baden-Württemberg would be supplied with green energy from the north. But plans for an ambitious north-south “energy highway” between Schleswig-Holstein and Bavaria have stalled, due in part to local protests against proposed “monster pylons”.

Global economy could 'self-destruct' if world carries on burning fossil fuels, leading economist warns | The Independent: A renowned economist who helped persuade the world to start taking climate change seriously has warned the global economy could “self-destruct” if countries fail to ditch fossil fuels and embrace a clean, green, high-tech future. Professor Lord Nicholas Stern was credited with bringing about a sea change in attitudes when he calculated the cost of failing to tackle the problem in 2006. While dealing with global warming would cost one per cent of the world’s gross domestic product, doing nothing would be up to 20 times more expensive, he concluded. Now Professor Stern, former Mexican president, Felipe Calderón, and other leading figures from politics, finance and science have launched a major new report saying Governments and businesses must change course – and quickly. “The challenge is urgent: the investment choices we make even over the next two to three years will start to lock in for decades to come either a climate-smart, inclusive growth pathway, or a high-carbon, inefficient and unsustainable pathway,” said the report by The Global Commission on the Economy and Climate. “The window for making the right choices is narrow and closing fast … The time is ripe for a fundamental change of direction.”It called for an end to vast subsidies paid to support fossil fuels by 2025 “at the latest”, saying these represented “fundamental price distortions” in the market. An estimated $550bn (about £430bn) in fossil fuel subsidies was paid out worldwide in 2014 “skewing investment away from sustainable options”, the report added. There was also a need to “transform” the financial system to deliver “the scale and quality of investment needed”.

Green Groups Warn Deal to Lower Aviation Pollution is 'Weak Shell Game' -- A deal to lower airline-related greenhouse gas emissions has been struck in a historic 191-nation treaty, but green groups say it falls short of what's needed. The International Civil Aviation Organization (ICAO), the United Nations body that oversees the flying industry, created a framework that aims to offset carbon emissions while only costing the sector less than two percent of revenues, Reuters reports. The system will be voluntary from 2021 to 2026 and mandatory from 2027 for nations that have big aviation industries. But as environmental advocates noted, the structure of the deal ultimately lets airlines off the hook by allowing them to "offset" their carbon footprint rather than reducing it, and by making the program voluntary. "Airline claims that flying will now be green are a myth. Taking a plane is the fastest and cheapest way to fry the planet and this deal won't reduce demand for jet fuel one drop. Instead offsetting aims to cut emissions in other industries," said Bill Hemmings, director of the European sustainable development advocacy group Transport and Environment, which was an observer to the ICAO talks. "Today is not mission accomplished for ICAO, Europe, or industry," Hemmings said. "The world needs more than voluntary agreements. Without robust environmental safeguards the offsets won't cut emissions, leaving us with a deal that amounts to little more than adding the price of a cup of coffee to a ticket."

Obama aide: Little chance of carbon tax in near term | TheHill: There’s very little chance that Congress could pass an economy-wide tax on carbon dioxide emissions in the near term, President Obama’s top energy adviser said. White House senior aide Brian Deese said at a Columbia University event Tuesday that a clean economy-wide price on carbon would be the easiest way to reduce emissions, like the cap-and-trade proposal Obama pushed early in his presidency or a tax on carbon emissions. ADVERTISEMENTBut the chances of that getting through Congress are politically small, Deese said, which makes further executive action even more important. “I don’t think that that type of approach is on the near-term horizon,” Deese said. “We do still have a disconnect, where the congressional politics of this issue have not caught up with either the substance of the issue, the urgency of the issue or what’s actually happening in terms of the speed at which you’re seeing transformations in the economy.” Deese said it’s easier to make the political case for climate action when the administration can show that greenhouse gas emissions have recently started to fall while the economy continues to grow. But it’s still a hard case to make with Congress. “My assessment is just, in the near term, I think that the politics are very challenging,” he said.

New WikiLeaks Emails Show Hillary Clinton At Odds With Her Party On Energy And Climate Policy - Lost amidst the outrage over last week's video of GOP presidential candidate Donald Trump making lewd comments about women and the GOP's ensuing civil war was another WikiLeaks release of emails involving Democratic candidate Hillary Clinton. Unlike the previous emails that have dominated the news cycle over the last year, this batch allegedly (Ms. Clinton's campaign has refused to either confirm or deny their veracity) provides excerpts from high-paid and often secret speeches that she gave to members of the international business community. These speeches were a major point of contention during the lengthy Democratic primary campaign, in which supporters of Bernie Sanders repeatedly but unsuccessfully pushed for Ms. Clinton to release the speech transcripts. The supporters of Mr. Sanders feared that the contents of Ms. Clinton's speeches differed from her stated positions on issues ranging from financial regulation to energy policy. Those fears came to fruition last week as WikiLeaks released emails purportedly obtained from the account of Ms. Clinton's campaign chairman and long-time advisor John Podesta. The emails show Ms. Clinton expressing laissez-faire positions on free trade, business regulation and, most damningly in the eyes of many on the political left, shale gas production. Among other things, Ms. Clinton stated during her speeches that the federal government pioneered hydraulic fracturing technology, attributed the U.S. economic recovery to the recent dominance of natural gas in the electric utility sector, accused Russia of funding anti-fracking and environmental groups, boasted of her promotion of fracking around the world, and spoke favorably of U.S. exports of natural gas and petroleum. One excerpt from September 2014 in particular indicates that Ms. Clinton has little in common with those in her party who would use federal policy to strand oil and gas assets:  “Number one, because of changes in technology as all of you know, we are now producing more oil and gas than we ever have in our history and we're on our way to be the number one producer in the world. Now, that is a tremendous opportunity, as long as we are smart about it. And we have to start by being smart about making sure we extract oil and gas in ways that don't destroy water tables, leak methane into the air, undermine the quality of life for people who live near the wells. And we have to do that. And there will be some places, frankly, where we will have to decide we can't do it there. But, many places we'll be able to, as long as we have the appropriate precautions undertaken."

Clinton's energy independence claim may signal likely policy path - The Barrel Blog: Near the end of Sunday’s contentious and much-maligned presidential debate, Hillary Clinton made, arguably, the most revealing statement yet on the likely path of energy policy in her White House. “We’ve got to remain energy independent,” Clinton said. “It gives us much more power and freedom than to be worried about what goes on in the Middle East. We have enough worries over there without having to worry about that.” Now, the statement may appear almost innocuous at first blush. Every US president since Richard Nixon has spoken on the importance of energy independence, a notion which gained new life both after the September 11, 2001, attacks and amid the US shale oil and gas renaissance. And Clinton’s use of the energy independence political catchphrase was quickly pointed to as one of two factual errors she made in the debate. “US production is up and the share of imports is down, but that’s not the same as being energy-independent,” wrote Politico, which claimed that this and a reference to Donald Trump not apologizing were Clinton’s two “falsehoods” of the debate. What if Clinton’s view is that, even with millions of barrels of foreign crude oil and other petroleum products coming into the US every day, that this nation is, in fact, energy independent? Arguably, this could mean that Clinton believes that her White House will have no obligation to boost US fossil fuel production going forward. Without the need to lower and ultimately end energy imports in a quest for what has long been viewed as the goal of US energy independence, Clinton may be likely to press ahead with regulations which could constrain production on federal lands and in federal waters. If Clinton views the energy independence goal as already achieved then there may be no reason for her to go beyond the status quo nor take any action to boost fossil fuel production.

WHY IT MATTERS: Energy - ABC News -- Energy independence has been a goal of every president since Richard Nixon. Hillary Clinton and Donald Trump have very different ways to achieve it. How energy is produced and where it comes from affect jobs, the economy and the environment. Clinton pledges that under her leadership, the U.S. will be able to generate enough renewable energy to power every home in America within 10 years, with 500 million solar panels installed by the end of her first term. She also vows to reduce U.S. oil consumption by one-third through cleaner fuels such as biodiesel and natural gas and more fuel-efficient cars, boilers, ships and trucks. Clinton generally supports oil and gas drilling on federal lands, but would bar drilling in the Arctic and Atlantic oceans. After running as a champion of coal in 2008, Clinton now calls for protecting health benefits for coal miners and their families and helping retrain them for new jobs. She offers cautious support for nuclear power. Trump vows to "unleash American energy," allowing unfettered production of oil, coal, natural gas and other sources to push the U.S. toward energy independence and create jobs. Trump would sharply increase oil and gas drilling on federal lands and vows to revive the struggling U.S coal industry. He also would open up offshore drilling in the Atlantic Ocean and other areas where it is blocked. Trump calls for rescinding the Clean Power Plan, a key element of President Barack Obama's strategy to fight climate change, as well as a rule to protect small streams and wetlands from development. He also would cancel the 2015 Paris climate agreement and stop U.S. money going to U.N. global warming programs. Although energy independence remains elusive, increases in U.S. oil production have lowered reliance on imports. In 2015, the U.S. relied on net imports for about 24 percent of petroleum use, the lowest level since 1970. Natural gas, cleaner than coal, has been embraced by politicians from both parties, including Clinton and Trump. Still, critics worry that popular gas drilling techniques such as hydraulic fracturing — or fracking — and horizontal drilling could be harming air, water and health.Clinton has said fracking should not take place where states and local communities oppose it, and she pledges to reduce methane emissions from all oil and gas production and protect local water supplies. On climate change, she vows to meet Obama's goal to reduce greenhouse gas emissions by up to 30 percent by 2025. Trump says restrictions supported by Clinton would hurt energy-producing states such as Colorado, Pennsylvania, North Carolina and Virginia — battleground states in the election. While arguing that tax credits and other subsidies for wind and solar power "distort" the market, Trump says the U.S. should "encourage all facets of the energy industry."

No Combustion-Engine Cars Sold in Germany After 2030, Parliament Says  On Jan. 29, 1886, Carl Benz—who had invented the first stationary gasoline engine seven years earlier—patented a "vehicle powered by a gas engine," which he had built in Mannheim, Germany. By 2030, the country may ban his invention.  Germany's Bundesrat, its upper house of parliament, passed a bipartisan resolution calling for a ban on sales of new vehicles powered by internal combustion engines, which includes both gasoline and diesel. "If the Paris agreement to curb climate-warming emissions is to be taken seriously, no new combustion engine cars should be allowed on roads after 2030," weekly news magazine Der Spiegel quoted Green Party lawmaker Oliver Krischer as saying. The shockwaves from this action, reported over the weekend, haven't quite hit the global auto industry or German manufacturers just yet. Germany has one of the largest automotive industries in the world, and it is the biggest industrial sector in Germany. Automobile manufacturing and related businesses employ 774,900 German workers and account for one-fifth of German industry revenue.  The country is also Europe's top automobile market, and U.S.-based manufacturers do big business there as well. General Motors sold 244,000 vehicles in Germany in 2015, while Ford is on track to sell 280,000 vehicles this year. The Ford Mustang is the most popular sports car in Germany. Fiat Chrysler Automobiles sold 90,000 vehicles there last year, with its U.S.-built Jeep brand growing strongly.

BP sees oil demand growth swamping impact of electric cars - Rising demand for oil over the next two decades is likely to overwhelm the impact of the electric car on crude markets, said Spencer Dale, chief economist for BP Plc. “They’ll have a huge impact in terms of air quality, but it’s not a game changer over 20 years even with aggressive electric vehicle penetration,’’ Dale said at in a panel discussion at the Bloomberg New Energy Finance summit in London on Tuesday. The clean-energy research unit of Bloomberg LP estimates that battery-electric vehicles, which only run on power from a plug, will displace 13 million barrels of oil a day by 2040. BP projects oil demand to increase by about 20 million barrels a day over the next 20 years, with about a quarter of supply going to passenger vehicles. Dale’s comments illustrate why major oil companies don’t see electric cars as a threat to their business -- even with BP’s forecast that 70 million of them may be on the road in two decades. Efficiency gains such as improved fuel economy may have more of an impact on oil demand than electrified transport, he said, noting mileage standards and better engines would have “many times greater’’ impact on oil demand.“I do think sometimes that perhaps if our objective has to do with climate, perhaps we should spend more time on how to encourage and capture those improvements in efficiency rather than on EVs,’’ he said. “If I had some subsidies to use, I’d ask if it’s always best to encourage a switch from internal combustion engine to electric vehicle or better internal combustion engines? Bigger bang for your buck.’’

China September coal imports surge again as domestic cuts bite | Reuters: China imported 24.26 million tonnes of coal in September, up more than a third from a year ago, customs data showed on Thursday, as government-enforced mine closures forced utilities and steel mills to buy more foreign raw material. For the year to date, imports increased 15.2 percent to 180 million tonnes. The monthly total was up from 17.7 million tonnes last year but down from August's total of more than 26 million tonnes, which was the highest in nearly two years. The pace of buying may not continue into October after Beijing allowed domestic mines to ramp up output after inventories fell to critically low levels and prices spiked.

Yet Another Coal Vs. Shale Gas Study Confirms Fossil Industry Cannibalizes Self – --The US Energy Information Agency has had its share of critics, but they certainly nailed this one. EIA has been arguing that cheap shale gas is the main factor behind the collapse of the US coal industry, and a research team from Case Western Reserve University has just added a new study to a growing pile of evidence in support of that claim. The new Case Western study is significant because coal industry supporters been hammering away at the idea that the US Environmental Protection Agency is the cause of its woes. That position is supported by numerous Republican (and some Democratic) office holders including Republican presidential nominee Donald Trump, who has been promising to save coal jobs by abolishing EPA. The Case Western team correlated EIA’s data on shale gas and coal consumption with changes in US Environmental Protection Agency regulations going back to 1990, and found … no correlation. The new study, published in The Electricity Journal, looked at domestic power plant fuel consumption (in the US, central power plants account for 93% of domestic coal production). As described by the study, in 1990 then-President George H.W. Bush signed new EPA regulations into law. Then, this happened: Consumption of coal continued to grow under those 1990-era EPA rules until 2008, and then went into steady decline, dropping by 23 percent from 2008 thru 2015. While the new EPA regulations may have slowed the growth of US coal consumption, they certainly did not stop it, let alone drive coal consumption into negative territory. More to the point, what happened after 2008? Nothing, if you look at EPA regulations. New federal rules tightening up emissions from power plants did not go into effect until June of this year, under President Obama’s Clean Power Plan. That would be 2016, for those of you keeping score at home.

Ken Bone, Internet Sensation from Presidential Debate, Works for Coal Company Opposed to Climate Regulations – Steve Horn - After Kenneth Bone asked a question about energy to presidential nominees Donald Trump and Secretary Hillary Clinton at the presidential town hall debate on October 9, he quickly became a viral internet sensation. That evening at Washington University in St. Louis, Bone asked, “What step will your energy policy take to meet our energy needs while at the same time remaining environmentally friendly and minimizing job loss for fossil power plant workers?” Trump responded by touting “clean coal” and bashing what he described as President Barack Obama's war on energy. Sec. Clinton responded by promoting hydraulic fracturing (“fracking”) for oil and gas as a “bridge” to renewable fuels while also citing climate change as a “serious problem” and that she wants “to make sure we don't leave people behind.”Lost in the shuffle of the viral memes, internet jokes, and a Facebook fan page is a basic question: Who is Ken Bone and what does he do for a living? A DeSmog investigation has revealed that Bone works for the Prairie State Energy Campus, which is co-owned by a consortium of electric power companies and located about an hour southeast of St. Louis in Lively Grove, Illinois. Adam Siegel, who blogs at the site Get Smart Energy Now, first pointed to the lack of disclosure the day after the debate.Both a blog post promoting Prairie State employees' community volunteer work and his personal Facebook page confirm that Bone works for Prairie State. According to the Chicago Tribune, Prairie State opened in late 2012 and is one of the dirtiest U.S. power plants opened in the past quarter century. Previously, it was partially owned by coal giant Peabody Energy until it sold its five percent stake in May.

Russia is moving nukes to its European enclave amid high tensions with the West -   Russia has moved nuclear-capable Iskander-M missiles into the Kaliningrad region bordering Poland and Lithuania, the Defence Ministry said on Saturday, adding this was part of routine drills involving such missiles across its territory. "These missile units have been deployed more than once (in the Kaliningrad region)... and will be deployed as part of military training of the Russian armed forces," ministry spokesman Igor Konashenkov said in a statement. A U.S. intelligence official said on Friday that Russia had started moving the Iskander-Ms into its westernmost region in what he said could also be a political gesture to express displeasure with NATO. Konashenkov said one of the missiles had been deliberately exposed to a U.S. spy satellite. "We did not have to wait for too long - our American partners confirmed it themselves in their revelatory endeavor," he said.

 Russia Accuses US Of Threatening Its National Security; Needs Nuclear Weapons For Protection From US Hostility - When earlier this month, Russia suspended a treaty with Washington on cleaning up weapons grade plutonium in response to what it said were "unfriendly acts" by the United States, it was mostly an act of window dressing: there was little in execution terms left under the treaty and the announcement was mostly symbolic, hinting at the ongoing deterioration in diplomacy between the two powers. However, when it was reported on Friday that Russia had deployed nuclear-capable Iskander SS-26 missiles to Kaliningrad in immediate proximity to central Europe in response mostly to recently encroaching behavior by NATO, things got decidedly more serious and will likely leed to even further retaliation by NATO and western powers.

First Nuclear Strike – the positions of Obama, Trump, Clinton -- The doctrine of nuclear deterrence that leaves open the possibility of launching a “first strike” before an enemy attacks will remain the basis of U.S. policy even as new generations of nuclear weapons are introduced, Defense Secretary Ashton Carter said Tuesday.  “That’s our doctrine now, and we don’t have any intention of changing that doctrine,” Carter told airmen in a question-and-answer session at Kirtland Air Force Base in New Mexico. Carter was responding to a question about nations such as Russia and North Korea “brandishing” their nuclear arsenals to bully and intimidate and whether the U.S. would follow suit. “It’s not the American approach to brandish, not the American approach to intimidate,” Carter said. “For as long as I can remember,” U.S. leaders “have always conducted themselves with tremendous respect for the awesome destructive power of these weapons.” However, Carter suggested that the deterrence doctrine might have to be “adjusted” in the future to adapt to new threats. “We can’t just do things the old way,” he said. “We have to look at those whom we’re deterring and adjust what we’re doing to take that into account.”  The first strike policy figured in the debate Monday night between Republican presidential candidate Donald Trump and Democratic candidate Hillary Clinton.  At first, Trump appeared to argue for scrapping the nuclear weapons stockpiles. “I would like everybody to end it, just get rid of it,” he said, and “I would certainly not do first strike.”  Then Trump seemed to reverse course: “At the same time, we have to be prepared. I can’t take anything off the table.” Clinton attacked Trump’s previous comments suggesting the U.S. may benefit from such allies as Japan, South Korea and Saudi Arabia developing nuclear weapons. “His cavalier attitude about nuclear weapons is so deeply troubling,” she said.

Pentagon Video Warns of “Unavoidable” Dystopian Future for World’s Biggest Cities - The year is 2030. Forget about the flying cars, robot maids, and moving sidewalks we were promised. They’re not happening. But that doesn’t mean the future is a total unknown.According to a startling Pentagon video obtained by The Intercept, the future of global cities will be an amalgam of the settings of “Escape from New York” and “Robocop” — with dashes of the “Warriors” and “Divergent” thrown in. It will be a world of Robert Kaplan-esque urban hellscapes — brutal and anarchic supercities filled with gangs of youth-gone-wild, a restive underclass, criminal syndicates, and bands of malicious hackers. At least that’s the scenario outlined in “Megacities: Urban Future, the Emerging Complexity,” a five-minute video that has been used at the Pentagon’s Joint Special Operations University. All that stands between the coming chaos and the good people of Lagos and Dhaka (or maybe even New York City) is the U.S. Army, according to the video, which The Intercept obtained via the Freedom of Information Act.  The video is nothing if not an instant dystopian classic: melancholy music, an ominous voiceover, and cascading images of sprawling slums and urban conflict. “Megacities are complex systems where people and structures are compressed together in ways that defy both our understanding of city planning and military doctrine,” says a disembodied voice. “These are the future breeding grounds, incubators, and launching pads for adversaries and hybrid threats.”

Massive Bailout Approved for FirstEnergy --The Ohio Public Utilities Commission (PUCO) approved a scheme Wednesday that will force FirstEnergy's customers to hand over approximately $200 million annually to the company and its shareholders for the next 3-5 years. Customers will receive virtually nothing in return for this massive subsidy, which could ultimately reach $1 billion.   Under Wednesday's order, FirstEnergy will begin to receive hundreds of millions of dollars, with effectively no strings attached. Although characterized as a "distribution modernization rider," nothing in the commission's order requires that these customer dollars be invested in modernizing Ohio's electrical grid or in any way be spent to benefit Ohio customers. Instead, the dollars can be siphoned off from FirstEnergy's Ohio utilities and used to bail FirstEnergy Corp. out of its poor coal investments while boosting the profits of corporate shareholders.  "Today's decision takes hundreds of millions of dollars out of customers' pockets in order to create a massive slush fund for FirstEnergy Corp. and its shareholders," said Shannon Fisk, attorney at the non-profit environmental law firm Earthjustice .  "And the fact that FirstEnergy asked for billions more does not make this decision any less unreasonable. Rather than forcing customers to prop up profits for a corporation that made a bad bet on aging coal plants, the commission should be looking after customers and ensuring investments in job-creating renewable energy , energy efficiency and smart grid initiatives."  Through Wednesday's decision, the commission has aided FirstEnergy's efforts to sidestep a recent order of the Federal Energy Regulatory Commission (FERC) that raised serious questions about FirstEnergy's previous bailout proposal. Under that proposal, customers would have directly assumed all of the financial risk of financially struggling coal and nuclear plants owned by FirstEnergy Corp.'s unrelated competition generation business.  In late April, FERC ruled that FirstEnergy's previous bailout proposal—which PUCO had approved a month earlier—may violate federal safeguards concerning transactions between public utilities and their unregulated affiliates. FERC blocked FirstEnergy's bailout scheme pending a federal review. Rather than submit its proposal for FERC review, FirstEnergy concocted a new scheme intended to bypass the FERC order.

Advocates make case in another attempt to ban fracking in Youngstown - (WKBN) – Some raised concerns at a Candidate’s Night forum Monday night in another attempt to ban fracking in Youngstown.“There’s too much in there that allows for people to sue businesses, any businesses, not just businesses related to gas and oil, that they believe is polluting the water,” said Jaladah Aslam with the Mahoning County Democratic Party.Youngstown State geology professor Dr. Raymond Beiersdorfer said fracking poses environmental risks.“We’ve had over 700 earthquakes in this area, illegal dumping of frack waste into the Mahoning River, frack waste spills that have killed everything in neighbors’ ponds, and people forced to live next to fracking wells and injection wells.”The Community Bill of Rights has been defeated by voters five times since 2013. It will appear on the ballot once again in November.

OSU will study impact of gas pipeline construction on agricultural fields - -  Ohio State University will launch a study this fall in conjunction with a planned $500 million, 215-mile petroleum pipeline from Harrison County in Eastern Ohio to the Michigan border. The Utopia East pipeline project will transport 50,000 barrels a day of ethane and ethane-propane mixtures for use in plastics production. Ethane is a byproduct of fracking used to extract oil and natural gas from Utica shale. Kinder Morgan Inc. will construct, own and operate the Utopia pipeline. Construction is scheduled to begin next month and be completed in 2018. The Ohio stretch of the pipeline will link to existing pipeline in Michigan, for delivery of petroleum products to NOVA Chemicals Corp., in Windsor, Ontario. During construction, OSU's College of Food, Agricultural and Environmental Sciences will conduct a three-year study on soil disturbances caused by pipelines and its impact on farmland. The study will be partially financed by a $200,000 gift from Kinder Morgan, and will focus on 50 fields statewide, predominantly in rural areas. Soil samples will be obtained before and after the pipeline's installation, said Steve Culman, soil fertility specialist at OSU's agricultural college in Wooster. "This is an area that affects a lot of acres nationally and locally within the state of Ohio," Culman said. "A lot of landowners are being affected by this. They are genuinely interested in understanding it." Kinder Morgan Vice President Allen Fore said the company takes pride in restoring agriculture properties to their full production yields after pipeline construction.  "This study will examine the effectiveness of our best practices to determine what restoration alternatives, if any, our company and industry should follow," Fore said.

BLM official signs plan to allow oil and gas leasing on Wayne National Forest - The federal government has scheduled a lease sale for 1,600 acres of public land in the Wayne National Forest’s Marietta Unit for this December, dealing a blow to area environmentalists who oppose oil and gas drilling on the national forest. On Friday, Dean Gettinger, district manager of the Northeastern States District of the federal Bureau of Land Management (BLM), signed a finding of no significant impact (FONSI) for drilling on 40,000 acres in the Marietta Unit, which covers parts of Washington, Noble and Monroe counties, northeast of Marietta. Oil and gas companies so far have filed expressions of interest to drill for natural gas on 18,000 of those acres, with 1,600 acres contained in the first round of land entering the lease program.“Based upon a review of the EA (Environmental Assessment) and supporting documents, I have determined that the proposed action is not a major federal action, and will not significantly affect the quality of the human environment, individually or cumulatively, with other actions in the general area,” the signed FONSI states. According to the document, “the BLM plans to lease some parcels now and make the rest available in the future.” Environmental groups, mainly based in Athens, have opposed the U.S. Forest Service and BLM’s plan to lease national forest land to private companies for deep-shale drilling (also known as fracking). They say it will harm natural resources in the forest, including water, and pose a hazard to people living in the area. They also cite the negative consequences related to climate change. Industry and private landowner groups have supported the leasing program, saying it will not harm the environment but will boost the economy in the affected counties. Jackie Stewart, director of industry-outreach group Energy in Depth-Ohio, praised the decision Friday night.

Fracking may have spawned a new bacteria - The Week --Fracking is a politically fraught subject. But for researchers intent on studying odd ecosystems, nothing could be better than the briny, pressurized deep of a fracking well. Now, efforts to catalogue these odd ecosystems have finally paid off, with the recent discovery of a new genus of bacteria endemic to shale oil and gas wells. In a study published in Nature Microbiology, the authors humorously dub their discovery "Frackibacter" — and note that the genus appears to be a unique product of fracking. Indeed, the study describes identical strains of Frackibacter thriving in two separate fracking wells that were hundreds of miles apart, drilled into two different kinds of shale formations. "We think that the microbes in each well may form a self-sustaining ecosystem where they provide their own food sources," said coauthor Kelly Wrighton of Ohio State University, in a statement. "Drilling the well and pumping in fracturing fluid creates the ecosystem, but the microbes adapt to their new environment in a way to sustain the system over long periods."  The shale heats up to incredible temperatures, the well is flooded with pressure, and salt from the shale leaches into the proprietary fluid. The result is a high temperature, high pressure, briny ecosystem within the shale, where only the hardiest microorganisms can possibly survive. Prior studies have shown that bacteria survive in the shale by producing osmoprotectants, organic compounds that prevent them from bursting as they absorb water to keep up with their salt intake.  But while scientists were rifling through the genetic information present in two separate wells, they came across a bit of bacterial DNA that did not fit into any existing family tree. Even after sampling fluids from each well over the course of an entire year (and reconstructing the genomes of every other bacteria species in the well) they could not account for the interloper. So the scientists designated their find Candidatus Frackibacter — a fitting title, given that "Candidatus" is a biological term for a new organism discovered through genomic analysis, rather than cultivated in a lab. Even the run-of-the-mill bacteria, however, provided fascinating insight. The researchers noted that, even in separate wells hundreds of miles apart, the microbial communities adapting to those extreme conditions were nearly identical. This implies that fracking may give rise to predictable communities of microorganisms. "We thought we might get some of the same types of bacteria, but the level of similarity was so high it was striking," Wrighton said. "That suggests that whatever's happening in these ecosystems is more influenced by the fracturing than the inherent differences in the shale."

Gas industry challenges new drilling rules in Pennsylvania - The natural gas industry in Pennsylvania is challenging new state regulations that govern surface development of shale gas wells, saying they threaten jobs and investment by adding up to $2 million to the cost of drilling a well. Energy companies in the Marcellus Shale, the nation’s largest natural gas field, filed suit against the Pennsylvania Department of Environmental Protection and the state’s Environmental Quality Board over rules that took effect last week, calling them financially burdensome, vague and unlawful. “The provisions we are challenging impose immediate harm to our industry because they affect our ability to operate and remain competitive,” David Spigelmyer, president of the Marcellus Shale Coalition, said Friday in a conference call with reporters. The suit, filed Thursday, marks the first time the powerful trade group has taken the state to court over drilling rules. It seeks to block enforcement pending a ruling on their legality. Neil Shader, spokesman for the Department of Environmental Protection, said the challenged regulations are “common-sense protections” that resulted from an “unprecedented amount of public comment and involvement.” The regulations had been under development since 2011 and are the first major rewrite since energy companies began exploring the Marcellus Shale several years ago. They impose more stringent requirements on wells drilled near schools, parks, forests and other public resources, strengthen standards for replacing or restoring water supplies polluted by drilling, and impact a range of surface activities, including waste processing, freshwater impoundments, pipelines and spill cleanup.

650000 Children in 9 States Attend School Within 1 Mile of a Fracking Well – EcoWatch -More than 650,000 kindergarten through 12th grade children in nine states attend school within one mile of a fracked oil or gas well, putting them at increased risk of health impacts from dangerous chemicals and air pollution .The finding comes from a new study by Environment America Research & Policy Center that exposes the proximity of fracking near schools, hospitals, day care centers and nursing homes, risking the health of our children and other vulnerable populations.  "Schools and day care centers should be safe places for kids to play and learn," said Rachel Richardson, director of Environment America's Stop Drilling program and co-author of the report. "Unfortunately, our research shows far too many kids may be exposed to dirty air and toxic chemicals from fracking right next door." video: Dangerous and Close: Fracking Puts the Nation's Most Vulnerable People at Risk   Using data provided by the oil and gas industry and state regulators, Dangerous and Close—Fracking Puts the Nation's Most Vulnerable People at Risk , found that:

  • 1,947 child care facilities, 1,376 schools, 236 nursing care providers and 103 hospitals are within a one-mile radius of fracked wells in the nine states examined.
  • More than 650,000 kindergarten through 12th grade children attend school within one mile of a fracked well.
  • The highest percentage of children attending school close to fracked wells is in West Virginia, where 8 percent of children spend their school days within one mile of a fracked well.
  • Texas has the largest number of children attending school close to a well, with 437,000 kindergarten through 12th grade students attending public or private school within one mile of a fracked well.

The report included data from nine states total including Arkansas, California, Colorado , New Mexico, North Dakota, Ohio, Pennsylvania , Texas and West Virginia. (see map)

Protesters emerge from pipeline stored at construction site(AP) — Four protesters have emerged from an above-ground section of a steel natural gas pipeline that’s being built underneath the Hudson River after they climbed into it to protest a pipeline from Pennsylvania to New York. A protest group says Rebecca Berlin, Mackenzie Wilkins, Dave Publow and Janet Gonzalez entered a work site early Monday and entered the 42-inch pipeline near the Indian Point nuclear power plant in Westchester County before workers arrived. A spokeswoman for the group says they don’t think putting the pipeline under the river is safe. They’re also protesting the pipeline’s proximity to the nuclear plant. Spectra Energy is building the pipeline. It says it respects peaceful protest, but says the protesters were placing themselves and first responders at risk. The company says the protesters went inside pieces of the pipeline being stored above ground.

Northeast Natural Gas to Gulf Coast Export Markets  -- Over the next three years, 16 pipeline projects are in the works to add more than 14 Bcf/d of new take-away capacity to move Marcellus/Utica natural gas to the south and west, relieving takeaway capacity constraints that have plagued the Northeast since 2012-13. Much of this gas will be moved to the Gulf Coast, primarily via reversals of pipes that traditionally transported gas north and east, and will target rapidly growing LNG and Mexico export markets. But few of these pipeline projects get the gas all the way to those export outlets. The new supplies must traverse “Miles and Miles of Texas” (and Louisiana) to reach the export gateways and along the way deal with shifting production trends within the state, pipeline systems that are "telescoped the wrong way" constraining capacity of the Texas pipeline grid, and unique regulatory considerations associated with Texas intrastate pipelines.  These issues are addressed in RBN’s latest Drill Down Report, highlights of which we discuss in today’s blog. Most of the pipeline projects that will provide desperately needed takeaway capacity out of the Marcellus/Utica region will either bring gas to states on the U.S. Gulf Coast or move gas into markets that have been traditionally served by Gulf Coast supplies, displacing those volumes back into the Gulf region. Either way, significant volumes of gas are being pushed into two states that have historically been the most prolific U.S. sources of natural gas supply: Louisiana and Texas.  Isn’t this a bit like bringing coal to Newcastle?  What are Louisiana and Texas going to do with all that incremental gas supply?  Some will be used to generate electricity, not only in Louisiana and Texas, but in a few states where gas will be dropped off along the way to the Gulf Coast.  But most of the gas is targeted for exports into Mexico, where it will be used to generate power in that country, or is intended for LNG exports to meet demand in Latin America, Europe and Asia. A few new natural gas export facilities have already come online over the past two years, including the first liquefaction trains at Cheniere Energy’s Sabine Pass LNG terminal in Louisiana and NET Midstream’s pipeline to Mexico, which together have ramped U.S. gas exports almost 2.0 Bcf/d over the past two years. Many more export facilities are being developed, including liquefaction/LNG export capacity at Sabine Pass, LA; Freeport, TX; Hackberry, LA; and Corpus Christi, TX, plus another half dozen new pipeline projects being built into Mexico connecting through Texas natural gas supply corridors. 

Catch a Wave - Market Shifts Could Spur a 'Second Wave' of U.S. LNG Export Projects -- Developing a multibillion-dollar liquefaction/LNG export project takes perseverance and patience––and having good luck wouldn’t hurt. The “first wave” of U.S. projects is now cresting; the first two liquefaction “trains” at Cheniere Energy’s Sabine Pass LNG facility are essentially complete, and 12 other trains are under construction and scheduled to come online in the 2017-19 period. But what about the “second wave” of projects that was supposed to be arriving soon thereafter? Today we continue our series on the next round of U.S. LNG projects with a run-through of the projects themselves and a look at how (despite the current market gloom) there is at least some cause for optimism that a few may get built by the early 2020s. In Part 1, we discussed the global LNG market conditions that led to Final Investment Decisions (FIDs) to build a total of 14 LNG liquefaction trains at five project sites, all but one of them along the Gulf Coast in Louisiana and Texas––the other is the Dominion Cove Point LNG project on Maryland’s Chesapeake Bay. When these projects were being planned, the stars of the global market were aligning, and it appeared to make perfect sense for LNG marketers and foreign utilities to commit to huge amounts of U.S. liquefaction capacity. After all, the Shale Revolution was ramping up in the U.S.; natural gas production in the Marcellus and other shale plays was on the rise; most long-term LNG prices were indexed to the price of crude oil (which was then sky-high); and U.S. developers like Cheniere, Cameron LNG and Dominion were offering to base the price of the LNG they loaded onto ships on the price of natural gas (not oil), plus a small mark-up and a flat liquefaction fee (typically $2.25 to $3.50/MMBtu). The price differential between oil- and Henry Hub-based LNG was sizable, big LNG buyers like Japan and South Korea were looking to diversify their LNG sourcing, and up-and-coming economies like China and India were planning to buy a lot more LNG. It all seemed like such a sure thing––a no-brainer. Now, though as this first wave of U.S. LNG projects is “rolling in,” the situation is quite different. The price of crude oil has tanked (as if you hadn’t noticed), bringing the price of oil-indexed LNG down with it; global LNG demand, which had been rising at a healthy pace for several years, only inched up in 2014-15; and a slew of new Australian and U.S. liquefaction capacity is now coming online, threatening to overwhelm the market with far too much supply.

List Of Potential US LNG Export Facilities -- RBN Energy -- October 12, 2016 -- The list of US LNG export projects at various points along the regulatory process, as reported by RBN Energy. First, Louisiana, mostly near Lake Charles:

  • Cheniere: to build a sixth 4.5 MTPA liquefaction train at Sabine Pass LNG site
  • Cameron LNG: has proposed two additional 4.5-MTPA liquefaction trains at its Hackberry facility south of Lake Charles, LA
  • Lake Charles LNG: has proposed a three-train, 16.2-MTPA liquefaction/LNG export facilty in advanced stages
  • LNG Ltd: has proposed the development of the Magnolia LNG project; as many as four 2-MTPA liquefaction plants, near Lake Charles
  • Tellurian Investments: developing Driftwood LNG, total capacity up to 26 MTPA; also near Lake Charles
  • Louisiana LNG Energy LLC: has proposed construction of a 6-MTPA liquefaction/LNG export terminal on Mississippi river southeast of New Orleans
  • Venture Global LNG: two proposed liquefaction/LNG export terminals in Louisiana; one 20-MTPA facility and one 10-MTPA facility
  • Southern California Telephone & Energy: developing the Monkey Island liquefaction/LNG export project; south of Lake Charles; at least three 4-MTPA trains
  • G2 LNG: has proposed a liquefaction/LNG export facility; up to 14 MTPA; Cameron Parish
  • CE FLNG: proposed project; two floating LNG vessels; each vessel up to 4 MTPA
Now, Texas:
  • Cheniere: plans to build three more 4.5-MTPA liquefaction trains at its Cheniere's Corpus Christi facility
  • Freeport LNG: developing a possible fourth 4.4-MTPA train at its Freeport site
  • Port Arthur LNG, an affiliate of Sempra: leading the development of a proposed two-train, 10-MTPA liquefaction/LNG export terminal along the Sabine-Neches Waterway in Port Arthur; Woodside Petroleum is also participating in this project
  • Annova LNG: has proposed a six-train, 6-MTPA liquefaction/LNG export facility planned by Exelon Generation for Brownsville
  • Third Point LLC (a NYC-based investment fund) and Samsung Engineering are developing Texas LNG, a proposed 4-MTPA liquefaction/LNG export terminal in Brownsville
  • Golden Pass LNG: a joint venture of Qatar Petroleum and Exxon Mobil; a 15.6 MTPA plant at its existing LNG import terminal at Sabine Pass
  • Rio Grande LNG, being developed by NextDecade LLC: up to six 4.5-MTPA liquefaciton trains and two LNG loading berths along the Brownsville Shipping Channel
  • In other states:
  • Kinder Morgan: two 5-MTPA trains in Pascagoula; and, a 2.5-MTPA Elba Island project in Chatham County, GA
  • Veresen: a proposed 6-MTPA Jordan Cove LNG project in Coos Bay, OR

 Natural-Gas Prices Heat Up as Oil Drilling Cools Off - WSJ: A long period of low oil prices has saved motorists money at the pump, but languishing crude prices could drive up heating bills. That is because the natural-gas supply is closely connected to oil drilling. Low crude prices have led U.S. oil producers to idle more than a thousand rigs over the past two years, resulting in a big decline in so-called associated gas, a byproduct of oil drilling. This gas typically represents about 40% of total supply, but its production isn’t particularly responsive to gas prices. Since September 2015, associated-gas production outside the Northeast, the country’s fastest-growing gas-producing region, has fallen by nearly 9%, or about 2.5 billion cubic feet a day, according to energy data firm Platts Analytics Bentek. That drop-off is enough to fuel roughly 13 million U.S. homes daily, and one reason monthly heating costs are poised to rise. Natural gas heats about half of all U.S. homes while another third are heated by electricity, which is increasingly generated by burning gas, according to the U.S. Energy Information Administration. The decline in production along with an unusually hot summer has helped to shrink a record gas glut that had been pressuring prices. U.S. gas production in September was about 2.4% lower than a year earlier and down 3.5% from its peak in February, according to Platts. Natural gas for November delivery on Tuesday closed down 1.2% at $3.2370 per million British thermal units, but prices are up 38.5% for the year and at their highest level since December 2014.

 Is The Era Of Cheap Natural Gas Over? | Natural gas prices have been low for years, as shale gas drillers continued to break records with higher and higher production. But just as the oil markets have gone through a very painful bust that is leading to a drop off in supplies, the market for natural gas is going through a similar period of adjustment. Not only that, but demand is on the rise, with a wave of new gas-fired power plants coming online. The result is a much tighter market for gas than we have seen in years. Before there was a boom in oil production in the United States, the shale gas revolution led to massive flood of new supply, which sent prices careening downwards. Natural gas spot prices are always volatile, but have largely traded below $3 per MMBtu since 2014. With prices so low, companies pared back drilling plans and focused much more on liquids-rich and oil-heavy shale plays. But a funny thing happened: instead of a subsequent crash in natural gas production as drillers pulled rigs from the field, output continued to rise, setting new records along the way. Part of that had to do with impressive advancements in drilling technologies and techniques, allowing companies to extract more gas for less money and with less effort. Another reason that gas output kept climbing was because a lot of gas is produced in conjunction with oil. The drilling frenzy for shale oil ensured that the gas kept flowing. But the crash in oil prices put that to an end. Both oil and gas rig counts plunged, and natural gas production finally peaked in the U.S. and begun to decline. After hitting a high watermark in February 2016 at 92 billion cubic feet per day (Bcf/d), production has since shrunk by 5 percent.Meanwhile, on the demand side of the equation, the trajectory is only on the upswing. Years of low natural gas prices have led to a huge uptake in the electric power sector, hollowing out the coal industry, and leading to the construction of new gas-fired power plants at a frenzied pace. In years past, existing natural gas plants were simply used more, as low spot prices meant gas plants were cheaper to run than coal plants. But now an entirely new generation of power plants is coming online, which will ensure demand continues to rise into the future. The new plants are like a one-way ratchet, ensuring a structural increase in demand and not just a cyclical increase, as John Kemp of Reuters recently noted.

NYMEX November gas settles at $3.237/MMBtu, down 3.8 cents -  The NYMEX November natural gas futures contract opened higher Tuesday and then lost some ground as traders attempted to gauge the direction of the market after several days of significant price increases. The November contract settled at $3.237/MMBtu Tuesday, down 3.8 cents day on day. The contract's trading range was $3.209-$3.30/MMBtu. A week ago, the November contract finished the day at $2.974/MMBtu. In the past week, the front-month contract has pushed 10% higher during what is traditionally considered a "shoulder" month, with moderate temperatures and working gas in storage nearly 6% above the five-year average of 3.475 Tcf. Energy consultant Kyle Cooper with ION Energy Group said that the current bearish storage situation makes it hard to justify the recent rally."The fundamentals just don't support it right now, but I am still bullish for this winter," Cooper said. The US National Weather Service forecast for the upcoming six to 10 days continued to show slightly above-average temperatures from the Rockies to the East Coast. However, a few degrees of higher temperatures during mid-October is not likely to translate into significantly higher demand for gas as the market transitions from air-conditioning load to the winter heating season.

EIA Natural Gas Figures Don't Make Sense -- The EIA published its latest Short-Term Energy Outlook and it is not exactly the most bullish report the agency has ever put out. The EIA believes that the losses to U.S. oil production are largely over. It estimates that the U.S. will produce 8.6 million barrels per day (mb/d) in 2017, which is higher than the current output levels of just around 8.5 mb/d. The rig count is up and investment is returning to the shale patch, which should allow for more drilling and new sources of supply. The EIA revised up its forecast from last month for 2017 production by 0.1 mb/d. At the same time, the EIA expects global inventories to build at a 0.3 mb/d pace next year, which is 0.3 mb/d more than the agency predicted in its previous forecast. The EIA sees higher production from the U.S. and Russia, combined with weaker global demand, extended the glut. On the natural gas side of things, the predictions are a bit more curious. As noted in a previous article, U.S. natural gas production hit a peak in February 2016 and has been declining since then. A severe cutback in drilling – including less oil drilling, which affects associated gas production – has led to a drop off in gas output by about 5 percent this year. As a result, prices have crept up above $3 per MMBtu in recent weeks as supply continues to fall and demand risesBut looking forward, the EIA has some seemingly contradictory figures for 2017. The agency sees natural gas production somehow rebounding sharply, surging from 77.5 Bcf/d in 2016 to 81.2 Bcf/d next year. That 3.7 Bcf/d increase is a bit hard to believe given that gas production will likely fall for the remainder of this year and into at least the early months of 2017. But it seems all the more improbable given that at the same time the EIA sees natural gas prices averaging just $3.07 MMBtu in 2017. With supply tightening, and prices already at $3.34/MMBtu for November 2016 delivery, the price forecast seems a bit odd. For production to rise as sharp as the EIA believes, prices will probably need to be higher. If prices stay stuck at $3/MMBtu, it would seem like a bit of stretch to see production rise by so much next year. One of those predictions is likely off significantly.

EPA: FERC's Pipeline Environmental Impact Assessment Is Wrong - The Federal Energy Regulatory Commission (FERC) did not properly account for climate change in its environmental impact assessment of a $1.4 billion natural gas pipeline, according to the U.S. Environmental Protection Agency (EPA).   FERC found that the 160-mile pipeline would have a limited impact on the environment, but the EPA argues potential emissions from burning the natural gas transported by the pipeline need to be factored in.  In April, FERC found that the 160-mile Leach Xpress pipeline would have a limited impact on the environment, but the EPA argues potential emissions from burning the natural gas transported by the pipeline need to be factored in.  The EPA's statement comes just a few months after the Obama administration called on federal agencies to consider the climate impacts of their projects and at a time of increasing pipeline protests due to environmental justice and climate impacts.

  Fossil fuel production emits more methane than previously thought, NOAA says -- Emissions of planet-heating methane from fossil fuel production are between 20 and 60 percent higher than widely cited estimates, including those used by the Intergovernmental Panel on Climate Change (IPCC), the science body whose assessments influence climate action around the world. That is the main finding of a peer-reviewed study published last week in the journal Nature. It is one of the most exhaustive analyses of long-term global methane emissions and methane carbon isotope records, with implications for climate policy worldwide. The two-year study was done by 11 researchers from the National Oceanic and Atmospheric Administration (NOAA) and the Cooperative Institute for Research in Environmental Sciences at the University of Colorado. The study also found that biological sources—including flatulent cows and rotting landfills—are to blame for the ongoing massive methane spike first detected by NOAA in 2007. "It was a substantial effort," said co-author Ed Dlugokencky, a methane expert at NOAA's Earth System Research Laboratory, "with a thorough analysis of uncertainties, to show that the fraction of atmospheric methane emitted from fossil sources (both anthropogenic and natural seeps) is greater than previously thought." Methane is dozens of times more potent as a greenhouse gas than carbon dioxide. It is the main component of natural gas and leaches out of every stage of production, development, transportation and consumption. It also escapes from oil operations and coal mines.Methane escaping from natural gas, oil and coal production accounts for 132 to 165 million tons of the 623 million tons emitted by all sources every year, according to the study. That makes fossil fuel industries responsible for between 20 and 25 percent of the global methane problem. That's one-fifth higher than IPCC estimates, and as much as 60 percent higher than the estimates in the European Joint Research Centre's Emissions Database for Global Atmospheric Research (EDGAR). 

Colonial Pipeline to stop shipping high sulfur jet, heating oil in Jan 2018 -  The US' Colonial Pipeline intends to eliminate shipments of high sulfur grades of jet fuel and heating oil in January 2018, the pipeline operator told shippers Tuesday. This change would affect products with a sulfur content greater than 500 ppm, which includes 54 Grade (jet) and 70, 71, 77 and 88 grades (high sulfur heating oil), according to its notice to shippers. "The effective handling/management of the high sulfur interface is becoming a significant issue as limited markets exist for distillate containing more than 500 ppm sulfur due to the reduction of state heating oil sulfur limits and a decreased use for this product in the Locomotive and Marine sector as railroads convert to engines requiring 15 ppm fuel," Colonial Pipeline said. Colonial said its decision to eliminate the high sulfur grades from its tariff was based on feedback from shippers, transmix processors, refiners and end users.The pipeline said shipments of low sulfur products, such as low sulfur heating oil (75 grade and 85 grade) and ultra low sulfur kero (55 grade), would continue.

Cheniere cleared to export LNG from second Sabine Pass plant | Fuel Fix: Cheniere Energy Inc., which shipped its first cargo of liquefied natural gas in February, has been cleared to double exports from its landmark terminal in Louisiana. Cheniere’s second liquefaction plant at Sabine Pass was approved by the Federal Energy Regulatory Commission in a notice on Wednesday. Each plant has the capacity to produce the equivalent of about 650 million cubic feet a day. Additional volumes will come at a testing time for the global LNG market, which is reeling from a worldwide glut that’s set to worsen through 2020 as demand from key Asian customers slows. Still, the first LNG exports from the lower 48 states have helped whittle down a U.S. supply glut and put Cheniere on the road to posting its debut profit. Train 2, as the plant is known, began producing LNG on July 28 during the commissioning process. Trains 1 and 2 were shut in late September for planned work, which was expected to last about four weeks. Next year, the company is planning to bring online a third plant and start the commissioning of a fourth. Sabine Pass took in 119 billion cubic feet of gas from April 1, which marked the start of the U.S. gas stockpiling season, through Sept. 9, ABB Inc. data show. During the same period, the country’s supply glut versus the five-year average fell to 299 billion cubic feet from 874 billion.

Delaware Basin Still Selling For $60,000 / Acre -- October 14, 2016 -- RSP Permian acquires Silver Hill for $2.5 billion. I've posted RSP Permian on the blog for the past several days. Interesting how things turn out. Data points:

  • RSP Permian to buy two privately held entities
  • together, they control 41,000 net acres in the Delaware Basin of the Permian Basin
  • $2.5 billion
  • sellers: Silver Hill Energy Partners and Silver Hill E&P II (controlled by equity firms Kayne Anderson Capital Advisors and Ridgemont Equity Partners
$61,100 / net acre.

 4 companies plead guilty to federal clean air violations (AP) — Four companies have pleaded guilty and agreed to pay a total of $3.5 million for criminal clean air violations at two Southeast Texas oil and chemical processing facilities. Papers filed in federal court Wednesday in Beaumont show KTX Limited and KTX Properties Inc. pleaded guilty to negligently releasing hazardous air pollutants in a tank explosion at its Port Arthur plant in March 2011. The explosion killed one worker and injured two other severely. The documents also show Crosby LP and Ramsey Properties LP admitted failure to monitor leaks of ground-level ozone-producing air pollutants at its Crosby plant from 2008 until 2012. They also admitted falsifying records and reports to the U.S. Environmental Protection Agency and the Texas Commission on Environmental Quality. A message left with the companies drew no response.

Enviros to Texas Lawmakers: What About the Fracking Kids? - Texas Observer - A new report detailing the proximity of schools and daycare centers to fracking wells in Texas should serve as a wakeup call to state lawmakers, environmental groups say. Unveiled at a news conference in Austin on Thursday, the report found that nearly 437,000 students in kindergarten through 12th grade attend one of 850 Texas schools that are within one mile of a fracking site. In addition, 1,240 daycare centers — or 9 percent of the total number — are within one mile of a fracking well. Health hazards associated with fracking include air pollution, groundwater contamination, truck traffic and explosions or other accidents, according to the report. Children are more susceptible to harm because their immune, respiratory and nervous systems are still developing. “This report lays out a pretty clear choice for Texas and the Legislature,” said Cyrus Reed, conservation director for the Sierra Club’s Lone Star Chapter. “Choose to protect children or the oil and gas industry.”  Last year, the Legislature passed House Bill 40, which bans cities from banning fracking. Though the measure is unlikely to be repealed anytime soon, Reed said,lawmakers could strengthen state oversight of the oil and gas industry during a sunset review of the Railroad Commission, which regulates oil and gas, in 2017.  He noted that the state’s Sunset Advisory Commission recently concluded that monitoring and enforcement related to the the oil and gas industry should be improved “to effectively ensure public safety and environmental protection.” “The Railroad Commission appears to be compromised by the influence of oil and gas campaign contributions, so it’s up to our state leaders whether we get serious about enforcing rules for companies that break the law and jeopardize the health and safety of Texans,” Reed said.

Fracking Sand -- Rigzone -- October 9, 2016 --- This article was previously linked to highlight another aspect of the shale boom. This short post highlights fracking sand:
Many operators have optimized their completion designs using higher intensity fracs with longer laterals and higher proppant volumes. The in-basin frac sand suppliers continue to dominate among the sand suppliers. Sand suppliers will continue to keep a close eye on the DUC inventory, especially with nearby transload and rail facilities in Permian, STACK, SCOOP and Williston. The longer lateral trends are clear in the Eagle Ford, Permian and Williston. The average lateral length in each basin increased from 2014 to 2015.
The graph below is hard to read, but if you click on it and then zoom in, maybe you can make it out more easily. Spend some time on this graphic; lots of interesting items to note. Also from the linked article: Today, there are few operators continuing to drill and complete wells.  Most notably, Pioneer Natural Resources stated a “no backlog” stance in a recent investor call.  Several other operators, including Continental Resources, EOG Resources, Oasis Petroleum and Whiting Petroleum have started completing DUCs or expect to as oil returns to $50/bbl.  The increase in the number of DUCs is likely due to the increase in rig count along with the market volatility. The horizontal rig count reached a low of 307 the week of May 20 this year (2016) and as of the latest Baker Hughes rig count, there are 396 active horizontal drilling rigs, a 29 percent increase. The Permian Basin accounts for 50 of the 96 horizontal rigs added during this time. Just as the Permian has led the drilling activity, expect the DUC inventory reductions to occur first in the Permian.

The governor of Oklahoma created ‘Oilfield Prayer Day’ in hopes of saving the state’s oil and gas industry - The religious right has a lot to pray about these days: the overdue rapture; babies they'll never get to know; the rise and impending fall of documented coveter of other peoples' wives, Donald Trump.   But right now, they're praying for the oil fields, which are in such an imperiled state that Oklahoma Gov. Mary Fallin — an avid Trump supporter — named Thursday Oilfield Prayer Day, inviting her constituents to appeal the Lord to show mercy on its oil and gas industry.  When Oilfield Prayer Day was initially reported in October, it applied only to Christians, but on Monday, Fallin widened her call to prayer to include members of all faiths, the Associated Press reported.  This because Oklahoma's oil industry is flagging. Slumping oil prices have hit Oklahoma particularly hard. But according to Reuters, during the boom, cash wasn't flowing into the state's reserves so much as into the pockets of a few. Now that the boom is over, oil barons still enjoy enormous tax breaks — to the tune of $470 million in 2015. Government services instead took the hit, with some public schools now operating only four days a week, so low is their funding. "There are many people suffering right now who have lost their jobs in the energy sector ... there are a lot of families who have been hurt, and I think prayer is always a good thing, for anyone," Fallin said, according to the Associated Press. So, rather than praying for those families — or reconsidering those low, low oil tax rates — Fallin is rallying good Christian folks to pray for the oil fields themselves.  "We have a saying: The oil field trickles down to everyone," Oilfield Christian Fellowship member, Jeff Hubbard, told the Washington Post.  But, as Reuters' report indicates, that's not really true in Oklahoma. Despite his industry's nose dive, oil tycoon Harold Hamm remains the richest person in Oklahoma with a net worth of $15 billion, according to Forbes. In any case, people are tweeting their unfiltered thoughts and prayers in honor of Oilfield Prayer Day. 

 It's Official: Injection of Fracking Wastewater Caused Kansas’ Biggest Earthquake - The largest earthquake ever recorded in Kansas—a 4.9 magnitude temblor that struck northeast of Milan on Nov. 12, 2014—has been officially linked to wastewater injection into deep underground wells, according to new research from the U.S. Geological Survey (USGS). The epicenter of that extremely rare earthquake struck near a known fracking operation. The Wichita Eagle noted from the study that this man-made quake, which hit 40 miles southwest of Wichita and felt as far away as Memphis, likely came from just one or two nearby wells. The publication ominously noted that, "one of those two wells, operated by SandRidge Energy , is still injecting water at the same level as when the earthquake occurred two years ago." The USGS scientists believe that the 4.9-magnitude earthquake was triggered by wastewater injection for the following reasons:

  • There had not previously been similar earthquakes in the area.
  • There were waste-water injection wells nearby.
  • The earthquake activity started after the amount of water injected in the wells increased.
  • There's a piece of earth that could be activated by changes in pressure.

Kansas has had a long history with fracking. In fact, the first well ever fracked in the United States happened in 1947 in the Sunflower state. The process is now used for nearly all of the 5,000 conventional wells drilled in Kansas every year.But just like Oklahoma, Kansas is seeing an alarming uptick of "induced" earthquakes connected to the underground disposal of wastewater from the fracking process. Kansas is a region previously devoid of significant seismic activity, however, the number of earthquakes in the state jumped from only four in 2013 to 817 in 2014, The Washington Post reported.

 Methane Emissions Sky High -- Once again we see the EPA erring on the side of protecting Industry instead of protecting the environment… EPA Agrees Its Emissions Estimates From Flaring May Be Flawed.  Agency says it will re-examine the formulas it uses, based on data provided by industry, and people near oil and gas sites hope that means cleaner air. Emissions from the widespread practice of flaring has been a matter of dispute with the EPA, with several environmental groups successfully pressuring the agency to consider recalculating its estimates.  The U.S. Environmental Protection Agency has agreed to re-examine the accuracy of its 33-year-old estimates of air pollution from flaring near refineries and at oil and gas drilling sites. The decision has health advocates and some people in South Texas hoping relief from the effects of foul air is coming. The agreement comes in the wake of a lawsuit against the EPA by four environmental organizations. They claimed that air samples near oil refineries in Houston showed elevated levels of volatile organic compounds, chemicals associated with threats to public health and smog-forming pollution. Those levels, the plaintiffs said, were 10 to 100 times higher than being reported under outdated and inaccurate formulas that estimate levels of air pollution. Although the lawsuit focused on refineries in Houston, the agreement could have consequences nationwide. Booming oil and gas drilling in Pennsylvania, Colorado, North Dakota and other states have been blamed for noxious emissions that residents say has sickened them. The EPA said it will re-examine, and if necessary revise, the emissions formulas for flares at many of the estimated one million natural gas drilling and production sites across the country, according to the consent decree filed with the U.S. District Court for the District of Columbia.

DUCs To The Rescue -- October 13, 2016 - Tudor, Pickering, Holt & Co (TPH), oil analysts, in recent note to investors:

  • US crude oil production needs to grow a bit if market is to re-balance by the end of the year
  • increased number of rigs may not be enough
  • estimated exit right on target but 1Q17 could miss
  • drillers hesitant to add more rigs (except in Permian and STACK)
  • the solution? DUCs
  • analysts "feel comfortable the Bakken may catch up ... but less confident that Eagle Ford will catch up"
  • highest totals in the Eagle Ford (1,250) and the Permian (1,350)

TPH:  In the next few years, operators will likely target a backlog of two to three wells per rig. A total inventory of about 2,000 would be a normal level, TPH said, which could be the case by 2018. That would make roughly 3,000 DUCs available toward production across the Permian, Eagle Ford, Bakken and Niobrara.  Wells on backlog cost about two-thirds the price of new wells to bring to production; the cost to reach equilibrium would be close to $12 billion, TPH said.Note that TPH is using the same accounting methods used by CLR: Wells on backlog cost about two-thirds the price of new wells to bring to production. 

EOG Big Well Design Winner In The Bakken And Probably Everywhere Else -- Investing in oil and gas can be a difficult prospect. Operators have a plethora of costs, differing leaseholds and production levels. The oil industry is unique based on valuation. The P/E ratio tells us little, although others use this as a basis for putting dollars to work. Operators are often spurned for debt levels and spending to grow production in the face of large debt payments. Investors have access to operator costs, hedges and other pertinent information. Production and well performance are not as easy to find. This data is placed on state sites and some are very difficult to pull data from. Well performance is a major variable, as it has changed the way we look at oil and gas. We continue to preach about well design and the importance of its effect on production. There were a significant number of people who believed that unlocking more resource from shale would be impossible. The opposite has occurred as Mega-Fracs or enhanced completion methods have caused a major shift in where we think oil will be in the long term. The industry had thought $80/Bbl. oil would be here soon and now we are just hoping for $60.

  • Well design can alter production significantly over the first five years of well life.
  • Some operators try to keep well costs down, hurting economics significantly.
  • Results in the Bakken and other plays seem to show that operators will be forced to use Mega-Fracs or suffer in this new lower oil price environment.
  • EOG is the pioneer of enhanced completions and seems to be far ahead of the competition.

 A Sixth Pipeline Company Wants To Tap Into The DAPL -- From The Seattle Times, October 7, 2016:

  • Epping Transmission Company
  • proposes a $6.5 million project to connect its Epping Station and Divide Mainline Pipeline to DAPL
  • Epping is located a few miles northeast of Williston
  • Epping has become a surprising center of activity in the Bakken
  • there is also a CBR terminal in Epping (seldom used now according to locals)
  • the Epping addition would add 30,000 bopd to the DAPL
  • with the additional Epping contribution, the DAPL would move 470,000 to 570,000 bopd
Currently, the Bakken is producing about 1 million bopd, i.e., 365 million bbls/year.

 Appeals Court Refuses to Halt Construction on Dakota Access Pipeline  - In a setback for the Standing Rock Sioux Tribe and their supporters, on Sunday evening, one hour before the start of the second presidential debate , the DC Circuit Court of Appeals lifted an injunction that had stopped construction on the Dakota Access Pipeline , allowing work to resume. The $3.7 billion, 1,170-mile pipeline would transport 470,000 barrels of crude oil across four states, which include sacred sites and burial grounds documented by the tribe. "We are troubled by the court's decision, but as water protectors and land defenders, our resolve to stop this Bakken frack-oil pipeline will not be diminished," Tom Goldtooth, executive director of the Indigenous Environmental Network , said. "This fight is far from over." Last month, after a federal judge rejected the tribe's challenge to halt construction on lands near their reservation, the Obama administration stepped in and revoked its authorization to construct the pipeline on federal land bordering or under Lake Oahu. The U.S. Army Corps of Engineers is conducting a review that it says will be completed within weeks.  In its order , the court noted, "But ours is not the final word. A necessary easement still awaits government approval—a decision corps' counsel predicts is likely weeks away; meanwhile, intervenor DAPL has rights of access to the limited portion of pipeline corridor not yet cleared—where the Tribe alleges additional historic sites are at risk."

Dakota Access Pipeline Construction Allowed To Resume Near Defiant Tribe --  Construction may resume on a stretch of the contested Dakota Access Pipeline near a Native American reservation in North Dakota, a federal court ordered Sunday evening.  The order, issued shortly before the symbolically important Columbus Day holiday, denied the Standing Rock Sioux’s attempt to halt work on the pipeline while their lawsuit proceeds against the federal agency that approved the project. The Sioux contend that the 1,172-mile pipeline running from the Bakken oil fields in North Dakota to facilities in Illinois may contaminate the Missouri River, their water source, and destroy sacred and historical sites. “The Standing Rock Sioux Tribe is not backing down from this fight,” said tribal chairman Dave Archambault in a statement. “We are guided by prayer, and we will continue to fight for our people. We will not rest until our lands, people, waters and sacred places are permanently protected from this destructive pipeline.”The U.S. Court of Appeals in Washington, D.C., said in its two-page order that the tribe did not prove “the existence of irreparable harm” nor did it meet other conditions necessary to obtain an injunction. The ruling addresses only work in the 20-mile area around Lake Oahe in North Dakota. Soon after the three-judge panel handed down its decision, the Associated Press reported that the departments of the Interior and Justice, as well as the Army, announced that no construction on federal land would be allowed within that buffer zone around the lake.   Energy Transfer Partners, the Dallas-based company that designed the pipeline to carry 570,000 barrels of oil per day, may resume building on other land in the area. The U.S. Army and the departments of Interior and Justice, however, asked the company to voluntarily suspend all work within this section, according to Reuters. A final reckoning on the project could come in weeks as the departments involved have been reviewing what factors led the U.S. Army Corps of Engineers to issue construction permits. Pipeline opponents have argued the Corps didn’t fully investigate the potential for environmental harm, and the Standing Rock Sioux have said they weren’t properly consulted as required by the National Historic Preservation Act.

Shailene Woodley + 26 Others Arrested While Peacefully Protesting Dakota Access Pipeline -- Shailene Woodley, star of The Fault in Our Stars and the Divergent series, was arrested Monday morning while protesting the Dakota Access Pipeline in Sioux County, North Dakota. Woodley was streaming live on her Facebook page Monday during a peaceful protest at Standing Rock. The protest was in response to the DC Circuit Court of Appeals ruling on Monday that lifted a temporary injunction on the pipeline, allowing construction to resume.The actress and environmental activist was trying to head back to her RV to go back to camp, when she noticed it was surrounded by police and a riot vehicle. As she approached her RV, she was stopped by police dressed in riot and military gear. After speaking with them, she was told on camera that she was being arrested for criminal trespassing. A spokesman for the Morton County Sheriff's Department said she was also arrested for engaging in a riot. Her mother was with her at the time. When she asked why she was being arrested and no one else, and whether it was because people know who she is, the officer who appeared to be in charge said it was because she was identified. As she was being put in handcuffs, Woodley explained to a person off-camera that she was being arrested for trespassing down by the pipeline where hundreds of others had gathered, but that she left as soon as police arrived and was told to leave. "It's because I'm well-known, it's because I have 40,000 people watching it," she said.

Award-Winning Filmmaker Arrested Documenting Pipeline Protest - Josh Fox - Deia Schlosberg, the producer of my new climate change documentary, How to Let Go of the World and Love All the Things Climate Can't Change, was arrested Tuesday in Walhalla, North Dakota, for filming a protest action against a pipeline bringing Canadian tar sands oil into the U.S. The action was conducted by Climate Direct Action, but Deia was not part of the group and did not participate in the action, only filmed it. Her film footage was confiscated and she is currently being held in jail. According to Reuters: A spokeswoman for the Pembina County Sheriff's Office confirmed that Schlosberg was being held at the jail but declined to release any further information, referring calls from a Reuters reporter to State's Attorney Ryan Bialas. Bialas could not immediately be reached for comment on Wednesday.  Deia is an award-winning filmmaker in her own right, and How to Let Go of the World, which she produced, is the third film in the Oscar-nominated, Emmy-winning Gasland series.  Here's my Facebook live video from Tuesday after I learned about Deia's arrest: Arrest of journalists, filmmakers and others witnessing and reporting on citizen protests against fossil fuel infrastructure amid climate change is part of a worrisome, growing pattern. Amy Goodman, host of Democracy Now, was arrested last month for covering Native American-led protests of the Dakota Access Pipeline. The actress Shailene Woodley was arrested and jailed this week while leaving a protest at a construction site for the Dakota Access Pipeline. She was singled out and was told by police that she was arrested because she was well known and has 40,000 people watching her Facebook page.  Journalism is not a crime, it is a responsibility. The actions of the North Dakota police force are not just a violation of the climate, but a violation of the constitution.

Outrageous! Felony Charges Given to Journalist Filming Anti-Pipeline Protest – Josh Fox - Many of you may have read my post on EcoWatch this morning , and already know that Deia Schlosberg, the producer of my new climate change documentary, How to Let Go of the World and Love All the Things Climate Can't Change , was arrested Tuesday in Walhalla, North Dakota, for filming a protest action against a pipeline bringing Canadian tar sands oil into the U.S.  But, what you probably don't know is that she was escorted to the courthouse this afternoon and was charged with Class A and C felony charges that carry 45 years maximum sentences combined. The charges include, two Class A felony charges and one Class C felony charge, and conspiracy to theft of property, conspiracy to theft of services and conspiracy to tampering with or damaging a public service.  I am outraged and need your help. Please watch my Facebook video below, read the letter I'm asking you to sign and then if you want to sign it, comment below the article and we'll add your name. Thank you!   Here's my Facebook live video from just one hour ago:  Here's the letter I'm asking you to sign on to. Comment below if you'd like to be added to the letter.

Amy Goodman: 'I Will Go Back to North Dakota to Fight This Charge' - Award-winning journalist Amy Goodman, charged with criminal trespassing for filming an attack on Native American-led pipeline protesters, will turn herself in to North Dakota authorities on Oct. 17.  Amy Goodman will surrender to authorities at the Morton County–Mandan Combined Law Enforcement and Corrections Center at 8:15 a.m. local time (CDT).  "I will go back to North Dakota to fight this charge. It is a clear violation of the First Amendment," said Goodman. "I was doing my job as a journalist, covering a violent attack on Native American protesters."  The charge in State of North Dakota v. Amy Goodman stems from Democracy Now! 's coverage of the protests against the Dakota Access pipeline. On Sept. 3, Democracy Now! filmed security guards working for the pipeline company attacking protesters. The report showed guards unleashing dogs and using pepper spray and featured people with bite injuries and a dog with blood on its mouth and nose.  Democracy Now!'s report went viral online, was viewed more than 14 million times on Facebook and was rebroadcast on many outlets, including CBS, NBC, NPR, CNN, MSNBC and the Huffington Post.  On Sept. 8, a criminal complaint and warrant was issued for Goodman's arrest.  Ironically, in the state's criminal complaint, North Dakota Bureau of Criminal Investigation Special Agent Lindsey Wohl, referencing the Democracy Now! video report in a sworn affidavit, stated, "Amy Goodman can be seen on the video identifying herself and interviewing protesters about their involvement in the protest." This is precisely the point: Goodman was doing the constitutionally protected work of a reporter.

Ranchers Tote Guns as Tribes Dig In for Long Pipeline Fight - — Ranchers are arming themselves before they climb onto tractors or see to their livestock. Surveillance helicopters buzz low through the prairie skies. Native Americans fighting to prevent an oil pipeline near the Standing Rock Sioux Reservation are handing out thick blankets and coats and are building maple-pole shelters that can withstand North Dakota’s bitter winter.As the first deep freeze looms, many here are bracing for a long fight as the company behind the Dakota Access pipeline races to finish the $3.7 billion project by January, and thousands of protesters tucked into tents, tepees and trailers in prairie camps vow to stop it.“This is where we are, and where we’re staying,” Retha Henderson said, surveying a bustling camp on the edge of the Cannonball River. “We’re not giving up.”Ms. Henderson said she had been drawn to the site by memories of her grandfather, an Oglala Lakota, and by dreams. She left her apartment and her catering job in Myrtle Beach, S.C.; gave away her cat; and hitchhiked to the Sacred Stone Camp.   Crews kept digging ditches and draping sections of the light-green 30-inch pipe into ranchers’ fields not covered by the federal order. And protesters kept dogging them, driving to construction sites as far as 80 miles from their camps to try to halt work. On Monday, a holiday that many celebrate as Indigenous Peoples Day instead of Columbus Day, scores of protesters rallied and pitched a tepee beside a section of pipe near the tiny farming town of St. Anthony. Twenty-seven people were arrested. In all, about 130 have been arrested since the large-scale protests began this summer.  Winter may be coming, but so are new supporters. A group of Comanche teenagers and their parents drove to a camp from Oklahoma over the weekend to march up a rural highway to land that the pipeline would cross. A group of 400 indigenous grandmothers is making plans to come. In South Dakota, people are raising money for 1,000 Oglala Lakota Sioux children to travel to the camps. “Something bigger than us is happening here,” said LaDonna Brave Bull Allard, a tribal historian for the Standing Rock Sioux who helped found the first camp, on her property, in April.

N.D. Pipeline Protests Have Agitated Area Farmers - The construction of the $3.8 billion Dakota Access Pipeline has gone anything but smoothly. Though the project was approved this summer by the U.S. Army Corps of Engineers, it has been plagued with protestors due to a portion that will run beneath a river near North Dakota’s Standing Rock Sioux Reservation. In fact, NPR reports that more than a thousand protesters have shown up so far, which has led to a couple of high-profile arrests, including a documentary filmmaker and actress Shailene Woodley.Now, area farmers and ranchers say the unrest has left them more than a little uneasy. Some, like North Dakota farmer Jared Ernst, say they’ve been carrying an extra piece of equipment with them to their fields.“I’ve been carrying a sidearm with me everywhere I go,” he says. “I have a small revolver that I carry. My wife has started carrying, a bunch of the neighbors have started carrying firearms in their vehicles … you just don’t know.”Ernst began carrying the revolver after he had a run-in with protesters trespassing in one of his alfalfa fields, he says.AgDay has more on the story; watch the video.

Hotline set up to help farmers affected by pipeline protests (AP) — North Dakota’s Agriculture Department has set up a hotline to help farmers and ranchers south of the Bismarck-Mandan area who’ve been affected by protests against the Dakota Access oil pipeline. Many producers need to finish seasonal work before winter sets in, and they’re having problems trying to find willing truck drivers and custom silage-chopping services, Agriculture Commissioner Doug Goehring said Wednesday. “We are appealing to those who can provide these services to contact the hotline,” he said. The protests have drawn thousands of people to the area where Texas-based Energy Transfer Partners is trying to wrap up construction on the $3.8 billion, 1,200-mile pipeline from North Dakota to Illinois. Opponents of the pipeline worry about potential impacts to drinking water on the Standing Rock Sioux reservation and further downstream, as well as destruction of cultural artifacts. But a protest camp spokesman says the notion that protesters are harassing farmers or farm workers is “not true.” “(W)e’ve had quite a few farmers and ranchers stop by the camp to show their support and thank us for taking a stand against Big Oil,” spokesman Cody Hall said. Rancher Matthew Rebenitsch told The Associated Press earlier this month that many people are locking their doors and carrying guns. And Morton County Sheriff Kyle Kirchmeier has said his office has received reports of people in rural areas being stopped on roads and intimidated, a claim Hall denied. Goehring said the Farm/Ranch Emergency Assistance Hotline (701-425-8454) is aimed at helping producers and those looking for work to connect with one another. Department employees will answer calls weekdays from 8 a.m. to 5 p.m., and callers can leave messages on evenings and weekends.

 Angry Driver Plows Pickup Through Native American Crowd Protesting Dakota Access Pipeline --  Caught live on video, an 18-year old male driver plowed his pickup into a crowd of about 40 Native American protestors in Reno following an angry exchange of words. One woman was hospitalized. Quanah Brighten, executive director of United Native Americans Inc., called it a hate crime.  At about 6:40 p.m. Monday, the pickup truck approached the intersection where demonstrators had gathered under the Reno Arch. On video, the truck can be heard revving its engine. Witnesses said they heard racial slurs from the male driver and his 17-year old female companion. Angry words were exchanged. Then, suddenly, the man roared into the crowd. The entire horrific event was broadcast live on Facebook.  Five people were hurt, including Kitty Colbert, 59, of Carson City, Nevada, who was taken to the hospital with injuries that were described as non-life threatening. According to the Reno Police Department , four others were treated on the scene for minor injuries. "He could have killed me," Colbert says on the video.   It could have been far worse. "I heard the driver ask one of the protesters, 'Do you want me to kill your homies?' and that really set everybody off," Wayman told AP on Tuesday. "This is a hate crime," Brightman told the Reno Gazette-Journal.  The driver stopped his vehicle several blocks from the scene and called police. The two occupants of the vehicle have been questioned, but no arrests have been made.

Donald Trump's Ties to the Dakota Access Pipeline - Since the presidential debate on Sept. 26 , we've been hearing quite a bit about Donald Trump 's tax returns (or lack thereof). While the conversation has revolved around why Trump has chosen not to release his returns—as all presidential candidates have since 1980—we do know some things about what those returns would reveal should he choose to make them public.  In particular, we already know quite a bit about Trump's connections to the fossil fuel industry and to the Dakota Access Pipeline . Trump has deep financial and personnel ties to the pipeline, which would transport nearly 500,000 barrels of fracked oil per day from North Dakota to Illinois. The pipeline threatens the water supply and sacred lands of the Standing Rock Sioux, who have joined with dozens of tribes and other groups to stop the project. While much of Trump's finances remain a mystery, he did have to file a financial disclosure form when he declared his candidacy for president (despite his claims, this is not the same and does not provide the same level of transparency as a tax return). This disclosure form shows significant investments in the fossil fuel industry and two of the fossil fuel companies Trump holds stock in are directly funding the Dakota Access Pipeline .  Trump disclosed between $500,000 and $1 million in investments in the primary builder of the pipeline, Texas-based Energy Transfer Partners . He also disclosed $50,000 to $100,000 in investments in Phillips 66 , which would own one-quarter of the Dakota Access Pipeline once completed.

Tale of Two Tribes: Utes Want to Drill as Sioux Battle Pipeline - Bloomberg: While the Standing Rock Sioux have drawn considerable media coverage for their fight against the Dakota Access Pipeline project, the Southern Utes have attracted scant attention for their 15-year push to make it easier to drill on Indian land. Their goal: Extend financial opportunities that have already given them control of 1,600 wells across four states, and helped make them one of the richest tribes in the U.S. “Without a prolonged effort to take control of our natural resources, the Southern Ute Indian Tribe would not be the economic powerhouse it is today,” Tribal Council Treasurer James Olguin told lawmakers in a congressional hearing last week. “We are the best protectors of our own resources and the best stewards of our own destiny.” Lobbying Push Since 2012, the Southern Ute tribe has spent $1.6 million lobbying Washington to ease energy permits, ensure tribal sovereignty and lighten U.S. Interior Department rules on fracking and methane emissions, according to the Senate’s Lobbying Disclosure Act database. That’s three times more than Pioneer Natural Resources Co., a shale driller with more than $32 billion in market value. While the Standing Rock Sioux vowed last week to keep fighting the Dakota Access Pipeline after a federal court declined to halt construction, the Southern Utes met with U.S. lawmakers in Santa Fe, New Mexico, to argue for new laws loosening federal control over their drilling operations. They were joined by representatives of the Navajo Nation, the largest U.S. tribe, and the Arctic Slope Regional Corp., owned by Alaska natives.The three groups called on Congress and the Interior Department to streamline permitting on Indian lands and give tribes more control over energy leasing and environmental reviews. “Nearly every aspect of energy development on tribal lands is influenced or controlled by the federal government, a policy stemming from old notions that Indian tribes are incapable of or unwilling to manage their resources,” Utah Republican Rob Bishop, chairman of the House Natural Resources Committee, said during the hearing.

Dedicated Activists: The Next Big Threat For North-American Oil -- Oil producers and pipeline developers are having a rough time trying to get their product to market, running into resistance from protestors and seeing projects fall by the wayside. The latest came from Royal Dutch Shell, backed out of a plan last week to build an oil train terminal in Washington State. The rail terminal would have received 400,000 barrels per day of oil from the Bakken, but Shell said that the project no longer made sense with the ongoing slump in crude oil markets, and crucially, because capital availability is getting tighter. The setback is only the latest in a string of defeats for developers of energy infrastructure around the country. Also last week, city planners in San Luis Obispo rejected a proposed rail terminal that would service a Phillips 66 refinery in central California. Yet another oil train terminal met defeat in Benicia, CA, a project that would service a refinery owned by Valero. Moreover, the U.S Surface Transportation Board, a federal rail regulator, affirmed Benicia’s right to reject the terminal, a decision that is important because it grants local communities more power to deny permits for energy infrastructure, which should raise an alarm bell for energy developers around the country. The Huffington Post summed up the latest developments nicely with a headline reading “West Coast Deals Four Major Blows to Big Oil.” Additionally, the fate of the much higher-profile Dakota Access Pipeline is up in the air. An appellate court gave Energy Transfer Partners the greenlight to resume construction but the Obama administration’s U.S. Army Corps of Engineers reiterated its request for a voluntary cessation of construction while the matter can be reviewed. The Dakota Access Pipeline would carry crude oil from the Bakken to refineries in Iowa and Illinois.  "This development (with Shell), along with the developments regarding the DAPL, will hurt Bakken producers' netbacks," said Sarp Ozkan, a senior energy market analyst with Ponderosa Advisors, according to Reuters. In other words, the stoppage of pipelines will hurt oil producers’ profits.

First Nations flex muscles in US, Canada pipeline debate -- First Nations tribes in Canada and the US have started flexing their muscles, successfully delaying pipeline projects on both sides of the border. Indications are that this effort is becoming more organized and may play a larger role in infrastructure decisions across the continent. Tribal action is behind the delays encountered by Energy Transfer Partners’ Dakota Access Pipeline in North Dakota. Tribes are demanding more consultation and, in some cases, opposing expansion of energy infrastructure altogether. That effort reached a new level in late September, when First Nations and tribal chiefs gathered simultaneously at Musqueam in Vancouver and Mohawk in Montreal to sign a new continent-wide treaty and form an alliance committing nearly 50 other bands in Canada and the US to stop all proposed oil sands pipeline, tanker and rail projects in their territorial lands and waters. “What this treaty means is that from Quebec, we will work with our First Nation allies in BC [British Columbia] to make sure that the Kinder Morgan Trans Mountain pipeline does not pass and we will also work with our tribal allies in Minnesota as they take on Enbridge’s Line 3 expansion, and we know they’ll help us do the same against Energy East,” Kanesatake Grand Chief Serge Simon said in a statement. The collective stance will have a major impact on the Liberal Party government, which was voted into power last November on the promise of granting a larger say for stakeholders and particularly First Nation bands in British Columbia in any oil pipeline approval and building process.“This whole issue in relative. They have always been bold and we will see that happening in the future,” Chris Bloomer, president of the Canadian Energy Pipelines Association, told Platts.

The billion barrel oil swindle: 80% of US oil reserves are unaccounted for - U.S. Storage Filling Up With Unaccounted-For Oil - U.S. crude oil storage is filling up with unaccounted-for oil. There is a lot more oil in storage than the amount that can be accounted for by domestic production and imports. That’s a big problem since oil prices move up or down based on the U.S. crude oil storage report. Oil stocks in inventory represent surplus supply. Increasing or decreasing inventory levels generally push prices lower or higher because they indicate trends toward longer term over-supply or under-supply. Inventory levels have reached record highs since the oil-price collapse in 2014. This surplus supply is a major factor keeping oil prices low. Current inventories are 45 million barrels higher than 2015 levels, which were more than 100 million barrels higher than the average from 2010 through 2014 (Figure 1). Until the present surplus is reduced by almost 150 million barrels down to the 2010-2014 average, there is little technical possibility of a sustained oil-price recovery. Understanding U.S. stock levels should be straight-forward. Every Wednesday, EIA publishes the Weekly Petroleum Status Report which includes a table similar to Figure 2. The calculation to determine the expected weekly stock change is fairly simple: Stock Change = Domestic Production + Net  Imports – Crude Oil Input to Refineries   Domestic production and net imports account for crude oil supply, and refinery inputs account for the volume of oil that is refined into petroleum products. If there is a surplus, it should show up as an addition to inventory and a deficit, as a withdrawal from inventory. But that’s not how it works because EIA uses an adjustment in order to balance the books (Table 1).  The logic is that estimated stock levels in tank farms and underground storage are relatively dependable and that any imbalance must be from less reliable production, net import or refinery intake data.  There is nothing wrong with adjustment factors if they are small in comparison to what is to be balanced. In the Table 1 example from September 2016, however, the adjustment is 60% of the stock change–a bit too much. A one-off perhaps? No, it’s a permanent problem that has gotten worse during the last several years. Figure 3 shows that crude oil supply and refinery intake of oil vary considerably on a weekly basis. The balance is cumulatively negative over time beginning with a zero balance in January 1983. That suggests that crude oil stocks should be falling over time but instead, they have been rising. The vertical bars show the weekly crude supply from production and net imports either exceeding the refinery input requirements (positive, green) or not reaching these requirements (negative, red). The solid red line is the cumulative.   The truth—however improbable—is that inventories are probably much lower than what is reported.

EIA Changes Reporting Process As Of Thursday (Two Days From Now) -- October 11, 2016 -- From the EIA today: Starting with the Weekly Petroleum Status Report (WPSR) published on Thursday, October 13, the U.S. Energy Information Administration will no longer include crude oil lease stocks in U.S. total commercial crude oil inventory data.  Crude oil lease stocks refer to oil (currently about 31 million barrels) that is stored in tanks at sites across the United States where producers are drilling on leased land. Lease stocks are not yet available for commercial use, and in many cases, operators do not count them as production until the oil is transferred off the lease. – EIA

US Shale Oil Output Seen Surging If Crude Reaches $60 a Barrel -- Crude at $60 a barrel would probably trigger a strong increase in North American oil output, the head of the International Energy Agency said, amid signs that OPEC members and Russia may be edging toward an agreement to limit production. Benchmark Brent crude hit a one-year high above $53 a barrel on Monday when President Vladimir Putin said Russia was willing to work with the Organization of Petroleum Exporting Countries to stabilize the market. A deal could lift prices as high as $60 by the end of this year, Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said at the World Energy Congress in Istanbul.  If prices reach $60 and stay there, U.S. shale drillers could find it commercially viable to revive production at some mothballed wells and boost output by more than 1 million barrels a day by early 2018, according to Vienna-based consultant JBC Energy GmbH. “We may well see, in a short period of time, strong production growth coming from North America and elsewhere,” IEA Executive Director Fatih Birol said Tuesday in a Bloomberg TV interview. “Prices around $60 would be sufficient.”  Brent crude climbed to $53.14 a barrel on Monday as Russia’s Putin said the world’s largest energy exporter was ready to join OPEC in restraining oil production either with a freeze or a cut. The international pricing benchmark has gained almost 15 percent since OPEC agreed last month on the first supply curbs in eight years, and it was trading near $53 a barrel on Tuesday.  Some U.S. producers have already stepped up operations. The number of active oil-drilling rigs in the U.S. has climbed from 328 in early May to 428 last week, according to Baker Hughes Inc. “As soon as OPEC moves into a position of trying to manage the price, it basically takes care of the downside risk,”  “The consequence is increased U.S. production.” If crude reaches and holds steady at $60, he said he expects U.S. output to rise by at least 500,000 barrels a day by the end of 2017. U.S. shale drillers could add from 1 million to 1.5 million barrels a day within the next year and a half, if prices stay at that level, JBC Energy said in an e-mailed note.

Why Dividends Are Still A Must For Big Oil | The big oil companies—at least in this oil price environment—have come under a lot of criticism for their decision to generate cash flow rather than focus on return on equity. Much has been discussed about the dividend-paying capabilities of the companies, as that they have dished out dividends that have often exceeded their earnings. Is this a sound strategy, and should investors continue to hold onto the big four stocks? The big four oil company’s dividend payout in 2015 was more than 100 percent of their profits. The situation got worse in 2016, when Exxon ponied up a whopping $3.1 billion in dividends for Q2, against a net income of $1.7 billion, according to S&P Global Market Intelligence. The gap was likely filled by taking on debt. The net debt of the big four oil companies; Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC, and Chevron Corp, has more than doubled in the last two years. The debt to equity ratio of Exxon is the least at 18 percent, while Shell has the highest gearing of 28 percent, likely to reach 30 percent, according to their Chief Financial Officer Simon Henry. BP is also expected to have a gearing of 30 percent by end 2017, according to Jefferies analyst. For the sake of comparison, in 2012, Exxon’s debt to equity was just 1.2 percent, and Shell’s was only 10 percent; looking back to a decade ago, Exxon had no debt at all.Though the companies are resorting to asset sales, job cuts, and other budget cuts to survive the downturn, many have asked why they continue to dish out dividends to their investors. Globally, more than $9 trillion of government securities yield below zero, according to Bloomberg Barclays index data. In such an environment where investors are scrounging for yields, the big four oil companies offer mouth-watering ones. Exxon has a dividend yield of 3.4 percent, Chevron has a yield of 4.19 percent, BP has a yield of 6.68 percent, and Royal Dutch Shell has a dividend yield of 6.4 percent. This has led the investors to continue holding the stocks of these companies even during such a massive oil rout. If the investors bail and trigger a sell off of these stocks, it would dampen the sentiment towards their stock, and the companies would find it difficult to raise new debt. Hence, taking some debt to continue paying dividends is the smart strategy—and possibly the only strategy—to follow.

 Email Dump Exposes Hillary's Secret Love of Fracking - Fracking was invented by the U.S. government and Hillary Clinton loved the energy production process so much, she advocated it worldwide, according to leaked transcripts of speeches made to businessmen.  The disclosure comes after Wikileaks released emails hacked from John Podesta, chairman of the Clinton campaign, on Friday. Despite a fracking ban in her home state of New York, Hillary Clinton told bankers, “I’ve promoted fracking in other places around the world.”Podesta received comments made in past Hillary Clinton speeches flagged as potential liabilities. Parts of those speeches included speeches to big investment banks such as Goldman Sachs. And many of the excerpts betrayed significant conflicts between what Democratic presidential nominee Hillary Clinton says on the campaign trail and what she really believes.Clinton’s support for fracking, or hydraulic fracturing, could cause further consternation among those in her base who enthusiastically supported Vermont Sen. Bernie Sanders during their contentious primary. Standing before Deutsche Bank on April 24, 2013, Clinton not only said she supported fracking — an energy production process hated by left-wing environmentalists — but that the government invented it. "I mean, fracking was developed at the Department of Energy. I mean, the whole idea of how fracking came to be available in the marketplace is because of research done by our government," Clinton said in a paid speech before the bankers. "And I've promoted fracking in other places around the world." The U.S. government is generally not credited with developing hydraulic fracturing to get at trapped natural gas and oil. In lesser forms, the process started in the 1860s, according to John Manfreda, writing for The Department of Energy did help the process along in the 1970s, according to the New York Times. But the modern practice -- made economically feasible, to boot -- was refined by George P. Mitchell. According to the Times, Mitchell's company injected the ground with water, sand and a chemical mixture, rather than more expensive foams and gels, into the wells. The process became viable for gas and made Mitchell rich.

Hillary Clinton Expresses Support For Fracking In Wikileaks Document - -  During the fight for the Democratic presidential nomination, Hillary Clinton cast herself as a skeptic of hydraulic fracturing -- the controversial process to extract natural gas. But newly released documents purporting to show excerpts of her paid speeches show that Clinton proudly touted her support for fracking, which environmental groups say can pollute groundwater and undermine the fight against climate change. The excerpts also show Clinton saying that some environmental organizations trying to restrict her work to promote fracking were front groups for Russian oligarchs. The transparency group Wikileaks published the document as part of what it says is a tranche of emails from John Podesta, Clinton’s campaign chairman. Podesta has refused to say whether the excerpts are authentic but has not denied their authenticity, either. The document published by Wikileaks shows what purports to be an 80-page memo of excerpts of Clinton’s speeches -- which she refused to publicly release during the primary campaign. It appears to be attached to a January 25, 2016 email to Podesta and other Clinton campaign aides.  In one excerpt of a speech to Deutsche Bank in April 2013, according to the document, Clinton boasted about the federal government’s support for fracking and her own work to promote the process across the globe. “Fracking was developed at the Department of Energy,” the document shows Clinton saying. “I mean, the whole idea of how fracking came to be available in the marketplace is because of research done by our government. And I've promoted fracking in other places around the world.” In another excerpt of the same speech, Clinton outlines why she supports a continued push for fracking. “The ability to extract both gas and oil from previously used places that didn't seem to have much more to offer, but now the technology gives us the chance to go in and recover oil and gas,” the document shows her saying. “Or with the new technology known as fracking, we are truly on a path -- and it's not just United States; it's all of North America -- that will be net energy exporters assuming we do it right."

Neither Clinton Nor Trump Opposes Fracking - The Real News Network - (video interview and transcript) Hydraulic-fracturing, the process of using millions of gallons of water, sand, and chemicals to break apart shale rock to extract natural gas. This industry has grown tremendously over the past decade plus. In the year 2000, fracking was 2% of oil output in the US. In 2016, it counts for over half of American oil production. There aren’t definitive numbers of exactly how many active fracking wells there are but the range is somewhere between 300,000 and 1.7 million. There have also been a lot of push and pull around this issue. The oil industry is viciously drilling new wells and seeking to expand into states that have not yet hopped on the fracking boom. The reason why these states haven’t hopped on this boom is in large part due to massive grassroots resistance from groups and every day citizens who voice concerns about the hazardous environmental impacts of releasing massive amounts of methane gas and the contamination of ground water. The EPA under President Barack Obama has been somewhat laissez faire about fracking. Climate change unfortunately has taken a back seat in the presidential election but Hillary Clinton was campaigning in Florida on Monday and here’s what she had to say.  Climate change is real, it’s urgent, and America can take the lead in the world in addressing it, right. We here in America can develop new clean energy solution. We can transform our economy. We can rally the world to cut carbon pollution.   She went on to remind the crowd that Donald Trump is a climate change denier whose said that climate change is a hoax perpetuated by the Chinese to undermine American industry. But is Hillary Clinton all that different in her support of the fossil fuel industry and what does her track record have to say about the future of the US and climate change under a Clinton administration. To discuss these and related topics, we’re joined in studio by one of the leading voices of the environmental movement, Wenonah Hauter is the author of Frackopoly: The Battle for the Future of Energy and the Environment. She’s also the founder and executive director of Food and Water Watch Action Fund, the first national advocacy group to call on a ban on fracking. Wenonah thank you so much for joining us.

Leaked emails show Hillary Clinton blaming Russians for funding 'phony' anti-fracking groups - -- Supporters of hydraulic fracturing have long accused Russia of funding anti-fracking environmental groups, and it turns out Democratic presidential nominee Hillary Clinton agrees.Mrs. Clinton complained about “phony environmental groups” pushing an anti-fracking agenda in a speech to a private audience, according to excerpts leaked Saturday by WikiLeaks after purportedly hacking into the account of Clinton campaign manager John Podesta. The Clinton campaign has refused to comment on the leaked documents while declining to dispute their authenticity. “We were up against Russia pushing oligarchs and others to buy media. We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians to stand against any effort, ‘Oh that pipeline, that fracking, that whatever will be a problem for you,’ and a lot of the money supporting that message was coming from Russia,” Mrs. Clinton said in her remarks. She allegedly made the comments at a June 18, 2014, speech sponsored by tinePublic, a Canadian promotional group. Filmmaker Phelim McAleer, who linked Russia to U.S. anti-fracking campaigns in his 2014 documentary FrackNation, said the former Secretary of State’s comments vindicate what he and others have long alleged. “Clinton had access to intelligence reports and briefings. This is a huge story,” Mr. McAleer said in an email. “We at FrackNation are now calling for Hillary Clinton and the State Department to release the names of all anti-fracking organization funded by [Vladimir] Putin’s Russia.” At the same time, the leaked speeches came as another blow to Mrs. Clinton’s tenuous relationship with environmentalists. “Apparently, @HillaryClinton will help clean up world w/ renewable energy—right after she helps poison it w/ fracking,” Mediaite columnist and The Young Turks political reporter Jordan Chariton said in a Sunday tweet.

Hillary's Leaked Speeches Confirm Russia Funded Anti-Fracking Groups -- Democratic nominee Hillary Clinton confirmed to an audience behind closed doors what national security experts have warned about for years — Russians are pumping money into anti-fracking environmental groups.  Clinton told an audience in Edmonton, Canada, hosted by the PR firm tinePublic, that Russian oligarchs were propping up “against phony environmental groups” opposed to pipelines and hydraulic fracturing, according to emails published by WikiLeaks.“We were up against Russia pushing oligarchs and others to buy media,” Clinton said in a June 2014 speech. “We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians to stand against any effort, oh that pipeline, that fracking, that whatever will be a problem for you, and a lot of the money supporting that message was coming from Russia,” she said. It’s unclear exactly to whom Clinton was speaking when she made these remarks or if she was referring to U.S.-based environmental groups or just European ones since the full transcript of her speech is unavailable. Clinton’s Edmonton speech was one of five she gave across Canada in 2014 that were sponsored by tinePublic. Edmonton is the capital of Alberta, which is Canada’s largest petroleum-producing province. Conservatives and energy proponents have been concerned for years the anti-fracking movement was being fueled by Russian money. Environmentalists largely oppose fracking on the grounds it makes global warming worse and contaminates groundwater, but defense officials and U.S. conservatives have found Russian fingerprints on anti-fracking campaigns. Eastern European officials have said Russia is backing environmental protesters at potential fracking sites in Romania and Bulgaria. Russia is currently Europe’s main gas supplier.

Fracking is a form of climate-change denial - We need to face the fact that the climate crisis is upon us, and that the greenhouse gases we’ve already emitted have locked in even worse that’s yet to come. The mass deaths in Haiti and the evacuation of 1.5 million people from the Florida coast in the wake of Hurricane Matthew is just the kind of weather-related event that we can expect to happen more frequently in a warmer world.  So what do we need to do? Run and cower in the corner? Accept futile half-measures? No, courage is what the movement fighting climate change and fossil fuels needs most now. Lack of courage by western governments is having devastating consequences, and in the case of America, one of them is fracking. This is the unacceptable “solution” to the climate crisis that the US has been pushing all across the world. The decision by the British government last week to overturn Lancashire’s rejection of fracking shows that the UK, too, seems to be falling for it.  Our movement and our scientists, by contrast, do have the courage to identify what needs to be done. Bill McKibben, founder of, estimates that we have 17 years to replace all fossil fuel infrastructure with renewable energy. That means no new fossil fuel projects. Period. We burn down what we have, and we build renewable energy sources as fast as we can. That means no new pipelines, no new fracking fields, no new offshore drilling, no new tar sands or coal mines. That would mean no new fracking in the US or the UK. You cannot be a climate leader and support fracking: it is a new form of climate denialism. One only has to look at the brave stand people all across the world are taking to fight fossil fuel developments to see the kind of courage our governments lack but that the future will demand. Britain has seen protests in Balcombe in West Sussex, and in Blackpool, while in the US we have had brave pipeline fighters in Nebraska and Standing Rock reservation, North Dakota. The neoliberal promise that we can both prevent catastrophic warming and allow energy companies to get rich extracting and burning more fossil fuels, including shale gas, is a fallacy. We can’t. Yet the US State Department’s shale gas initiative is seeking to expand fracking to other countries, even when their citizens don’t want it. The UK’s Institute of Gas Engineers and Managers, IGEM, cites it as a model for the world, and now Britain is seeking to import its own US-style fracking boom.

5 Climate Activists Shut Down 5 Tar Sands Pipelines -- Activists successfully shut down five pipelines today across the U.S. that deliver tar sands oil from Alberta, Canada. The pipelines targeted were Enbridge line 4 and 67 in Leonard, Minnesota; TransCanada's Keystone pipeline in Walhalla, North Dakota; Spectra Energy's Express pipeline at Coal Banks Landing, Montana; and Kinder-Morgan's Trans-Mountain pipeline in Anacortes, Washington.  In an online statement by #ShutItDown , the group said:   "This morning, by 7:30 PST, 5 activists have successfully shut down 5 pipelines across the United States delivering tar sands oil from Alberta, Canada in support of the call for International Days of Prayer and Action for Standing Rock . Activists employed manual safety valves, calling on President Obama to use emergency powers to keep the pipelines closed and mobilize for the extraordinary shift away from fossil fuels now required to avert catastrophe."  Since then, EcoWatch has learned that police have approached two sites so far and two women have been arrested in Minnesota. The two are Emily Johnston, 50, and retired attorney Annette Klapstein, 64. "For years we've tried the legal, incremental, reasonable methods, and they haven't been enough; without a radical shift in our relationship to Earth, all that we love will disappear," Johnston said. "My fear of that possibility is far greater than my fear of jail. My love for the beauties of this world is far greater than my love of an easy life." Only one activist is at each site, accompanied by a support person and video crew. The groups have been posting and live-streaming on Facebook .

Fracking controversy erupts in UK following approval of shale gas industry request — MercoPress: Horizontal fracking can go ahead, the British government has said, in a landmark ruling for the UK shale gas industry. Communities Secretary Sajid Javid has approved plans for fracking at Cuadrilla's Preston New Road site at Little Plumpton in Lancashire.Environmentalists and local campaign groups reacted angrily, saying it was a denial of local democracy. It means, for the first time, UK shale rock will be fracked horizontally, which is expected to yield more gas. A second site, Roseacre Wood, has not yet been given the green light amid concerns over the impact on the area. Lancashire County Council (LCC) refused permission to extract shale gas at both sites last year on the grounds of noise and traffic impact, but Cuadrilla appealed. In response to the decision, LCC has called on the government to do more to address people's concerns about fracking. “It is clear the government supports the development of a shale gas industry, but I would ask them to do more to address the concerns of local communities and the councilors who represent them by supporting the best environmental controls,” it said. Cuadrilla chief executive Francis Egan said: “We have been through an exhaustive environmental impact assessment on this. We have assessed everything; noise, traffic, water, emissions, etc. ”The Environment Agency are entirely comfortable with it.“

Farmers condemn go-ahead for fracking in Lancashire - Farmers Weekly: Farmers have condemned a government decision to allow shale gas exploration in Lancashire – despite the local county council’s refusal to grant the go-ahead.The government over-ruled Lancashire County Council’s (LCC) refusal to grant permission for exploratory fracking by energy company Cuadrilla on Thursday (6 October).A decision on whether to allow fracking at a second site is expected to be granted following pending a request for further information. Dairy farmer’s son and agricultural engineer Tony Holden said: “This is a very dark day for agriculture and the UK as a whole.”Mr Holden argued Theresa May’s government was effectively making landmark decisions without a mandate from the public. ““This is about turning farms into gas fields and then farming crops, meat and milk on gas land,” he added. If fracking took place, the quality of food produced from farms in the area could be called into question, said Mr Holden. This could undermine food security, he added. By over-ruling the decision of LCC, the government was acting in the interests of an energy company, rather than in the interests of local people.“This is not democracy, it is dictatorship.” Local farmer Robert Sanderson said he too was disappointed at the decision. “I think it is catastrophic,” he told ITV News. Mr Sanderson said he had almost 1,000 head of cattle and their fertility could be jeopardised if there was any contamination.

Ignoring local concerns on fracking will come back to haunt Britain - When a county council in the north of England refused to grant planning permission for a shale gas site back in June 2015, it was hailed as a victory for anti-fracking campaigners and concerned locals. The UK secretary of state for communities and local government, Sajid Javid, has now overruled this decision. Fracking will go ahead in Lancashire after all. The planning authority’s initial position clearly reflected a high level of public concern over the local impacts of the proposed fracking site. But the government’s move sends a clear message: councils who refuse applications not only face the challenge of an appeal, but also the potentially huge cost of defending their decisions in court. This could have big implications for local decision making and everyone affected by proposed fracking sites. However, in the long run, this overruling may actually harm the UK shale industry. My research shows that there is already an extreme deficit of trust in the UK planning system. People view planning authorities and local councils as being under significant policy pressure to allow shale gas exploration. This perception is not unfounded. The government has not only declared its explicit support for shale gas and fracking, but has also actively changed the law on subsurface trespass to facilitate underground drilling.  There’s now a strict time limit, 16 weeks, for fracking-related planning applications. Given that many planning authorities won’t have much experience of dealing with oil and gas developments, this deadline may prevent detailed consideration of local impacts. Such decisions must also be made in accordance with the UK’s national planning framework which explicitly emphasises the economic importance of mineral extraction. But how can fracking decisions be seen as legitimate if local decisions and local concerns are simply vetoed? The overrule is all the more surprising given that last year new wind farm planning guidance stressed that locals should have the final say.

 BP Abandons Drilling in the Great Australian Bight -- Conservationists and environmentalists in Australia are celebrating a major victory after the oil giant BP announced that it is abandoning its hugely controversial plans to drill for oil and gas in the Great Australian Bight. The area, which is off the country's southern coast, is a marine park and home to one of the largest breeding populations of endangered southern right whales in the world. BP had big plans for the Bight and had once boasted that the region could be as important to the oil industry as the Gulf of Mexico.  But BP had also been struggling to persuade Australia's regulator, National Offshore Petroleum Safety and Environmental Management Authority, Nopsema, that it could safely drill in the highly ecologically sensitive region. Three times the regulator has knocked back the company, the third being just last month, when it again found BP's environmental plans inadequate.  The company's plans have also long been opposed by the Wilderness Society and other groups. Speaking last year, the Society's South Australia's director Peter Owen said: "The Great Australian Bight is a haven forwhales , boasting the world's most significant southern right whale nursery as well as many humpback, sperm, blue and beak whales." Environmentalists have called on BP to abandon its plans saying that the area could not be put at risk from oil exploitation and that the company could never adequately clean up an oil spill.Today their wish was granted. BP said it was pulling out due to costs and the low oil price.

Jet fuel being bought for blending into diesel for winter spec: traders - Jet fuel is being bought for blending into diesel to improve its cold properties as winter draws closer, European and Russian traders said. Blending was being reported by sources in Northwest Europe, the Mediterranean and Scandinavia, with the current pricing environment and availability of appropriate fuel grades serving to create the situation. Middle distillate margins have been helped recently by a weaker Dated Brent market, with cracks -- the relative value fetched by a product when compared with the input cost of crude -- moving up slightly. Ultra low sulfur diesel cracks are seeing greater support than the rest of the middle distillate complex, which is contributing to the economic favourability of blending jet into diesel.The jet FOB/Dated Brent crack moved to $11.7853/b Thursday, from $11.5852/b Wednesday while the ULSD 10 ppm FOB ARA barge/Dated Brent crack jumped 24 cents/b to $12.0833/b. Blending jet into diesel has helped push up kerosene prices in Russia, traders said. Stocking of diesel with more stringent cold properties was under way, even though current demand was dampened by relatively mild weather, sources said.

It Takes Two - Supplying Mexico's Growing Natural Gas Demand -- There is a natural gas renaissance of sorts happening south of the U.S.-Mexico border. The state-owned Comisión Federal de Electricidad (CFE) is investing heavily in expanding and modernizing its power generation fleet with thousands of megawatts of new, natural gas-fired power plants, and the energy secretary also last October put forth an aggressive five-year plan to build out a pipeline system to supply growing gas-fired generation demand. Mexico’s power generation demand is increasingly a target for U.S. gas producers and pipeline projects. At the same time, as we discuss in Part 2 of RBN’s Miles and Miles of Texas Drill-Down Report published last week, a good portion of this new demand is relying on — and in large part has been driven by — availability of low-priced gas from the U.S. via Texas and the U.S. Southwest states. But there is a lot that needs to happen on both sides of the border over the next few years to facilitate this mutually beneficial relationship. Already since October, Mexico’s newly appointed independent pipeline operator, Centro Nacional de Control del Gas Natural (CENAGAS), has pulled back on the pipeline buildout. Today, we begin a two-part series on how plans to facilitate this new demand are progressing, starting on the Mexico side of things.

Argentina wants to delay, cancel three-four Oct LNG cargoes: sources - Argentina's Enarsa is trying to defer or cancel three to four LNG cargoes due to be delivered in October, after doing the same for up to four cargoes in September, sources told S&P Global Platts Monday. Enarsa awarded contracts for a total of eight October cargoes via tender, with five cargoes scheduled for delivery into the Escobar terminal and three for the terminal at Bahia Blanca. According to cFlow, Platts trade flow software, only one cargo has been delivered to either port. One vessel, the Arctic Voyager, is laden and has been in a holding pattern off the coast of Bahia Blanca for two weeks. The country's reduced appetite for LNG is understood to be driven by warmer-than-expected weather after an Argentinian winter -- which runs between June and August -- that was colder than in the previous three years.Enarsa told Platts on October 4 that warmer weather conditions have caused demand for natural gas to drop considerably, adding that its ability to store LNG was minimal relative to the total volume consumed. According to one London-based analyst: "My view on Argentina is that they overbought for September assuming colder weather, similar to [that of] July and August, but the reality turned out relatively normal and demand is falling fast as it is mainly residential." The tenders for the October cargoes were launched in July and August, when temperatures were below those seen in previous years.

Russian natural gas pipeline exports to Germany, Slovakia hit record high -  The amount of natural gas exported from Russia via the Nord Steam, Yamal, and Brotherhood pipelines combined rose to a record high Monday as gas transit via Ukraine increased, data from Platts Analytics' Eclipse Energy showed Tuesday. Total Russian pipeline gas exports via Nord Stream, Yamal, and Brotherhood hit 360 million cu m Monday, above the previous record high of 357 million cu m from early September and over 15% higher than the 313 million cu m from October 10, 2015.Russian gas transit via Ukraine neared a three-year high in early September of 195 million cu m/d on Nord Stream maintenance, but averaged 136 million cu m/d in August and 102 million cu m/d in July, with Russia attempting to reduce gas transit flows via Ukraine. Indeed, Russian state-owned Gazprom is pressing ahead with plans for both the Nord Stream 2 and TurkStream pipelines, which if realized, would see Russian gas able to bypass Ukraine into Europe. But with these pipelines still several years away from being put into operation and oil-indexed prices competitive with hub pricing this winter, Russia has had to increase reliance on Ukrainian transit to boost flow rates. Flows through the Yamal pipeline are limited to 87 million cu m/d due to the pipeline's capacity, and flows through Nord Stream have been capped at about 120 million cu m/d due to restrictions in place regarding capacity on the OPAL pipeline, with the Brotherhood pipeline currently the swing factor in Russian gas exports. The record daily high has been achieved by an increase in Russian gas transit via the Brotherhood pipeline, taking Russian gas to the Slovakian border via Ukraine, which increased to 153 million cu m on Monday.

Emerging winter demand propels Asian LPG prices to 10-month high - Asian LPG prices shot to a 10-month high of $379.50/mt late Thursday, waking up from a protracted slumber, as robust appetite from China to stockpile for winter and a high-priced deal by oil kingpin Saudi Aramco this week set the stage for firmer prices, market sources said Friday. "[There is] strong demand since winter is coming," said a source with a Chinese company. The price was last higher on January 4, the first trading day of the year, at $385/mt, data from S&P Global Platts showed. Chinese buyers such as Ouhua Energy, Star Gas, Oriental Energy and Tianjin Bohai have bought end October to early November arrival cargoes of propane and butane since late September.Exact price details were sketchy but traders said some clips were done at Far East Index plus $1-$3/mt on a delivered basis. Tianjin Bohai earlier this week bought an early November-arrival cargo from Turkish trader Bayegan. The cargo was heard to be an evenly-split 44,000 mt parcel. Price details were not available. The physical CFR Singapore-Japan propane price climbed $3.50/mt day on day Thursday -- bucking a $1.07/b ($8.56/mt) slump in the crude complex -- to be assessed at $379.50/mt. The front month contango structure in Far East Index swaps has largely flattened out, while the CP swap structure has flipped into backwardation.

OPEC production cut: Just another Saudi head fake? - What do you do when everyone is bugging you to do something, but you don't want to do it? The simple answer is that you make it look like you are doing something in order to get others off your back. It is not always easy to tell what people's intentions are. But we can look at what they have done in the past. The main thing that the Kingdom of Saudi Arabia has done over the past year in response to pressure from other OPEC members is talk about steps it would take to raise oil prices. But in the end the kingdom doesn't actually do them, or it does things which have no practical significance. (Saudi Arabia, the world's largest exporter, is the OPEC member with the greatest flexibility in its production. Any OPEC production cut without Saudi leadership would lack credibility.) We should keep all this in mind when evaluating the latest reports that OPEC has agreed to cuts. Bloomberg tells us right up front that OPEC has merely agreed to the "outline of a deal" that will be taken up at its November meeting. One of Saudi Arabia's partners in its yearlong public talkfest has been Russia, the number one or number two oil producer in the world depending on what month it is. The Russians said in early October 2015 that they were ready to discuss oil prices with OPEC. Later that month it was leaked that the Russians had no intention of cutting their own production. In late January of this year, the oil price catapulted after Russia's energy minister said he was "ready to meet with OPEC and Saudi Arabia to discuss a production cut," the Financial Times reported. When the Russians did meet with Saudi Arabia and also with representatives from Qatar and Venezuela in late February, the group proposed a freeze in production, but no production cut. Only the uninitiated may be forgiven for not understanding that a freeze would change nothing. Oil production would simply continue at the current level, hardly a strategy to achieve higher prices. In early March the Russians announced that their oil companies agreed to a freeze in production. In late March the Saudis announced that they, too, would be freezing production even if Iran would not commit to a similar freeze. The Iranians, of course, have been keen to get back into the export market in a major way after having been crippled by trade sanctions for years, sanctions which have been lifted in the wake of an international agreement governing Iran's nuclear program.The stated intention of the Saudis and the Russians was to raise oil prices. But, given that the practical effect on production was zero, they must have had some other method in mind. One possibility is that they have been working together simply to jawbone the price of oil higher without having to reduce production. If that's the case, it seems to have worked reasonably well as all the announcements of meetings and rumors about what might happen at those meetings seem to have coincided roughly with a rising price.

OPEC action should not shock rebalancing oil market: Saudi energy minister - Saudi energy minister Khalid al-Falih said Monday an agreement among OPEC members outlined last month should not shock the market and a "very gentle hand on the wheel" was needed as global supply and demand was already converging. Speaking at the World Energy Congress in Istanbul, Falih said he was "optimistic" the details of last month's preliminary agreement in Algiers would be pinned down when OPEC holds its regular meeting in Vienna in November. Several OPEC ministers are expected to meet here this week, with Russian energy minister Alexander Novak also due in Istanbul.Falih reiterated comments earlier in the year that an increase in oil prices to $60/b was "not unthinkable," while insisting that prices were not the over-riding consideration. However his comments on the need for caution by OPEC may fuel suggestions that Saudi Arabia is reluctant to deviate greatly from the policy it adopted in 2014 of tolerating low prices and seeking to maintain market share. "OPEC needs to make sure that we don't crimp too tightly and create a shock to the market. We don't want to give the market the opposite signal and shock markets into prices that could be harmful," he said. Falih added that market conditions had changed since OPEC made its decision in late-2014 not to intervene in the market to support prices -- a time, he said, when booming US shale production was causing a divergence in the market. "It's a very gentle hand on the wheel and we're not doing anything dramatic, different. I think the market forces have shifted significantly between 2014 and now," he said.

Post-Algiers prospects: What's really at stake when OPEC meets again in November? - Capitol Crude podcast: This week’s episode of Capitol Crude looks at the fallout from OPEC’s Algiers meeting and the prospects for rebalancing global oil supply and demand. Platts senior editors Meghan Gordon and Brian Scheid talk to former Capitol Crude co-host Herman Wang about his time chasing oil ministers in Algiers and what’s at stake when the group meets again in November. Veteran OPEC watcher Bob McNally of The Rapidan Group lays out some longer-term rebalancing scenarios, and Platts Global Editorial Director Dave Ernsberger considers the possibility of peak demand.

Putin Says Russia Ready to Join OPEC Effort to Limit Oil Supply - Bloomberg: Russia, the world’s largest energy exporter, is ready to join OPEC in limiting oil production with either a freeze or a cut, said President Vladimir Putin. “Russia is ready to join in joint measures to limit output and calls on other oil exporters to do the same,” Putin said on Monday at the World Energy Congress in Istanbul. “In the current situation, we think that a freeze or even a cut in oil production is probably the only proper decision to preserve stability in the global energy market.”Ministers from some of the largest oil-producing nations are gathering in Turkey this week to discuss ways to end a two-year supply glut. With benchmark Brent crude trading at about $52 a barrel -- less than half its price in mid-2014 -- countries from Saudi Arabia to Russia remain under severe economic pressure. Last month in Algiers, the Organization of Petroleum Exporting Countries reversed its policy of pumping without constraints, helping boost prices. Even so, a lot of work needs to be done by the next OPEC meeting on Nov. 30, with crucial details still to be resolved on how the burden of cuts will be shared, or whether producers outside the group will cooperate. Russia would prefer to freeze its output at current levels rather than make reductions, Energy Minister Alexander Novak said earlier Monday in Istanbul. Russia has pumped 11.2 million barrels a day of oil so far in October, beating a post-Soviet record, according to preliminary data from the Energy Ministry’s CDU-TEK unit. November Meeting Putin said he hoped OPEC would agree in November on limits to its crude production and that Russia was ready to back such a decision, while remaining a reliable energy supplier. “We support OPEC’s recent initiative to cap output and think that at the OPEC meeting in November this idea will materialize in a specific agreement, giving a positive signal to the markets and investors,” Putin said. Brent crude climbed as much as 1.7 percent to $52.80 a barrel Monday amid signs that Russia and Saudi Arabia could be moving closer to a supply agreement. The international benchmark has gained 15 percent since OPEC agreed last month on the first supply curbs in eight years.

Oil Spikes Above $50 As Russia, Saudis Hint At Output Freeze... Again -- Oil prices are rebounding from their Friday drop as first the Saudis, then Russia dropped more hints at the potential for maybe, possibly, kinda, sorta considering an output freeze... As Bloomberg reports, Russia, the world’s largest energy exporter, is willing to consider freezing or even cutting oil output in cooperation with OPEC, said President Vladimir Putin.Speaking at the World Energy Congress in Istanbul Monday, Putin said he hoped OPEC would agree on limits to its crude production in November and that Russia was ready to support that decision. Russia will continue to be a reliable energy supplier, he said.Ministers from some of the largest oil-producing nations are gathering in Turkey this week to discuss ways to end a two-year supply glut. With benchmark Brent crude trading at about $52 a barrel -- less than half its price in mid-2014 -- countries from Saudi Arabia to Russia remain under severe economic pressure. Last month in Algiers, the Organization of Petroleum Exporting Countries reversed its policy of pumping without constraints, helping boost prices.“It is not unthinkable that we could see $60 by year-end” following the agreement in the Algerian capital, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in Istanbul.Even so, a lot of work needs to be done by the next OPEC meeting on Nov. 30, with crucial details still to be resolved on how the burden of cuts will be shared, or whether producers outside the group including will cooperate. Russia would prefer to freeze its output at current record levels rather than make cuts, Energy Minister Alexander Novak said earlier Monday.Russia has pumped 11.2 million barrels a day of oil so far in October, beating last month’s post-Soviet record of 11.1 million, according to preliminary data from the Energy Ministry’s CDU-TEK unit.

"Verbal Stimulus" Sends Oil To 1-Year Highs... Now What? --Thanks to the miracle of "verbal stimulus" oil prices have recovered to their highest since July 2015... As UPI's Daniel Graeber explains, Crude oil prices erased a pronounced slump in early Monday trading after Russia signaled it would join a production agreement reached last month in Algeria.Oil prices traded in the red overnight in a carry-over from Friday's slump. A long rally in oil prices faltered last week amid sluggish growth in the U.S. labor sector. Wage growth was slightly better than inflation over the last year, though the U.S. Labor Department said employment gains were worse than last year.Crude oil prices are up more $5 per barrel, or around 15 percent, since members of the Organization of Petroleum Exporting Countries agreed in late September to work toward a goal of capping production levels at between 32.5 million and 33 million barrels per day.Friday's downturn was supported in part by data from Baker Hughes that show an increase in activity in exploration and production in North America. The increase in North American oil production helped drag oil from $100 per barrel in 2014 to lower than $30 per barrel this year as markets moved in favor of the supply side. Exploration and production activity has yet to translate to real gains in output, however.Monday's rally was supported in part by Russia moving in support of the production agreement reached last month in Algeria. Russia is already producing oil at record-setting levels, though the Algerian proposal has given the market confidence that oil prices won't drop below $30 per barrel again anytime soon. The price for Brent crude oil moved up 0.3 percent to start the trading day at $52.66 per barrel. West Texas Intermediate, the U.S. benchmark for oil prices, gained 0.2 percent to open at $50.54 per barrel.

Libya Starts Expanding Oil Exports — for Now, at Least - Little more than a week after the OPEC cartel moved to reduce oil supplies on the glutted global market, embattled Libya has reopened a major seaport terminal for oil exports and has announced that it intends to expand production through the rest of the year.The expansion, if successful — some experts have doubts — would effectively cancel out much of the cuts recently agreed to by Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries.The successful loading of a tanker on Thursday was the first time this year that oil has been dispatched from an oil terminal in Zueitina, Libya. The cargo of 800,000 barrels, destined for China, is viewed by energy experts as a tentative sign that Libya may finally be ready to return to the world market.Although Libya has Africa’s largest oil reserves, the country has been unable to export more than a trickle for most of the last five years because of the revolution that overthrew Col. Muammar el-Qaddafi in 2011 and the civil war among competing militias that has continued since.The renewed Libyan exports and plans to expand production were made possible by the Libyan National Army, the militia that took control of Zueitina and two other major ports last month.AdvertisementContinue reading the main story Libya, as well as Iran and Nigeria, were exempted by the other 11 members of OPEC when they agreed on Sept. 28 to the general outlines of a cut of up to 700,000 barrels from the cartel’s current daily production level of just over 33 million barrels

OPEC says it pumped 33.39 mil b/d in Sep, up 220,100 b/d from Aug - OPEC's two largest oil producers Saudi Arabia and Iraq told the oil producer group that their production continued to be at elevated levels, helping the organization's output to rise sharply in September, according to OPEC's monthly oil market report Wednesday. Two weeks ago OPEC surprised the market by provisionally agreeing to rein in production to between 32.5 million and 33 million b/d with the aim of reversing the fall in oil prices. OPEC's 14 members collectively pumped 33.39 million b/d in September, a jump of 220,100 b/d from 33.17 million b/d in August, the report showed. The oil producer group made marginal changes in its supply and demand forecast for 2016 but said it expected new production from Russia to increase the non-OPEC supply growth forecast for next year. With regards to the US, it said total liquids production in the country would "marginally" pick up towards the third quarter of next year but that it would still decline year on year. Output from top producer Saudi Arabia is estimated to have fallen to 10.491 million b/d in September from 10.578 million b/d in August, according to figures published by the oil producer group in its October market report. The Vienna-headquartered group officially uses secondary sources to monitor its crude production but also publishes a table of production figures submitted directly by member countries. Saudi Arabia told OPEC it produced 10.65 million b/d in September, up by 20,000 b/d from the August level.

A Strange "Production Cut" - OPEC Oil Output Hits Record High As Rosneft Says "No" To Production Cap -- Something odd happened on the way to the recently "agreed upon" OPEC production cut: instead of cutting production, OPEC countries have seen their oil output surge, and according to an IEA reported released today, the oil producing countries pumped oil at record-high volume last month, while officials from three member countries, those exempt from the "deal", said they plan to raise output even more in the near future. OPEC increased output by 160,000 barrels a day to a record 33.64 million barrels a day in September, the IEA said, a rather stark departure from last month's Algiers agreement where most OPEC members agreed to bring output down to a maximum of 33 million barrels a day. The increased production shows, among other things, not only just how farcical the recent oil surge has been on the back of expectations that somehow OPEC will actually not only agree on lower production quotas and more importantly comply with then, but also how much work OPEC must do to achieve production cuts it agreed to last month in an attempt to end a crude glut that has depressed prices for two years.  “Now the real work starts,” the IEA, which advises industrialized nations on energy policy, wrote in its monthly report. The market—if left to its own devices—may remain in oversupply through the first half of next year, it said.The work will be even more difficult as a result of the deal exemption granted to Libya, Iran and Nigeria, who are now scrambling to capture as much market share as possible before the OPEC deal is effected, if ever. As the WSJ reports, last month, production from Iran, Libya and Nigeria increased by a collective 120,000 barrels a day over August levels, the IEA said. In the near term, officials from those countries say they aim to boost daily production by another 580,000 barrels or so—an amount about equal to the total volume OPEC said it would cut. Further increases from those countries “would suggest that bigger cuts would have to be made by others, such as Saudi Arabia,” the IEA said. Saudi Arabia, OPEC’s largest producer, saw output fall by about 20,000 barrels a day to 10.58 million barrels a day from August to September, the IEA said.

Rising OPEC Oil Output Shows Challenge of Curbing Production —OPEC pumped oil at record-high volume last month, the International Energy Agency said Tuesday, and officials from three of its member countries say they plan to raise output in the near future. The increased production shows how much work the Organization of the Petroleum Exporting Countries must do to achieve production cuts it agreed to last month in an attempt to end a crude glut that has depressed prices for two years.  But the agreement exempted Libya, Iran and Nigeria, OPEC members with recent oil-industry troubles, from any near-term cuts. Now they are presenting a challenge by boosting output at a time when the cartel wants to collectively pull back.Last month, production from Iran, Libya and Nigeria increased by a collective 120,000 barrels a day over August levels, the IEA said. In the near term, officials from those countries say they aim to boost daily production by another 580,000 barrels or so—an amount about equal to the total volume OPEC said it would cut.Further increases from those countries "would suggest that bigger cuts would have to be made by others, such as Saudi Arabia," the IEA said. Saudi Arabia, OPEC's largest producer, saw output fall by about 20,000 barrels a day to 10.58 million barrels a day from August to September, the IEA said.  Rising production in Libya, Nigeria and Iraq is due to a convergence of disparate factors. In Libya, years of fighting that blocked oil ports ended recently when a militia took control of key export facilities and agreed to restart shipments. The government also plans to link long-dormant oil fields to a new export pipeline. Libyan officials say the country's production could rise from 300,000 barrels a day in August—the baseline that OPEC used in calculating its proposed production cap—to 700,000 barrels a day.After years of depressed oil production under the weight of Western sanctions, Iran is slowly ramping up its exports now that those penalties are lifted.Nigeria, where oil thieves and rebel groups have sabotaged oil facilities, is adding up to 200,000 barrels a day after it repaired a key pipeline that had been damaged and was out of commission for months. Another challenge for OPEC is dealing with Iraq, which has protested the data OPEC is using to calculate production. Iraq says the independent analysis firms OPEC relies on understate Iran's recent production and could result in the country being forced to adopt an unfairly low cap. The IEA said Iraq increased output by 90,000 barrels a day last month over the previous month.

IEA Pours Cold Water On Oil Price Rally - Just as oil prices really started to pick up steam, the IEA had to spoil the party. The Paris-based energy agency said on Tuesday that the oil market will remain in a state of oversupply through the first half of 2017, and in fact, there are some worrying signs for oil prices in the near-term. The IEA lowered its oil demand forecast once again, dropping demand growth for 2016 to 1.2 million barrels per day. In September it expected growth of 1.3 mb/d, which in turn was down from the 1.4 mb/d estimate in August. Two consecutive months of downgrades to its demand figures come as the agency sees “vanishing OECD growth and a marked deceleration in China.” The development is all the more surprising because low fuel prices were expected to stoke demand. That did happen in the early phase of the current oil price downturn – in the third quarter of 2015 demand grew at its fastest rate in five years at 2.5 mb/d, as motorists and industry around the world burned through cheap fuel. But demand growth has screeched to a halt, largely due to a slowdown in China. The third quarter of 2016 saw crude oil demand grow at a four-year low of 0.8 mb/d on an annualized basis. Slowing demand is a major problem for oil prices, particularly because the OPEC-fueled rally may not have a lot more room to run. Oil prices are up roughly 15 percent since OPEC said that it would cut production by 200,000 to 700,000 barrels per day. But the IEA warned that ongoing production gains from other OPEC members could more than offset those cuts. In September, OPEC’s collective output rose to 33.64 mb/d, an all-time record. Iraq added 90,000 barrels per day; Libya added about 70,000 bpd; Nigeria brought back 20,000 bpd; Iran added a modest 30,000 bpd. Much more oil could be forthcoming from some of those nations, particularly Nigeria and Libya, if damaged infrastructure can be repaired and brought back online.

Global crude oil stocks draw may have hit five-year high in Q3: IEA -  Global crude stocks may have fallen by almost 700,000 b/d during the third quarter, the first significant decline since mid-2011, if demand from ongoing Chinese stockbuilds is factored into market balances, the International Energy Agency said Tuesday. China has been filling its strategic crude stocks at higher than previous rates since oil prices fell in late 2014 and the stock building has accelerated this year, according to figures implied from official import and refining throughput data.Even Chinese commercial crude stocks grew by 9.2 million barrels in August, the largest month-on-month rise recorded since early 2015, the IEA said. Excluding demand from implied Chinese stockbuilding, the global crude market would have been almost balanced during the third quarter of 2016, the IEA said. But including the implied stockbuild in China, world crude stocks have drawn at a rate close to 700,000 b/d, the IEA said. "The extent and duration of Chinese reserves filling may prove to be the biggest uncertainty," the IEA said. "While still an inventory build, these barrels are effectively neutralized from the market, for an emergency situation, hence can be effectively added on the demand side." China's strategic stocks may have grown by an average 700,000 b/d during the first half of the year taking into account official data and likely undeclared demand from Chinese independent refiners, the IEA said in its latest oil market report.

Not ‘unthinkable’ for oil to hit $60 this year, says Saudi energy minister - Saudi Arabia’s energy minister Khalid al-Falih said that he was optimistic major oil producers could agree to cut production by November and that it wasn’t “unthinkable” that crude prices could rise another 20% this year to $60 a barrel. The minister’s words confirmed a decisive shift in policy by the Organization of the Petroleum Exporting Countries toward a return to market intervention—a role the oil cartel seemed to abandon two years ago when it refused to step in to prop up sinking prices. A production cut is meant to reorder the supply and demand landscape and push prices up during a historic market slump. “I think the role of responsible producers around the world, and Saudi Arabia considers itself to be the leading one, is to try to balance supply and demand in a very responsible way,” Falih told a conference in Istanbul this week that has become a meeting point for major oil producers to try to hammer out a tentative agreement to reduce output. It follows an agreement in principle reached in Algiers last month. Significant questions remain over the deal, including how much each country will cut and when. OPEC members Iran, Libya and Nigeria—where there have been significant oil-production disruptions—are exempt from cutting output, further clouding the deal’s effectiveness. Falih said accommodating these members and managing uncertainties over the supply and demand balance in the market is the reason OPEC has set itself a range for its production volume rather than a hard target. He warned that the producer group must remain flexible to avoid a supply shock as the market tightens.

  OPEC must enact cuts for sustained oil price rise, IEA says (AP) — The International Energy Agency is urging OPEC countries to swiftly deliver on promised production cuts if they want to see a sustained increase in oil prices that will also help shore up their economies. In its monthly report Tuesday, the global watchdog said production from the Organization of the Petroleum Exporting Countries hit a record high in September of 33.64 million barrels a day. Iraq produced more oil than ever, while Libya reopened oil ports. Further boosting global supply levels is the fact that production in non-OPEC member Russia hit a post-Soviet record. While supply is running high, the IEA said demand is slowing along with the global economy — a combination that could pressure oil prices. The IEA forecast that the market will remain oversupplied through mid-2017 if OPEC doesn’t enact last month’s pledge in Algeria to cut supply to between 32.5 and 33 million barrels per day. “OPEC has abandoned its free-market policy set in train nearly two years ago. Global oil inventories are far too high — in the view of some producers – and they aren’t being worked off nearly fast enough,” the IEA said. “The current price of oil has caused discomfort for all producers.” At last month’s meeting, OPEC countries said the specific details of the overall production cut would be ironed out at a meeting in Vienna Nov. 30. Timelines and country-by-country breakdowns have still to be worked out, though Iran, Libya and Nigeria may be exempt from the cuts for various reasons. “Now the real work starts,” the IEA said. It’s also unclear how much non-OPEC members, notably Russia, are willing to play along. Russian President Vladimir Putin intimated at a meeting in Istanbul on Monday that Russia was ready to support OPEC, which further buoyed oil prices.

Why energy prices are ultimately headed lower; what the IMF missed - Gail Tverberg  - We have been hearing a great deal about IMF concerns recently, after the release of its October 2016 World Economic Outlook and its Annual Meeting October 7-9. The concerns mentioned include the following:

  • Too much growth in debt, with China particularly mentioned as a problem
  • World economic growth seems to have slowed on a long-term basis
  • Central bank intervention required to produce artificially low interest rates, to produce even this low growth
  • Global international trade is no longer growing rapidly
  • Economic stagnation could lead to protectionist calls

These issues are very much related to issues that I have been writing about:

  • It takes energy to make goods and services.
  • It takes an increasing amount of energy consumption to create a growing amount of goods and services–in other words, growing GDP.
  • This energy must be inexpensive, if it is to operate in the historical way: the economy produces good productivity growth; this productivity growth translates to wage growth; and debt levels can stay within reasonable bounds as growth occurs.
  • We can’t keep producing cheap energy because what “runs out” is cheap-to-extract energy. We extract this cheap-to-extract energy first, forcing us to move on to expensive-to-extract energy.
  • Eventually, we run into the problem of energy prices falling below the cost of production because of affordability issues. The wages of non-elite workers don’t keep up with the rising cost of extraction.
  • Governments can try to cover up the problem with more debt at ever-lower interest rates, but eventually this doesn’t work either.
  • Instead of producing higher commodity prices, the system tends to produce asset bubbles.
  • Eventually, the system must collapse due to growing inefficiencies of the system. The result is likely to look much like a “Minsky Moment,” with a collapse in asset prices.
  • The collapse in assets prices will lead to debt defaults, bank failures, and a lack of new loans. With fewer new loans, there will be a further decrease in demand. As a result, energy and other commodity prices can be expected to fall to new lows.

Let me explain a few of these issues.

OPEC points to larger 2017 oil surplus despite deal to cut | Reuters: OPEC reported a increase in its oil production in September to the highest in at least eight years and raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group's deal to cut output. The Organization of the Petroleum Exporting Countries pumped 33.39 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 220,000 bpd from August, OPEC said in a monthly report on Wednesday. The figures underline OPEC's challenge in seeking to restrain supplies for the first time since 2008 to curb a persistent supply glut and prop up prices. Oil is trading near $53 a barrel LCOc1, less than half the price hit in mid-2014. "Inventories stand near all-time highs worldwide," OPEC said in the report. "Although in recent weeks these high levels have been slightly drawn down." To speed up a rebalancing of the market, OPEC agreed at a meeting in Algeria on Sept. 28 to cut supply to between 32.50 million bpd and 33.0 million bpd. The group hopes to finalize details, including how much each of the its 14 members can pump, at a meeting in November. The report showed the supply boost in September mostly came from Libya and Nigeria, which are restoring output after disruptions, and from Iraq, which has questioned the accuracy of OPEC's secondary-source figures. OPEC uses two sets of figures to monitor its output: figures provided by each country, and secondary sources which include industry media. The reason why two sets of figures are used is because of past disputes over how much countries were really pumping. Iraq told OPEC it produced 4.775 million bpd in September, while the secondary sources put output at 4.455 million bpd. Baghdad has taken issue with the gap between the two sets of figures. Iraqi Oil Minister Jabar Ali al-Luaibi called a separate briefing on the day of the Algeria meeting to complain about the gap. Crude Tumbles After OPEC Raises Doubts Over Cut Timing -- Just when everyone thought "oil" was "fixed" the meeting ends and OPEC secretary-general drops this little tape-bomb - We haven’t decided yet whether OPEC and non-OPEC would make cuts at the same time, or OPEC would move first, Secretary-General Mohammed Barkindo tells reporters in Istanbul. And WTI slumps...

Even More OPEC Confusion: Unclear Who Cuts First, If Anyone, As Production Hits New Record High -- Following yesterday's latest IEA report which showed that OPEC production had hit an all time high, this morning OPEC released its own estimate of production by OPEC member nations for September and, not surprisingly, the latest report showed that in the month OPEC was supposed to be set on "cutting" production, the 14-nation group produced a whopping 33.39 million b/d crude in Sept., up 220k b/d from August.  While Saudi Arabia showed the largest decline of 88K to 19.49mmbpd, other members promptly ate up the Saudi market share which as recently as last month hit a record. To wit

  • Iraq +105k, 4.46m
  • Nigeria +95k, 1.52m
  • Libya +93k, 363k (an increase of 34%)

Even more notable is what we touched upon last month after the Algiers deal was announced, namely that Venezuela and Iraq oil output may be underestimated by as much as 565k b/d for Sept., according to secondary sources cited in OPEC’s monthly oil market report.

  • Venezuela reported crude output of 2.33m b/d in Sept. to OPEC, 245k more than secondary source estimates
  • Iraq reports 4.78m b/d in Sept., 320k above secondary source estimates
  • Secondary source estimates also lower for 5 other OPEC members; higher for members Angola, Nigeria, Qatar.

Recall that OPEC "agreed" to cut total output to 32.5m-33m b/d as part of agreement to steady oil markets, however both Iraq, Venezuela have disputed secondary sources. This means that if OPEC agrees with the country's own source data, the cartel will need to cut as much as 565k more, an output cut which would have to come out of Saudi production.

  Oil Slides After API Reports Biggest Crude Inventory Build In Six Months - Not even the combination of OPEC and Russia talk can keep oil prices up after this week’s American Petroleum Institute report, released Wednesday, which showed a 2.7 million build – the first increase in U.S. supplies in six weeks and the largest single inventory increase in the last six months.  Experts had expected a large build of 2 million in crude oil for this week—but 2.7 million exceeded even this pessimistic figure, and the already unsteady markets appear rattled. The large build report caused a notable weakness in West Texas Intermediate prices, which were trading down 1.46% at $50.05 after the data was released, with Brent down 1.26% at $51.75.This build will either be confirmed or denied by the U.S. Energy Information Administration (EIA) report to be released tomorrow—a day later than normally scheduled due to this week’s holiday schedule.API also reported a gasoline build of 688,000 barrels, in sharp contrast to analyst experts’ anticipated 900,000-barrel draw.Distillate supplies declined by more than 4.5 million barrels, marking the third straight week of draws in that type of fuel. The distillate withdrawals were particularly high last week – the highest since October 2014 - due to the effects of Hurricane Matthew.Oil supplies at the Cushing, Oklahoma, facility saw a 1.35 million-barrel dive, as opposed to the 100,000-barrel build that analysts anticipated. Crude oil inventories in the U.S. reached 499.7 million barrels in the week ending on September 30, the EIA reported last week, down by 3 million barrels from the previous week.

Oil price gains limited by higher OPEC output, U.S. crude stocks | Reuters: The price of crude oil climbed on Thursday, gaining support from record Chinese imports, but gains were limited after OPEC said its production had risen to the highest level in at least eight years and following reports of an increase in U.S. crude stocks. Brent crude futures LCOc1 were trading at $51.91 per barrel at 1037 GMT, up 10 cents from their previous close. U.S. West Texas Intermediate (WTI) crude was up 3 cents, at $50.21 per barrel. Traders said oil markets had come under pressure after the Organization of the Petroleum Exporting Countries (OPEC) reported a rise in output. "Crude responded predictably, with both Brent and WTI falling," said Jeffrey Halley of brokerage OANDA. OPEC on Wednesday reported its oil production climbed in September to an eight-year high of 33.39 million barrels per day. It also raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group's decision to limit output. But some investors see the OPEC plan to curb output as a reason to take a bullish stance on the prospects for crude prices. "In 2014 the big opportunity was in prices going down and now the big opportunity is in prices going up. That’s the way I see it," hedge fund manager Pierre Andurand told the Reuters Commodities Summit. He added that OPEC's decision in Algiers to limit its overall output to 32.5-33 million bpd "takes off a large wild card from the oil markets for 2017."

Oil Prices Extremely Volatile After Massive Crude Build | The Energy Information Administration tipped markets towards bear territory when it reported that U.S. crude oil inventories had jumped by 4.9 million barrels in the week to October 7. The total of 474 million barrels remains higher than the average for this time of year. Yesterday, the American Petroleum Institute was the first to spread oil doom and gloom by estimating that crude inventories had gone up by 2.7 million barrels in the same week. This immediately weighed on international oil prices, as it came amid a temporary pause to the news flow about OPEC and Russia’s freeze plans. It also suggested that inventories may be building for the first time in the last six weeks. Analysts polled by media had expected an increase of 2 million barrels in crude oil stockpiles, along with a 900,000-barrel decline in gasoline inventories. Last week, the EIA reported a 3-million-barrel draw after API estimated a draw of 7.6 million barrels the day prior. According to the EIA, gasoline inventories last week fell by 1.9 million barrels, with refineries producing an average 9.9 million barrels a day. The rate of crude oil processing stood at 15.6 million barrels, down 480,000 bpd from the previous week, with the facilities operating at 85.5 percent of available capacity. The EIA’s latest report will push downward already volatile international prices, especially after the excitement started to wane about Russia joining the OPEC freeze after temporarily pushing Brent above US$53 a barrel. Markets are more than likely to remain excessively volatile until the end of November, when OPEC will meet to make a final decision on the output cap. At the time of writing, Brent crude was trading down 1.29% at US$51.14 a barrel, while West Texas Intermediate traded down 1.3% at US$49.53 a barrel.

WTI Plunges Below $50 On Biggest Inventory Build In 6 Months --Following last night's bigger than expected build from API, DOE reports an even bigger (4.85 mm barrel) build - the biggest since April (and first build in six weeks). Cushing, Gasoline, and Distillates saw bigger than expected draws (likely presured by Hurricane effects). While Production dropped very modestly on the week, WTI plunged off early high back below $50. DOE:

  • Crude +4.85mm (+2mm exp)
  • Cushing -1.318mm (+100k exp)
  • Gasoline -1.907mm (-900k exp)
  • Distillates -3.746mm

US Crude inventories rose for the first time in six weeks with the biggest build in 6 months...

Oil ends up; refined products draw offset U.S. crude build | Reuters: Oil prices settled up on Thursday after a U.S. government report showing hefty draws in diesel and gasoline offset the first crude inventory build in six weeks. Crude prices fell initially when the U.S. Energy Information Administration (EIA) said crude stocks swelled 4.9 million barrels in the week ended Oct. 7. It was the first crude build since the end of August and was far above a 700,000-barrel rise forecast by analysts in a Reuters poll. [EIA/S] Prices bounced back as the market turned its attention to product inventory drawdowns in the same EIA data. The EIA reported a drop of 3.7 million barrels for distillates, which include diesel and heating oil, and 1.9 million barrels decline for gasoline. Analysts had expected distillates to draw by just 1.6 million barrels and gasoline to decline by 1.5 million. Brent crude LCOc1 settled up 22 cents, or 0.4 percent, at $52.03 per barrel. U.S. crude CLc1 ended up 26 cents, or 0.5 percent, at $50.44. "There is a lot of seasonality in this data," Scott Shelton, energy futures broker at ICAP in Durham, North Carolina, said, referring to the EIA inventory report. Shelton said crude builds were common this time of year as U.S. refineries headed into maintenance. The rise in crude imports by 110,000 barrels per day (bpd) last week was also "marginal" and "hard to get too excited about if you were bearish", he argued. John Kilduff, partner at New York energy hedge fund Again Capital, said that while more crude builds were likely in the coming weeks due to depressed refinery runs, "the declines in distillate fuels, of late, are starting to add up".

OilPrice Intelligence Report: Oil Hits Ceiling At $50 Per Barrel - Crude oil is set to close out the week not much different from where it started, seesawing a bit along the way. Oil prices sank on EIA data showing rising crude inventories – the first increase in six week – but that was offset by a large drawdown in refined product stocks. “It could simply be the fact that selling couldn’t sustain itself below $50,” Mark Anderle, director of supply and trading at TAC Energy, told the WSJ in an interview. “Clearly to me this says the bulls are still in charge.” Oil prices are looking for some direction with conflicting data emerging this week.  The Bakken continues to feel the effects of low oil prices. New data shows that North Dakota’s oil production dipped below 1 million barrels per day for the first time in more than two years. Output fell to 981,000 bpd in August, down from a peak of over 1.2 mb/d in December 2014. The Bakken has seen drilling vanish and companies decamp to more profitable plays such as the Permian in West Texas. "It does send a signal to the world markets that U.S. producers are serious about reducing activity, reducing costs, reducing production and I think that should help support the recent price increase we saw," Lynn Helms, director of state’s Department of Mineral Resources, told reporters.   The flurry of drilling in the Permian basin is leading to an increase in the volume of associated natural gas produced. Gas production has topped 7 billion cubic feet per day, according to Bloomberg Intelligence, equivalent to about 8 percent of U.S. supply. Natural gas markets are growing tighter in the U.S. as demand rises and drilling slows (in most places), but the Permian remains as one region where gas output is expected to climb in the near-term. As such, it could be one of the few downside risks to natural gas prices. Nevertheless, Henry Hub is up to $3.30 per MMBtu as overall supply in the U.S. falls.   The EIA says that energy-related emissions in the U.S. in the first half of 2016 have declined to their lowest levels since 1991, due to mild weather and a cleaner energy mix. A warm winter led to weak demand for electricity, and renewable energy and energy efficiency continue to eat into the market share for fossil fuels, particularly for coal. But the upcoming winter is expected to be colder, which could lead to higher emissions, and as the EIA noted in a separate report, higher natural gas prices and more expensive electricity. 

US Rig Count up 15 This Week to 539; Louisiana Gains 6 - ABC News: The number of rigs exploring for oil and natural gas in the U.S. increased by 15 this week to 539. A year ago, 787 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 432 rigs sought oil and 105 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Louisiana gained six rigs, New Mexico and Oklahoma increased by three each, Colorado was up two and Alaska, Pennsylvania and West Virginia added one apiece. Texas declined by three rigs. Arkansas, California, Kansas, North Dakota, Ohio, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

U.S. Rig Count Rises To 8 Month High As Permian, Eagle Ford See Decline  - Houston oilfield services company Baker Hughes, Inc. showed a four-rig increase in the United States oil count, marking 16 straight weeks of no-decline in the active oil rig figure and signaling the continuation of a strong recovery for the country’s drilling activity. The oil rig count now stands at an eight-month high at 432 sites – but still 163 rigs lower than the 595 figure that we saw one year ago. Last week, the US oil rig count rose 3 to 428, while the gas rig count fell 2 to 94. The number of active gas rigs rose by eleven, the biggest jump since late January. The gas rig total stood at 105, which is a 10-month high, but 87 rigs short of last year’s 192. Zero Hedge predicts the trend of the increasing number of rigs will stop soon, because the counts have tracked the lagged oil price “very closely” over the past few weeks. Canada saw a three-rig increase in its oil count and a three-rig decrease in its gas count, which meant a zero-sum difference in its total count. State-wise, Louisiana saw a massive six-rig rise. New Mexico and Oklahoma saw a more modest three-rig increase each. The biggest decreases by basin were the Eagle Ford and the Permian, which lost a total of six rigs. Cana Woodford gained four rigs, while DJ-Niobrara, Haynesville and Marcellus saw a two-site increase. Brent oil traded down by 0.71 percent at $51.66 at the time of the report’s writing. West Texas Intermediate barrel prices stood at $50.11, down by 0.65 percent.

 Kuwait postpones $10 billion bond issue until 2017 | Dubai: Kuwait has delayed a sovereign bond issue of up to $10 billion (Dh36.7 billion) until next year after deciding it is in no rush to raise funds overseas, bankers familiar with Kuwaiti debt policy said.Finance Minister Anas Al Saleh said in July the government planned to sell as much as $10 billion of US dollar-denominated conventional and Islamic bonds in international markets to help plug its budget deficit for the current fiscal year, which will end on March 31.Officials subsequently said they were looking at a window of September or possibly October for the issue.But the government has still not sent banks a request for proposals to arrange the issue, while the sale still needs official approval by the Ministry of Finance, said one of the bankers. This means the deal will definitely take place in 2017, he added.“The government has not mandated banks on the bond, which would suggest that they were targeting a later release post-the Saudi Arabia one,” said Dima Jardaneh, head of regional economic research at Standard Chartered. This implies the first quarter of 2017 is a likely time period for the issue, she said. Kuwait’s Ministry of Finance did not respond to requests for comment.

Saudi Capital Spending to Drop 71% in 2016 Amid Low Oil Prices -- Saudi Arabia’s austerity measures will slash capital spending this year by 71 percent, as the world’s biggest exporter of crude seeks to repair public finances damaged by low oil prices. Capital expenditure is projected to fall to 75.8 billion riyals ($20.6 billion) this year compared with 263.7 billion in 2015, according to the government’s bond prospectus obtained by Bloomberg. In 2014, capital spending amounted to 370 billion riyals. The kingdom, with the largest budget shortfall among the world’s 20 biggest economies, has delayed payments to contractors and is weighing plans to cancel more than $20 billion of projects, according to people familiar with the plans. The government estimates that the budget deficit will decline to 13.5 percent of gross domestic product this year from 15 percent in 2015, according to the prospectus.  “I would’ve liked to have seen more cuts to current spending rather than focusing almost entirely on capital expenditure,” said Khatija Haque, head of Middle East and North Africa research at Emirates NBD. “In the short term, the impact will be slower growth” as government spending and investment is reduced, she said. The government also suspended bonuses and trimmed allowances for government employees, including a 20 percent cut to ministers’ salaries. As a result, current spending will decline to 581.2 billion riyals from 714.4 billion. Economists expect the spending cuts to weigh on the largest Arab economy. Growth will likely slow to 0.6 percent this year from 3.4 percent in 2015, according to HSBC Holdings Plc.

Saudi Arabia Burns Through Cash Subsidies, More Pain Ahead - Saudi Arabia, OPEC’s de facto leader and the world’s largest oil exporter, has seen better days – much better days. Its now infamous decision in November 2014 to abandon its role as swing producer and actually ramp up production as global oil supplies were increasing and prices were tanking has hurt itself as much or more than U.S. shale oil producers it wanted to drive out of the market. In the ensuing two years since that decision, Saudi Arabia’s state coffers have taken a hit. Due to low oil prices, attributed to the supply glut, the kingdom – which derives as much as 92% of its revenue from oil sales - ran a historic budget deficit last year of $98 billion, with an estimated $87 billion forecasted for this year. Saudi Arabia is also being forced to raise cash in its first international bond sale, as much as $16.5 billion , sometime this month. It’s massive state-owned oil company, Saudi Aramco, the world’s largest, will soon go public, offering partial ownership in an IPO in 2018 worth as much as $2 trillion, the largest IPO in history. However, if oil markets remain over supplied with corresponding low prices, the company’s offering will not bring as much as it could have previously. Saudi Arabia’s budget woes have also hit ordinary citizens hard, while most are used to generous cash subsidies and other state benefits. Nearly 30% of Saudi Arabia’s 32 million population is under the age of 15, while the country’s median age is just 28.6 years.   Now, all of that is changing.

 Employment and immigration in oil-exporting countries --Citigroup suggests a rather grim fix for oil-exporting countries struggling with the drop in crude prices: Lower ambitions for economic growth, and fewer unskilled immigrants. Limiting immigration is a tactic that’s appealed to other countries recently (we’d make a snarky comment about the UK, if only we Yanks were in any place to feel superior). But we’re willing to at least entertain the logic, since GCC countries — the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia — are in a very different situation than Europe and the US. They’ve historically relied heavily on foreign nationals’ labour in the private sector, and employed domestic workers in oil-funded government jobs.  The Gulf Research Center’s most recent estimate pegs foreign nationals (non-citizens, that is) at about half of the GCC’s population. (To compare, foreign nationals made up around 8 per cent of the UK’s population in 2014, and roughly 7.8 per cent of the US population based on Pew Research estimates that include undocumented foreign nationals.)  As Farouk Soussa, Citi’s chief Middle East economist, observes in a note this week, the GCC’s immigration policies were a response to growth in the region during the oil boom, which was “hugely dependent on input growth, with productivity growth actually negative since the 1970s,” he writes.  He argues that one cause of the negative productivity growth is “the abundance of cheap foreign labour. His argument is that it “gives labour-intensive industries such as these a competitive advantage… and reduces incentives to invest in innovative technologies and industries.”

 Without Saudi oil aid, Egypt rushes out big buy tenders -- Egypt has not received October allocations of petroleum aid from Saudi Arabia, traders told Reuters, forcing its state oil buyer to rapidly increase tenders even amid a severe dollar shortage and growing arrears to oil producers. Saudi Arabia agreed to provide Egypt with 700,000 tonnes of refined oil products per month for five years under a $23 billion deal between Saudi Aramco and the Egyptian General Petroleum Corporation (EGPC) signed during a state visit this year by Saudi Arabia's King Salman. Delivery of the Saudi Aramco products was halted as of Oct. 1 though the reason remains unclear, a trader that deals with the EGPC told Reuters. The kingdom has pumped billions of dollars, including grants, into Egypt's flagging economy since the toppling of President Mohamed Mursi of the Muslim Brotherhood in 2013 after mass protests against his rule. The oil aid has saved Egypt hundreds of millions of dollars per month at a time when it faces an acute shortage of hard currency that has forced it to ration dollars for key commodities and negotiate long term credit arrangements with oil producers to keep critical supplies flowing. Under the 700,000-tonne monthly supply deal, Saudi Aramco agreed to provide 400,000 tonnes of gas oil, 200,000 tonnes of gasoline and 100,000 tonnes of fuel oil per month, all on a credit line with a 2 percent interest rate to be repaid over 15 years, an EGPC official has told Reuters. The EGPC has re-entered the spot market in recent weeks to fill the gap, traders said, announcing its largest purchase tenders in months, including calls for some 560,000 tonnes of gasoil for October arrival, a steep rise from the roughly 200,000 tonnes sought in September. The state oil buyer announced additional tenders on Thursday and Friday for 665,000 tonnes of gasoil and 132,000 tonnes of gasoline for November arrival, levels that could suggest a protracted delay or suspension of Saudi Aramco products.

Hillary Confirms Saudi Arabia, Qatar Fund ISIS In Leaked Email - Over three years after we first reported that one of the two chief sources of funding and support for the "Islamic State" is the small but wealthy nation of Qatar, and long after we also announced that Saudi Arabia had revealed that it was behind ISIS, in a report that was widely disputed, overnight we finally got definitive evidence that it was indeed Qatar and Saudi Arabia that are the main "logistical and financial" supporters of the Islamic State terrorist organization. In a leaked email sent on August 17, 2014 by Hillary Clinton to her current campaign manager, John Podesta, who back then was counselor to Barack Obama, she admitted that Qatar and Saudi Arabia "are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region." The email, which was sent just days after the US launched it "temporary" air campaign in Syria, which has now extended over two years, represents an eight-point plan laying out ideas how to defeat ISIS in Iraq and Syria. Clinton’s email said that the United States should engage in "military operations against these very irregular but determined forces" by "making proper use of clandestine/special operations resources, in coordination with airpower, and established local allies" such as Kurdish forces. Having confirmed the role of Qatar and Saudi Arabia, Hillary then states that "we need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia" and recommends to step up US commitment to the Kurdish Regional Government or KRG. "The Qataris and Saudis will be put in a position of balancing policy between their ongoing competition to dominate the Sunni world and the consequences of serious U.S. pressure.  By the same token, the threat of similar, realistic U.S. operations will serve to assist moderate forces in Libya, Lebanon, and even Jordan, where insurgents are increasingly fascinated by the ISIL success in Iraq."

WikiLeaks emails reveal Bill Clinton's $1M 'birthday' present from Qatar for foundation - Washington Times: WikiLeaks emails reveal Bill Clinton’s $1M ‘birthday’ present from Qatar The WikiLeaks document dump of Hillary Clinton campaign chairman John Podesta has revealed Qatar’s previous desire to give her husband a $1 million “birthday” present. Thousands of emails leaked by WikiLeaks founder Julian Assange’s nonprofit organization continue to embarrass Democrat presidential hopeful Mrs. Clinton. The latest email thread shows an aide discussing conversations with  ambassadors from Qatar, Brazil, Peru, Malawi, and Rwanda while in the nation’s capital. “[Qatar] would like to see WJC ‘for five minutes’ in NYC, to present $1 million check that Qatar promised for WJC’s birthday in 2011,” an employee at The Clinton Foundation said to numerous aides, including Doug Brand. “Qatar would welcome our suggestions for investments in Haiti — particularly on education and health. They have allocated most of their $20 million but are happy to consider projects we suggest. I’m collecting input from CF Haiti team.” The documents, which U.S. intelligence blames on Russian state actors, are just a few of roughly 50,000 WikiLeaks says it has on Mr. Podesta. Jake Johnston, an analyst at the nonpartisan Center for Economic and Policy Research, told the Daily Caller Thursday that Mr. Clinton’s lucrative “birthday” present further solidifies the perception that a “pay for play” operation was going on between the State Department and The Clinton Foundation while Mrs. Clinton was secretary of state.

 US Allows Qatar to Buy F-15s — and Seals a $19B Sale of Jetliners - The White House’s recent decision to allow the sale of F-15 fighter jets to Qatar helped to seal the $18.6 billion purchase of 100 Boeing jetliners announced Friday by Qatar Airways, according to people with knowledge of the deal. Executives with Boeing and state-owned Qatar Airways denied links between the military and commercial sales.“The Qatar Airways has its independent policy of ordering airplanes,” CEO Akbar Al Baker said when asked whether the two sales were connected. “So nothing is attached to anything.”But the jetliner deal — which has been under negotiation for months — was finalized less than two weeks after the Obama administration approved the 36 F-15 fighter jets for Qatar on Sept. 28, people close to the agreement say. The up-to-$4 billion fighter jet deal has been in the works for years, but has reportedly been on hold while the U.S. negotiated a 10-year, $38 billion security package with Israel. Israel has reportedly raised objections to Qatar buying F-15s. Last week, White House officials informally told members of Congress that the F-15 sale would get approval, but the State Department and Pentagon have yet to formally announce the deal, which reportedly has options for up to 72 fighters. Boeing builds the F-15 in St. Louis.

Clinton is right on Syrian Kurds – AEI - During the second presidential debate at Washington University in St. Louis, moderator Martha Raddatz asked former Secretary of State Hillary Clinton about Syria: You advocated arming rebels, but it looks like that may be too late for Aleppo. You talk about diplomatic efforts. Those have failed. Cease-fires have failed. Would you introduce the threat of U.S. military force beyond a no-fly zone against the Assad regime to back up diplomacy? Clinton started out weakly, declaring “I would not use American ground forces in Syria,” even though there already are US forces in Syria, a discrepancy that neither Raddatz nor her co-moderator Anderson Cooper seemed to catch. What followed was pretty standard: Clinton argued that she would target Islamic State leader Abu Bakr al-Baghdadi:  That is important, though to capture him and show him weak and cowering might have greater resonance if the US goal is to delegitimize the ideology which he espouses.  Clinton also said she would increase US support for the Kurdish peshmerga. There is nothing controversial about arming the Iraqi Kurds. Clinton may be unaware that the US government already generously provides weaponry to them, albeit through Baghdad. The most interesting part of her answer—and a break with conventional wisdom—was the conclusion of her remarks:  And I know there’s a lot of concern about that in some circles, but I think they should have the equipment they need so that Kurdish and Arab fighters on the ground are the principal way that we take Raqqa after pushing ISIS out of Iraq. Her mention of Raqqa, the Islamic State’s capital in Syria, suggests she seeks to arm the People’s Protection Units (YPG), Syrian Kurdish units close to the Kurdistan Workers Party (PKK), designated by both Turkey and the United States as a terror group. Once again, neither Raddatz nor Cooper seemed to realize the significance of what Clinton proposed, although the Turkish government certainly has.

Russia & US will engage in ‘global war’, unless ‘proxy’ Syria conflict resolved – Turkey’s deputy PM -- The Syrian conflict has now become a “proxy war” between the two Cold War superpowers, believes Deputy Prime Minister of Turkey, Numan Kurtulmus, who warned that that the conflict could escalate beyond the Middle East. “If this proxy war continues, after this, let me be clear, America and Russia will come to a point of war,” Kurtulmus told the state’s Anadolu news agency, adding that the world was “on the brink of the beginning of a large regional or global war.” Kurtulmus described the government of Syrian President Bashar Assad as a “pawn” in the conflict, and urged it to seek peace, claiming that there would be no way to overcome the alliance of forces that opposes it. The politician insisted that Assad has no place in any future political system in the country, as the opposition will “not negotiate with a bloody dictatorship.” Turkey has been one of the leading advocates of Assad’s removal since the conflict, which has resulted in more than 400,000 deaths, broke out in 2011. But Russia, a staunch Syria ally, which has intervened in the conflict at the request of Damascus, has refused to contemplate Assad’s unilateral removal unless Syrian people decide so. In an interview with French television broadcast on Wednesday night, Russian President Vladimir Putin reiterated that the Syrian president would agree to develop a new, more democratic and inclusive constitution, and overhaul the political system – but only if he was allowed to stand in a future election.

Royal Air Force Pilots Ordered To Shoot Down "Hostile" Russian Jets Over Syria -- As the US officially enters the Yemen military campaign, the UK appears ready and willing to precipiate a catalytic event from which there is no going back. With relations between Russia and the West at post-Cold War lows and deteriorating fast, Royal Air Force (RAF) pilots have been given the go-ahead to shoot down Russian military jets when flying missions over Syria and Iraq, if they are endangered by them. The development comes with warnings that the UK and Russia are now "one step closer" to being at war, according to the Sunday Times. While the RAF's Tornado pilots have been instructed to avoid contact with Russian aircraft while engaged in missions for Operation Shader, the codename for the RAF's anti-Isis work in Iraq and Syria, their aircraft have been armed with air-to-air missiles and the pilots have been given the green light to defend themselves if they are threatened by Russian pilots. "The first thing a British pilot will do is to try to avoid a situation where an air-to-air attack is likely to occur — you avoid an area if there is Russian activity," "But if a pilot is fired on or believes he is about to be fired on, he can defend himself. We now have a situation where a single pilot, irrespective of nationality, can have a strategic impact on future events." Where things get tricky is the qualifier "if he believes he is about to be fired on" - since this makes open engagement a function of threat evaluation in real time during stressed conditions, the likelihood of an escalation that could result in two warplanes shooting at each other, just jumped significantly.

US, Saudis to grant 9,000 ISIS fighters free passage from Iraqi Mosul to Syria – source -- The US and Saudi Arabia have agreed to grant free passage to thousands of Islamic State militants before the Iraqi city of Mosul is stormed. The jihadists will be redeployed to fight against the government in Syria, a military-diplomatic source told RIA Novosti.   "More than 9,000 Islamic State (IS, formerly ISIS, ISIL) militants will be redeployed from Mosul to the eastern regions of Syria to carry out a major offensive operation, which involves capturing Deir ez-Zor and Palmyra,” the source said.  According to the anonymous diplomatic source, US President Barack Obama has already sanctioned an operation to liberate Mosul, due to take place in October. During the storm of the city in northern Iraq the US-led coalition’s planes would only strike detached, vacated or uninhabited buildings, while keeping terrorists as targets, he said.In September, US Secretary of Defense Ashton Carter confirmed that Washington would send an additional 600 troops to Iraq to help liberate Mosul at the request of the local authorities. The source suggested that redeployment of IS militants is necessary because “Washington must somehow counter Russia’s achievements in Syria, try to diminish their importance.”"Apart from the purely political dividends, the other purpose of this operation, obviously, will be to discredit the success of Russian Airspace forces. And, of course, it’s an attempt to undermine Syrian President (Bashar) Assad,” he said. The leadership of Saudi Arabia’s General Intelligence Directorate will be the mediators and guarantors of the agreement on safe passage for the jihadists from Mosul, he claimed.

 The Truth About the War in Aleppo - David Stockman  -- This is starting to sound pretty ominous. The Washington War Party is coming unhinged and appears to be leaving no stone unturned when it comes to provoking Putin’s Russia and numerous others. The recent collapse of cooperation in Syria – based on the false claim that Assad and his Russian allies are waging genocide in Aleppo – is only the latest example. So now comes the U.S. Army’s chief of staff, General Mark Milley, doing his best imitation of Curtis LeMay in a recent speech dripping with bellicosity. While America has no industrial state enemy left on the planet that can even remotely challenge its economic might, technological superiority and overwhelming military power, General Milley unloaded a fusillade of bluster at the Association of the United States Army’s annual meeting in Washington DC: “The strategic resolve of our nation, the United States, is being challenged and our alliances tested in ways that we haven’t faced in many, many decades,” Army Chief of Staff Gen. Mark Milley told the audience. “I want to be clear to those who wish to do us harm … the United States military – despite all of our challenges, despite our [operational] tempo, despite everything we have been doing – we will stop you and we will beat you harder than you have ever been beaten before. Make no mistake about that.” That is rank nonsense. We are not being “tested” by anyone. To the contrary, Imperial Washington is provoking tensions and confrontations everywhere – from the South China Sea to Syria, Iraq, Yemen, Libya, the Black Sea, the Baltics and Ukraine – that have no bearing whatsoever on the safety and security of the citizens of Spokane WA, Topeka KS and Springfield MA.

How Syria Became the New Global War - Der Spiegel -- As the noose around Aleppo tightens -- and the Assad regime and its Russian allies continue to bomb the city -- the extremely dangerous nature of this proxy war is becoming more apparent than ever. Could escalation between Moscow and Washington be on the horizon?   Every group participating in the murderous fighting around the city is trying to listen in on the radio communications of their opponents. In the "Afghan sector" near Khan Tuman southwest of the city, Dari is spoken, a dialect of Persian common in Afghanistan, Yazen says. In the "Hezbollah sector" in the south, Arabic with a Lebanese accent can be heard. The Iranian officers, meanwhile, speak Persian. And nobody, the scout continues, understands the Pakistanis when they speak Urdu. He says that the Iraqi militias surrounding Aleppo tend to speak with the strong accent prevalent in southern Iraq, "but we've gotten used to it." The only reason they don't hear much Russian, he says, is because the pilots flying overhead "only use frequencies that are difficult for us to intercept." Aleppo, the destroyed, divided city, has become a symbol for the horrors of the air war that the Syrian regime and its allies are waging against the Sunni rebels, as well as a symbol for the impotence of the West. Seldom have Western politicians been as helpless as they are now. And seldom has the air war in Syria been as brutal as it has been in the last two weeks.Now that diplomacy has collapsed, the eyes of the world are once again squarely on Russian President Vladimir Putin, who has thrown his unconditional support behind the Syrian regime of Bashar Assad. And they are on US President Barack Obama, the leader of the Western world, who didn't want to become deeply involved in the Syrian conflict.

Saudi Air Strike Kills At Least 82, Injures 534 At Yemen Funeral - While the US and western powers condemn Russian airstrikes conducted in Aleppo, to the point where yesterday John Kerry accused Russia of "crimes against humanity", a parallel campaign waged by Saudi Arabia in Yemen gets little press coverage. Perhaps as a test how far it can go without provoking a diplomatic rebuke, earlier today an air strike by the Saudi-led coalition on mourners in Sanaa on Saturday killed at least 82 people, the acting health minister in the Houthi-led administration in the Yemeni capital said. Ghazi Ismail told a news conference in Sanaa the number of people wounded in the attack was 534, Reuters adds. The International Committee of the Red Cross said it had prepared 300 body bags. Hundreds of body parts were found inside and outside the hall after the strike. “The number of casualties from the air force of the Saudi-American aggression at the main hall in the capital Sanaa has risen to more than 450 dead and wounded,” the SABA news agency quotes Abdul-Salam al-Madani, who is a deputy to the Houthi health minister, as saying. A missile tore through the hall of the building, leaving many dead and injured, Reuters reported earlier, citing eyewitnesses. According to the news agency, a medic said that he saw “mutilated and charred bodies,” adding that the funeral was being held for the deceased father of the Houthi rebels’ Interior Minister. Military and security officials from the rebel movement are among the victims, according to the outlet.  As RT reports, one of the deadliest attacks occurred after the coalition’s aircraft attacked a crowded marketplace in Mastaba, a village in Yemen’s northern Hajja governorate in April. The UN children’s agency, UNICEF, put the death toll from that airstrike at 119, including 22 children. In August, at least 11 people were killed and 19 injured in an airstrike that targeted a hospital in northwestern Hajjah province, according to Doctors Without Borders (MSF). (pictures, videos)

UN calls on Saudi Arabia to stop torturing, executing minors in scathing report - A UN watchdog has slammed Saudi Arabia for subjecting minors as young as 15 to stoning, flogging, amputation, and even execution, contrary to the children rights convention, but a Saudi official reportedly responded that sharia is “above all laws and treaties.”   On Thursday, the Committee on the Rights of the Child (CRC) published a report on Saudi Arabia’s track record in enforcing the Convention on the Rights of the Child, to which it is a party. Upon reviewing the kingdom’s government policy towards children, who are defined as individuals under 18 years old for the purposes of the convention, the committee urged Saudi authorities to revise its legislation “without any further delay… with a view to unambiguously prohibit the imposition of death sentence on children” pursuant to the convention.  The document noted that minors in Saudi Arabia can stand trial as adults after they reach the age of 15, and that Saudi courts issue and carry out death sentences “after trials falling short of guarantees of a due process and fair trial… especially as concerns the absolute prohibition of torture.”“The Committee is particularly concerned that out of the 47 persons executed on 2 January 2016, at least four, namely Ali al Ribh, Mohammad Fathi, Mustafa Akbar and Amin al-Ghamadi were under the age of 18 when sentenced to death by the Specialized Criminal Court,” the report says.  The 18-member committee also strongly criticized Saudi Arabia’s traditional practices of punishing perpetrators with stoning, flogging, and limb amputation, demanding that it “repeal all provisions contained in legislation” authorizing such penalties.

US May Be Guilty Of War Crimes For Enabling Saudi Mass Killings Of Yemeni Civilians - As the US slams Russian bombing in Aleppo, accusing Putin of "crimes against humanity" and in the process sending US-Russian relations to levels not seen since the Cold War, it quietly sells billions in weapons and equipment to Saudi Arabia, a nation which has "exported more extreme ideology than any other place on earth over the course of the last 30 years." It also happens to be one of the biggest state donor to the Clinton Foundation. Which may explain why as Reuters reported in an exclusive story today, the Obama administration went ahead with a $1.3 billion arms sale to Saudi Arabia last year despite misgivings and warnings from some officials that the United States could be implicated in war crimes for supporting a Saudi-led air campaign in Yemen that has killed thousands of civilians. Citing government documents and the accounts of current and former officials, Reuters reveals that while the Obama administration and the Pentagon rail against Russian bombing in Syria, State Department officials have been skeptical - in private of course - of the Saudi military's ability to target Houthi militants without killing civilians and destroying "critical infrastructure" needed for Yemen to recover.  However, and this may be where Saudi funding for Hillary's campaign - according to a recent report, Saudi Arabia funded 20% of Hillary's presidential campaign - and her election came into play, government lawyers ultimately did not reach a conclusion on whether U.S. support for the campaign would make the United States a "co-belligerent" in the war under international law, Reuters said citing four current and former officials. Such a finding would have obligated Washington to investigate allegations of war crimes in Yemen and would have raised a legal risk that U.S. military personnel could be subject to prosecution, at least in theory. The findings emerge days after an air strike on a wake in Yemen on Saturday that killed more than 140 people renewed focus on the heavy civilian toll of the conflict. The Saudi-led coalition denied responsibility, but the attack drew the strongest rebuke yet from Washington, which said it would review its support for the campaign to "better align with U.S. principles, values and interests."

US ship and Saudi forces targeted as Yemen’s civil war escalates - Saudi Arabia said on Monday that it had stopped two ballistic missiles fired at its forces by Yemen’s Houthi rebels, and the US said two missiles were fired from Houthi-controlled territory at an American naval vessel in the Red Sea, as the civil war in Yemen escalates. The Houthis denied they fired the missiles that targeted — but missed — the US warship, but the incident will raise concerns about maritime security in one of the world’s most important waterways. Last week, Houthis struck a commercial vessel of the United Arab Emirates, which is part of the Saudi-led coalition fighting the rebels. “The [naval] attacks are very, very significant developments. If you had told the US Navy two years ago they would be fired at by anti-ship missiles from Yemen, they’d have laughed at you,” said a former Nato naval officer. ”This is hugely significant at a strategic level as these missiles threaten the key shipping route between Europe and much of the rest of the world.” The missiles targeting the Saudi forces, two days after Saudi air strikes killed more than 140 people at a funeral, were fired toward Marib in Yemen and the Saudi city of Taif. The 19-month war in Yemen has claimed more than 10,000 lives but neither side has been able to gain the upper-hand, with the Houthi rebels controlling Sana’a, the capital, and the northern highlands, and the government controlling the southern port of Aden and swaths of the east. But with a deepening humanitarian crisis and Saudi Arabia repeatedly accused of hitting civilians targets, including the funeral attack, scrutiny has increased on the US and UK role in supporting the Saudi-led coalition. In the wake of the funeral attack on Saturday, Washington said it would review its support for the Yemen operation. Ban Ki-moon, the UN secretary-general, on Monday said there must be accountability for the “appalling conduct” of the war.

U.S. Launches Strikes in Yemen After Missiles Aimed at American Ships - NBC - The U.S. military launched Tomahawk cruise missiles against radar sites in Yemen early Thursday, a senior defense official said.  The strikes followed two incidents this week in which missiles were fired at a U.S. Navy ship from a rebel-controlled area of the country.  The missiles were launched from the destroyer USS Nitze at around 4 a.m. Thursday local time (9 p.m. Wednesday ET), and initial assessments were that all three coastal sites in rebel Houthi-controlled areas were destroyed, the official said.  Pentagon press secretary Peter Cook said in a statement that President Barack Obama authorized the strikes on the recommendation of Secretary of Defense Ash Carter and Chairman of the Joint Chiefs General Joseph Dunford.  "These limited self-defense strikes were conducted to protect our personnel, our ships, and our freedom of navigation in this important maritime passageway," Cook said. "The United States will respond to any further threat to our ships and commercial traffic, as appropriate, and will continue to maintain our freedom of navigation in the Red Sea, the Bab el-Mandeb, and elsewhere around the world."

State Department Asked What Is Difference Between Yemen And Syria Bombings, Awkward Moment Follows  -- As we asked rhetorically yesterday, how Kerry can accuse Russia of committing war crimes in Syria with a straight face is unclear, as reports of atrocious crimes committed in Yemen continue to surface. It seems AP's Tom Lee questioned this hypocrisy also. As The Independent reports, a US government spokesperson has struggled to answer questions put to him on why the US condemns Russian bombing in Syria, and supports Saudi-led bombing in Yemen, both of which have killed thousands of civilians.During a media briefing in Washington DC on Tuesday, State Department spokesperson John Kirby was asked repeatedly about whether Saudi coalition bombing of Houthi rebels in Sanaa - facilitated by US arms sales to the Gulf state - deliberately targets civilian infrastructure.“Over the weekend there was this air strike on a funeral by the Saudi-led coalition,” Matt Lee of the Associated Press asked. “I was just wondering: does the administration see any difference between this kind of thing, and what you accuse the Russians, Syrians and the Iranians of doing in Syria, and particularly Aleppo ?”Mr Kirby struggled to answer the question, pointing out that the Kingdom has launched an investigation into how the funeral hall was hit, whereas nothing of the sort has been carried out by the Syrian or Russian governments, which he accused of deliberately causing harm to civilians.

 The Podesta Emails: The outrageous US obsession to adjust the Middle East chaos according to the US interests - An email sent by John Podesta to Hillary Clinton in late September of 2014, shows characteristically the degree of US obsession to adjust things in Middle East perfectly according to their interests. Even in an environment of absolute mess, for which the US intervention was highly responsible, the key associate of the Clintons, is an authentic example of how the US officials are thinking. How they insist, after all this chaos, to play the same games on the expense of millions of people who lose their lives, their homes.  The most characteristic part of this email, is that Podesta is still considering that the US should fight ISIS under specific terms and conditions, as if the US have the time and the luxury to do so. As he writes characteristically: “... we will be able to work with the Peshmerga as they pursue ISIL into disputed areas of Eastern Syria, coordinating with FSA troops who can move against ISIL from the North. This will make certain Basher al Assad does not gain an advantage from these operations.” This shows that even after ISIS went out of control, the biggest concern of the US was to prevent Assad of taking advantage. At the same time, Podesta admits that the US allies, Qatar and Saudi Arabia, are helping ISIS: “... we need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region.” The plans for a kind of Kurdish autonomous state also confirmed: “in return for increase autonomy, the KRG will not exclude the Iraqi Government from participation in the management of the oil fields around Kirkuk, and the Mosel Dam hydroelectric facility.”, as well as, the subsequent worsening of the US-Turkish relations: “In the past the USG, in an agreement with the Turkish General Staff, did not provide such heavy weapons to the Peshmerga, out of a concern that they would end up in the hands of Kurdish rebels inside of Turkey. The current situation in Iraq, not to mention the political environment in Turkey, makes this policy obsolete. [...] as Turkey moves toward a new, more serious Islamic reality, it will be important for them to realize that we are willing to take serious actions, which can be sustained to protect our national interests.

Diplomatic divide over Libya threatens EU unity on defense - Politico - European governments’ new push to cooperate more effectively on defense and security is already being tested in Libya, where France is accused of playing a double game in an ongoing conflict that has exposed divisions within the bloc. The North African country has been torn between two capitals since a France-led NATO intervention in 2011 that toppled its longtime leader, Muammar Gaddafi. Europe officially backs the Tripoli-based government of Fāyez al-Sarrāj, which has been recognized by the U.N. But France has also been accused of giving support to Khalīfa Ḥaftar, the leader of an Egypt-backed government in the eastern city of Tobruk that refuses to accept Tripoli’s legitimacy. At least one EU partner criticized France for projecting “ambiguity” in the dispute at a time when Europe is otherwise trying to show off its new plans for military integration — and as France, Germany and Italy have been calling to set up a military-civilian European headquarters and to share some troops. “We are concerned about French ambiguity but Paris is a strategic partner in Libya,” Nicola Latorre, chairman of the Italian senate’s defense committee and a close ally of Prime Minister Matteo Renzi, told POLITICO. For months analysts and diplomats have said France is following two opposite lines in Libya: a political one to support Tripoli and a military one to back Ḥaftar and his main sponsor, Egypt. A French diplomat rejected that criticism, saying Paris is fully in line with the rest of its European partners in the push for stability in the country, a departure point for African migrants hoping to reach Italy. But questions continue to be raised, especially after an incident in July that fed suspicions France was playing a double game in Libya. Paris confirmed that three French soldiers engaged in intelligence operations against terrorists in Libya were killed in a helicopter crash. A militia, the Benghazi Defense Brigades, claimed in a statement it had shot the aircraft down and that the helicopter belonged to Haftar’s forces. Analysts stress that the only forces in that area with helicopters are Haftar’s militias, pointing at the accident as evidence of France’s ambiguous policy in the region.

Russia and Turkey agree gas pipeline deal- For the third time in three months, Russian president Vladimir Putin and Turkish president Recep Tayyip Erdogan met in Istanbul. The result of this meeting is a Gas Pipeline Deal that bypasses Ukraine. “Russia and Turkey have put tensions over Syria behind them to agree a gas pipeline deal which would open a new route for Russian energy to western Europe. The TurkStream agreement between Russian president Vladimir Putin and Turkish president Recep Tayyip Erdogan in Istanbul on Monday would, if implemented, redraw the energy map of Europe by allowing Russia to bypass some of its gas around Ukraine. It would also strengthen ties between Moscow and Ankara at a time of growing mistrust between Turkey and the west in the wake of the coup attempt that plunged the country into turmoil three months ago and killed 270 people. Monday’s agreement committed the pair to construction of two lines of pipes beneath Turkish waters on the bed of the Black Sea, with a combined capacity of 30bn cubic metres of gas. One would serve the Turkish market and the other the rest of Europe. TurkStream, to be operated by Gazprom, the Russian state-owned gas monopoly, was proposed by Mr Putin two years ago as a replacement for the abandoned South Stream pipeline which had involved co-operation between Russia and several EU countries.

 Putin and Erdogan pledge deeper military contact after gas deal signed - BBC News: The Russian and Turkish leaders have agreed to intensify military and intelligence contacts after a meeting in Istanbul. President Vladimir Putin also said he and Recep Tayyip Erdogan had agreed on the need for aid to get to the northern Syrian city of Aleppo. The two countries have signed a deal to construct two pipelines to send Russian gas under the Black Sea to Turkey. Ties were strained after Turkey downed a Russian military jet last year. But speaking at a joint news conference with Mr Putin, Mr Erdogan said he was confident that the normalisation of relations would take place rapidly. Unlike Russia, Turkey is a member of Nato, but both countries currently have uneasy relations with the West and are also facing economic challenges. Despite the deal, differences remain between the countries. While Russia supports Syria's President Bashar al-Assad, Turkey has called for him to be ousted and has offered support to forces fighting Syrian government troops. On Saturday, Russia vetoed a French-drafted UN resolution calling for an end to air strikes and military flights over Aleppo.

Russian Government Officials Told To Immediately Bring Back Children Studying Abroad --In Europe, when it gets serious, you have to lie... at least if you are an unelected bureaucrat like Jean-Claude Trichet. In Russia, however, when it gets serious, attention immediately turns to the children.Which is why we read a report in Russian website Znak published Tuesday, according to which Russian state officials and government workers were told to bring back their children studying abroad immediately, even if means cutting their education short and not w aiting until the end of the school year, and re-enroll them in Russian schools, with some concern. The article adds that if the parents of these same officials also live abroad "for some reason", and have not lost their Russian citizenship, should also be returned to the motherland. Znak cited five administration officials as the source of the report.The "recommendation" applies to all: from the administration staff, to regional administratiors, to lawmakers of all levels. Employees of public corporations are also subject to the ordinance. One of the sources said that anyone who fails to act, will find such non-compliance to be a "complicating factor in the furtherance of their public sector career." He added that he was aware of several such cases in recent months. It appears that the underlying reason behind the command is that the Russian government is concerned about the optics of having children of the Russian political elite being educated abroad, while their parents appear on television talking about patriotism and being "surrounded by enemies."

Russia orders all officials to fly home any relatives living abroad | Daily Mail Online: Russia is ordering all of its officials to fly home any relatives living abroad amid heightened tensions over the prospect of global war, it has been claimed.Politicians and high-ranking figures are said to have received a warning from president Vladimir Putin to bring their loved-ones home to the 'Motherland', according to local media.It comes after Putin cancelled a planned visit to France amid a furious row over Moscow's role in the Syrian conflict and just days after it emerged the Kremlin had moved nuclear-capable missiles nearer to the Polish border.Former Soviet leader Mikhail Gorbachev has also warned that the world is at a 'dangerous point' due to rising tensions between Russia and the US.According to the Russian site, administration staff, regional administrators, lawmakers of all levels and employees of public corporations have been ordered to take their children out of foreign schools immediately. Failure to act will see officials jeopardising their chances of promotion, local media has reported. The exact reason for the order is not yet clear. But Russian political analyst Stanislav Belkovsky is quoted by the Daily Star as saying: 'This is all part of the package of measures to prepare elites to some 'big war'.' Relations between Russia and the US are at their lowest since the Cold War and have soured in recent days after Washington pulled the plug on Syria talks and accused Russia of hacking attacks.

I'm an Anti-Putin Russian and Clinton Makes Me Nervous - The state-owned pollster, VTsIOM, in its latest poll in July, revealed that 34 percent of those who'd heard of Trump thought Russia-U.S. relations would improve under him; only 6 percent of those who'd heard about Clinton believed that of her. In part, that can be explained by the effect of Putin's propaganda machine, which has been giving Trump more favorable coverage than Clinton for two reasons. First, Russian state TV always backs populist rebels in any Western country on the theory that whatever weakens the Western establishment is good for Russia. Second, Putin and Clinton openly dislike each other.  She says she sees in him a cold-blooded, self-enriching KGB agent and a bully; he remembers how she appeared to encourage protests against him in 2011.  Those reasons matter little to me. I believe Russia's place is in an open, free-thinking Western world, and that nationalist populists, including Trump, are destroying that vision of the West. I took part in the 2011 protests and I agree with Clinton's assessment of Putin. And yet I, too, think a Clinton presidency would be bad for Russia -- and that would ultimately hurt the U.S. as well.  Clinton's positions on Russia are based on simplistic ideological lines. In a campaign speech in late August, she branded Putin "the grand godfather of this global brand of extreme nationalism" -- the brand espoused by anti-immigrant political parties in Europe. Indeed, if one took at face value Putin's recent efforts to build a "conservative" ideology as an intellectual basis for its rule and his propaganda's backing of European nationalists, such a description would be justified. Nothing in Russia can be taken at face value, however. Putin's domestic ideology, based on Orthodox Christianity and imperial patriotism, is skin-deep and inconsistent. Only 4 percent of Russians regularly attend church, even though 72 percent consider themselves Orthodox Christians. It's difficult to impose fundamentalist values on a society that is used to the Soviet Union's hostility to religion, has three times the abortion rate of the U.S. and contains large and autonomous Muslim and Buddhist populations. Putin, who has donated a month's salary to Moscow's Jewish museum and who has opened mosques, is not an ideological ally of European nationalists like the National Front in France, who manage to be both anti-Semitic and Islamophobic. Right-wing populists talk with dread of Muslim "no-go zones" in European cities; Putin's Russia has whole regions, notably Chechnya, where Russian laws are applied only if they are consistent with local and religious traditions. Putin's government has been harsher than most European ones on ethnic nationalism, suppressing neo-Nazi groups with as much cruelty as it has shown Islamist terrorists.

Putin Ally Warns Americans To Vote For Trump Or Face Nuclear War -- The name of what is arguably Russia's most flamboyant, ultra-nationalist politician, and according to some the local incarnation of Donald Trump,  Vladimir Zhirinovsky, a deputy in the state Duma and leader of the nationalist LDPR party, is familiar to frequent readers: he most recently made an appearance on these pages two months ago, when he warned Germany that it risks utter destruction if it continued on its present track of operating Bundeswehr forces in the Baltics. Zhirinovsky also shares another feature with Donald Trump: both are outspoken to a fault. Which is why we were not surprised to read that as Reuters reported earlier, Zhirinovsky urged Americans to vote for Donald Trump as president or "risk being dragged into a nuclear war." In an interview with Reuters, Vladimir Zhirinovsky, known in Russia and Europe for his fiery rhetoric, said that Trump was the only person able to de-escalate dangerous tensions between Moscow and Washington. On the other hand, Hillary Clinton could spark World War Three, said the Russian who received a top state award from Putin after his pro-Kremlin Liberal Democratic Party of Russia (LDPR) came third in Russia's parliamentary election last month.  "Relations between Russia and the United States can't get any worse. The only way they can get worse is if a war starts," said Zhirinovsky, speaking in his huge office on the 10th floor of Russia's State Duma, or lower house of parliament. "Americans voting for a president on Nov. 8 must realize that they are voting for peace on Planet Earth if they vote for Trump. But if they vote for Hillary it's war. It will be a short movie. There will be Hiroshimas and Nagasakis everywhere." Zhirinovsky's comments come at a time when relations between Russia and the US are at generational lows, as a result not only of the conflicts raging over Syria and Ukraine but also the recent White House accusation that Russia was responsible for cyber attacks against Democratic Party organizations. In turn, an amused Putin replied his country was not involved in an effort to influence the U.S. presidential election. Instead Putin accused the US of "starting this hysteria, saying that this (hacking) is in Russia's interests. But this has nothing to do with Russia's interests," in a speech during a business forum in Moscow. He added that the accusations were a ploy to divert U.S. voters' attention at a time when public opinion was being manipulated. "Everyone is talking about 'who did it' (the hacking)," said Putin. "But is it that important? The most important thing is what is inside this information."

Army Chief Issues Stark Warning to Potential Enemies - The U.S. Army's chief of staff on Tuesday issued a stern warning to potential threats such as Russia and vowed the service will defeat any foe in ground combat."The strategic resolve of our nation, the United States, is being challenged and our alliances tested in ways that we haven't faced in many, many decades," Army Chief of Staff Gen. Mark Milley told an audience at the Association of the United States Army's annual meeting in Washington, D.C."I want to be clear to those who wish to do us harm … the United States military -- despite all of our challenges, despite our [operational] tempo, despite everything we have been doing -- we will stop you and we will beat you harder than you have ever been beaten before. Make no mistake about that."Milley's comments come during an election year in which voters will decide a new president and commander in chief -- and a period of increased military activity of near-peer competitors, including Russia and China.The Army has struggled to rebuild its readiness after more than a decade of extended combat operations in Iraq and Afghanistan. The service has significantly cut the size of its force since the Cold War and decreased its modernization budget in the last decade, Milley said."While we focused on the counter-terrorist fight, other countries -- Russia, Iran, China, North Korea -- went to school on us," he said. "They studied our doctrine, our tactics, our equipment, our organization, our training, our leadership. And, in turn, they revised their own doctrines, and they are rapidly modernizing their military today to avoid our strengths in hopes of defeating us at some point in the future."Milley also quoted a senior Russian official as saying publicly, "The established world order is undergoing a foundational shake-up" and that "Russia can now fight a conventional war in Europe and win." The general warned that future warfare with a near-peer adversary will "be highly lethal, unlike anything our Army has experienced at least since World War II." "On the future battlefield, if you stay in one place for longer than two or three hours, you will be dead."

Russia Says It’s Joining China to Counter U.S. Missile Defense -- Russia said it’s working with China to counter U.S. plans to expand its missile-defense network, which the two nations see as targeting their military assets. The upgrades aim to give Washington the ability to launch a nuclear strike “with impunity,” Lieutenant General Viktor Poznikhir of the Russian Armed Forces General Staff said Tuesday at a security forum in Xiangshan, China, according to a transcript of his speech posted on the Defense Ministry’s website. The Asian neighbors this year conducted a joint missile-defense exercise of their computer command staff, he said.“We are working together on ways to minimize possible damage to the security of our countries," Poznikhir said. “The illusion of invulnerability and impunity under the guise of missile defense will encourage Washington to make unilateral steps in dealing with global and regional issues. This could lead to a decrease in the threshold for using nuclear weapons to preempt enemy actions.” Russia’s concern about U.S. nuclear capabilities highlights a deepening rift between the Cold War foes as they trade accusations over the war in Syria. While NATO members have stressed that the alliance’s global missile shield will be a defense solely against potential attacks from so-called “rogue states,” particularly Iran and North Korea, Russia and China have been voicing concerns over their own security. In May, Russian President Vladimir Putin said that placing parts of the system in Romania and Poland -- once Soviet satellites -- is threatening peace in Europe and warned that it may trigger a new arms race. China described the U.S. Terminal High Altitude Area Defense system as an "out-and-out strategic" move that threatens its national security, warning about taking “necessary measures to safeguard” its interests. The plan has already soured Chinese ties with South Korea. According to Poznikhir, the U.S. defense system includes weapons that, if fired from a warship in the Baltic Sea, can intercept ballistic missiles launched from the European part of Russia before a nuclear warhead is separated. U.S. missile defense launchpads can also be used for Tomahawk cruise missiles and there is no guarantee that such systems wouldn’t replace Thaad complexes in South Korea, he said.

West is playing with nuclear war -  Britain’s ruling elite are making advanced preparations towards a major escalation of military operations in Syria. Parliament met in an emergency three-hour session yesterday to accuse Russia of war crimes in Syria and lay the basis for Britain’s involvement in establishing a no-fly zone and possibly sending ground forces into the war-torn country. Global tensions over Syria are at a boiling point. As parliament met, Russian President Vladimir Putin cancelled a planned October 19 visit to France in response to the accusation made the previous day by French President Francois Hollande that Moscow was guilty of “war crimes” in Syria. The Syrian army, with the support of Russia, have been attacking the east of Aleppo, where NATO’s Al Qaeda-linked Islamist proxies in Syria are based. With its proxies facing defeat, Washington, backed by its international allies, is calling for the imposition of a no-fly zone in order to save them. “The population [of Aleppo] is the victim of war crimes. Those who commit these acts will pay for this responsibility before the international court of justice,” said Hollande. Tensions have been ratcheted up ever since Washington, without any evidence, pinned responsibility on Moscow for an attack on a UN aid convoy and demanded that Russia and Syria ground their aircraft. Russia denies any involvement.

Stein: endless war led to failed states, mass refugee migrations and worse terrorist threats -- After our call to independent media for a 'counter-debate' with the US third parties, the independent news network Democracy Now! made a first revolutionary step to break the US bipartisan debate monopoly. Amy Goodman of Democracy Now! explains again the process, in this second presidential debate: “We spend the rest of today’s show airing excerpts of the Donald Trump-Hillary Clinton debate and give Green Party presidential candidate Jill Stein a chance to respond to the same questions posed to the major-party candidates. Again, Dr. Stein and Libertarian presidential candidate Gary Johnson were excluded from the debate under stringent rules set by the Commission on Presidential Debates, which is controlled by the Democratic and Republican parties. We invited both Stein and Johnson to join us on the program; only Stein took us up on the offer.” In this second part of the second debate, Trump focused on the "threat" of the waves of refugees. Clinton defended the refugees, but put all the blame on ... guess who: Russia and Syria!  Again, Stein exhibited her superiority by saying the whole truth. That the endless US wars and interventions are responsible for the failed states, mass refugee migrations and worse terrorist threats. This is the root of the problem, and the US should change policy towards what Jill Stein said:“Instead of continuing to pour gasoline on this fire, we need to take a stand on behalf of a weapons embargo to all parties, since our weapons are getting into the hands of all parties. We need to impose a freeze on the bank accounts of our allies that are continuing to fund terrorist enterprises, and to work with the Turks, who are our ally—in name, at least—to close down their border to the flow of terrorist militias across their border. That is the contribution that we need to make.” There is no need for further analysis here. Every point that Jill Stein made about the US disastrous wars and interventions, was spot on. Just

Jill Stein: Trump Is Less Dangerous Than Clinton; She Will Start Nuclear War With Russia - (video) Green party presidential candidate Jill Stein: Donald Trump is less scary on foreign wars, because he wants to work with Russia. JILL STEIN: It's important to look at where we are going. It's not just a moment in time, but where has the strategy of voting for the lesser evil you will taken us?  All these times you have been told to but for the lesser evil because you didn't want the wars, or the meltdown of the climate, or the offshoring of our jobs, or the attack on immigrants or the massive bailout for Wall Street, that is actually what we have gotten. By the droves.Because we with public interest allow ourselves to be silent and voted for the lesser evil. But the lesser evil doesn't solve the problem.The Obama administration, even with both houses of Congress, actually did all of these fossil fuel emissions. "All of the above" gave us some renewable energy but it completely amplified and intensified our film production, which has been incredibly destructive to the climate.The wars have gotten bigger, we are now bombing seven countries. It is important to not just look at the rhetoric but also look at the track record and the reality is the lesser people and greater people is a race to the bottom, and even Donald Trump in the right wing extremism grows out of the policies of the Clintons, in particular Nafta, which sent our jobs overseas and Wall Street deregulation, which blew 9 million jobs up into smoke.That is what is creating this right wing extremism. A vote for Hillary Clinton isn't going to fix it... It is now Hillary Clinton that wants to start an air war with Russia over Syria by calling for a no fly zone. We have 2000 nuclear missiles on hairtrigger alert. They are saying we are closer to a nuclear war than we have ever been. Under Hillary Clinton, we could slide into nuclear war very quickly from her declared policy in Syria.  I sure won't sleep well at night if Donald Trump is elected, but I sure won't sleep well at night if Hillary Clinton elected. We have another choice other than these two candidates who are both promoting lethal policies.

“Oops!”—A World War! - Dmitry Orlov - Over the past week or so I’ve been receiving a steady stream of emails demanding to know whether an all-out nuclear war is about to erupt between the US and Russia. I’ve been watching the situation develop more or less carefully, and have been offering my opinion, briefly, one on one, to a few people’s great relief, and now I will attempt to spread the cheer far and wide. In short, on the one hand, all-out nuclear annihilation remains quite unlikely, barring an accident. But, on the other hand, such an accident is by no means impossible, because when it comes to US foreign policy “Oops!” seems to be the operative term. One reason to be cheerful is that any plan to attack Russia is bound to become mired in bureaucracy. Battle plans are developed by mid-rank people within the US military establishment, approved and forwarded up the chain of command by higher-rank people and finally signed off on by the Pentagon’s top brass and their civilian political accomplices. The top brass and the politicians may be delusional, megalomaniacal and inadvertently suicidal, but the mid-rank people who develop the battle plans are rarely suicidal. If a particular plan has no conceivable chance of victory but is quite likely to lead to them and their families and friends becoming vaporized in a nuclear blast, they are unlikely to recommend it. Another reason to be cheerful is that Russia has carefully limited the Pentagon’s options. One plan that, in the popular imagination, could lead to an all-out war with Russia, would be the imposition of a no-fly zone over Syria. What many people miss is that it is not possible to impose a no-fly zone on a country with a sufficiently powerful air defense system, such as Syria. As a first step, the air defense system would have to be taken out, and the air campaign to do so would be very expensive and incur massive losses in both equipment and personnel. But then the Russians made this step significantly worse by introducing their S-300 system. This is an autonomous, tracked, mobile system that can blow objects out of the sky over much of Syria and some of Turkey. It is very difficult to keep track of, because it can use “shoot and scoot” tactics, launching an attack and crawling away in a random direction over rough terrain. Last on my list of reasons why war with Russia remains unlikely is that there isn’t much of a reason to start one, assuming the US behaves rationally.

  Could Falling Chinese Oil Production Kill The OPEC Deal? --Dwindling Chinese oil production could lead the Organization of Petroleum Exporting Countries (OPEC) to delay a freeze deal further, as the Asian giant ramps up its own imports to make up for lost domestic supply. China, which was ranked as the fifth-largest oil producer in the world during 2015, reported a production rate of 3.87 million barrels per day in August—the lowest since December 2009, and the second consecutive month of sharp declines, according to Forbes.Markets will have to reach an oil price of $60 a barrel before Chinese energy companies can grow production operations back to previous highs, analysts speaking to Bloomberg have said.  The China National Offshore Oil Cooperation (CNOOC) can see profits at barrel prices above $41 a pop on average – a figure almost 40 percent higher than the break-even point of select Middle Eastern outlets who can still viably produce in a $25 a barrel market.  Around 15 percent of the oil that China purchases from foreign sources comes from Saudi Arabia – the de facto leader of OPEC, who’s regional rivalry with Iran caused two major efforts at implementing an oil production freeze to fail.Though Saudi Arabia and its fellow OPEC members have agreed to discuss the terms of a deal in the weeks leading up to their official meeting in Vienna at the end of November, the Chinese government’s perspective as a distant observer of the bloc’s internal banter does not give it much power to improve its companies’ prospects.As a group, OPEC controls 40 percent of oil exports while China, on its own, contributes far less to the international markets. Even in 2015 –a year when oil prices were thought be on the road to recovery after the 2014 crash – Sinopec reported that it slashed oil and gas production. Using satellite imagery of China’s oil warehouses, Silicon Valley start-up Orbital Insight Inc. calculated that the country had roughly 600 million barrels of oil in storage as of May – a figure that exceeds existing estimates by roughly one-third.   “There is more storage available in China than the market is willing to acknowledge. Any information around this is valuable.”  In total, China maintains 2,100 commercial storage tanks capable of storing 900 million barrels in total, according to observations made from the satellite imagery. If OPEC and Russia fail to come to an agreement in November, the member states that compete to supply energy to China – notably Iran, Saudi Arabia and Russia – will economically benefit from the China’s falling domestic oil production.

China’s SDR Distraction by Barry Eichengreen -  At the start of October, China’s currency, the renminbi, was added to the basket of currencies that make up the International Monetary Fund’s Special Drawing Rights, or SDR. Previously, the SDR had been defined as a weighted average of the dollar, euro, British pound, and Japanese yen. Now that the renminbi has been added, it can claim to be one of just five truly global currencies.  Should we care? The Chinese certainly do. In Beijing, where I was late last month, joining the rarefied SDR club was all people wanted to talk about. (Okay, truth be told, they also wanted to talk about Donald Trump.)  Seeing the renminbi added to the SDR basket was a matter of national pride. It symbolized China’s emergence as a global power. And it vindicated the government’s efforts to encourage use of the renminbi in cross-border transactions, freeing China and the rest of the world from over-dependence on the dollar.  But the fact of the matter is that adding the renminbi to the SDR basket has little practical significance. The SDR is not a currency; it is just the unit in which the IMF reports its financial accounts. Only a small handful of international bonds are denominated in SDRs, because banks and firms do not find this option particularly attractive. The main issuer of SDR bonds is the IMF’s sister organization, the World Bank (the Fund itself is not authorized to issue bonds).   The Chinese argue that the renminbi’s addition to the SDR basket should be seen in a broader context. It is one of a series of steps to encourage use of the renminbi in international transactions.  This agenda includes negotiating currency swap agreements, now more than two dozen, between the People’s Bank of China (PBOC) and foreign central banks. It also includes designating a Chinese financial institution to provide clearing and settlement services for transactions in renminbi in each leading financial center. But the reality, again, is that these steps are more about symbolism than substance. The PBOC’s renminbi swaps are almost entirely unused. Designated clearing banks have not exactly been flooded with business. Offshore renminbi bank deposits are falling. The proportion of China’s merchandise trade settled in renminbi has been declining since mid-2015. And there is no sign that where the Polish government has so boldly ventured, other governments will soon follow.

China’s September Reserves, and Q2 Balance of Payments -- China’s headline reserves dipped by about $19 billion in September, dropping below $3.2 trillion. Adjust for foreign exchange changes, and the underlying fall is widely estimated to be a bit more—around $25 billion.  Press coverage emphasized that the fall “exceeded expectations.” To me that suggests “expectations” on China’s reserves aren’t formed in all that sophisticated a way.$20-30 billion in sales is in line with the change in the PBOC’s balance sheet in July and August (the FX settlement data, the other key proxy for intervention, suggests more modest sales in August). Throw in the September spike in the Hong Kong Inter-bank Offered Rate (HIBOR) —which suggested a rise in depreciation pressure on the CNY and CNH —and $25 billion in sales is if anything a bit smaller than I personally expected.* Of course, some of the sales could be coming through the state banks; time will tell. Even if the pace of sales did not pick up in September, there is is an interesting story in the Chinese data. The $75 billion a quarter and $300 billion a year pace of sales implied by the July-September monthly data aren’t anything like the pace of sales at the peak of pressure on China’s currency. But $75 billion a quarter is a still bit higher than the underlying pace of sales in Q2. The balance of payments data show Q2 reserve sales of about $35 billion (the change in the PBOC’s balance sheet reserves was $31 billion). But other parts of China’s state added to their foreign assets in Q2. In fact, counting shadow intervention (foreign exchange purchases by state banks and other state actors), I actually think the government of China’s total foreign assets may have increased a bit in the second quarter.

More Chinese firms unveil debt swaps as Beijing struggles to reduce leverage | Reuters: Chinese firms are moving rapidly to announce debt restructuring plans following the release of government guidelines on Monday, as policymakers experiment with ways to rein in the country's ballooning corporate debt. China Construction Bank Corp (CCB), the nations' second-largest lender by assets, has been reported in two deals to help big, debt-laden state companies in as many days, and other Big Four banks are expected to follow soon. Chinese companies sit on $18 trillion in debt, equivalent to about 169 percent of gross domestic product (GDP), according to the most recent figures from the Bank for International Settlements. Most of it is held by state-owned firms. Construction Bank will conduct a debt-to-equity swap with Yunnan Tin Group, the world's biggest tin producer and exporter, to cut its debt and financing costs, the official Xinhua News Agency reported on Wednesday. Separately, the bank on Tuesday announced the launch of a 24 billion yuan ($3.60 billion) debt restructuring fund to help struggling Wuhan Iron and Steel Group Corp. Although the statement from CCB did not specify the planned operations of the fund, official media reported that the debt reduction would be accomplished primarily

China banks may need $1.7 trillion injection as credit quality worsens: S&P | Reuters: Rising debt levels will worsen the credit profiles of China's top 200 companies this year, requiring the country's banks to raise as much as $1.7 trillion in capital to cover a likely surge in bad loans, S&P Global said in reports on Tuesday. The study sees little scope for improvement in 2017 amid worsening leverage and excess capacity in almost all sectors. Debt has emerged as one of China's biggest challenges, with the country's debt load rising to 250 percent of gross domestic product (GDP). Excessive credit growth is signaling an increasing risk of a banking crisis in the next three years, the Bank of International Settlements (BIS) warned recently. Seventy percent of the companies in the S&P survey were state owned, and they accounted for $2.8 trillion or 90 percent of the total respondents' debt. S&P estimated the problem credit ratio at Chinese banks was already at 5.6 percent at end-2015. In a downside scenario of unabated credit growth, that could worsen to 11-17 percent. In such a situation, banks would need as much as $1.7 trillion in recapitalization by 2020, S&P estimated. Even under a base case scenario, they would require $500 billion. That compares with China's last big bank debt cleanup some two decades ago, when an estimated 4 trillion yuan ($600 billion) was spent on restructuring as of late 2005, according to a report for French economics thinktank CEPII. S&P expects Beijing will continue to allow rapid credit growth over the next 12-18 months before attempting to rein it in, implying risks would heighten in one to two years.

China exports fall as concerns over demand grow - A weaker renminbi failed to stop a sharp fall in China’s exports in September, damping economists’ hopes that demand would pick up in the fourth quarter and sending markets in the region lower. In renminbi terms, exports fell an annualised 5.6 per cent, according to China’s General Administration of Customs, the first drop since February when outbound shipments contracted 20.6 per cent. Imports grew only 2.2 per cent in local currency terms, down from 10.8 per cent growth in August. The outlook was bleaker when valued in dollars, with outbound shipments falling 10 per cent year on year, sharpening from a rate of 2.8 per cent the month before and far worse than the 3.3 per cent shrinkage forecast by economists surveyed by Bloomberg. A drop of 1.9 per cent in imports also came in well below expectations of 0.6 per cent growth. The fall in exports “adds weight to our view that the People’s Bank will maintain its recent policy of gradual trade-weighted renminbi depreciation in coming quarters,” said Julian Evans-Pritchard, China economist at Capital Economics. The central bank set the midpoint for the renminbi’s trade against the dollar weaker by 0.1 per cent at 6.72960 on Thursday, in the fourth consecutive day of weakening.

 China September Exports: Not Quite as Bad as They Seem? - The 5.6 percent fall—in the yuan data—in China’s September exports was a surprise. Exports had been rising in yuan terms, and in volume terms, since March. I expected the rise to continue, largely because the pickup in volumes is consistent with the expected impact of the 8 percent fall in the broad yuan (using the BIS index) since last July.  And I am very conscious of the risk of interpreting data to fit your prior beliefs, and thus missing a new signal. That said, I do think there are a couple of reasons why the fall in exports may not be indicative of a shift in trend. The first is straightforward: there was one fewer working days in China this September than last September (22 versus 21; data are here). Nominal exports, in yuan, per working day, fell by 1 percent. This argument should not be overstated. There were more working days this August than last August, so nominal exports, in yuan, per working day, were down in August. The more important reason is a bit more complicated. Chinese export prices jumped last September, in the immediate aftermath of the yuan’s August depreciation. Each dollar in exports generated more yuan. Over time, though, export prices have come down. They are now lower than their pre-August devaluation levels.  China hasn’t released its export price index for September. But if you compare the export price index for August (e.g. assume there was no change in September) to the export price index last September, export prices should be down about 5 percent y/y. After adjusting for the likely change in exports prices—but not adjusting for the change in working days—I get a 1 percent estimated fall in export volumes. Not great, but not as bad as the headline numbers.

 Helicopter Money Preparations Seen by Mizuho in Kuroda Framework - Bloomberg: No matter what he says or does, helicopter money speculation follows Japan’s central bank chief Haruhiko Kuroda. From Tokyo to Stockholm, some analysts see the groundwork for a central bank-funded fiscal stimulus in last month’s decision by the BOJ to target sovereign bond yield levels. The shift means the monetary authority would be obligated to absorb new government debt sales to stop borrowing costs rising, according to Mizuho Securities Co. and Nordea Markets. The risks for investors, they say, include a rapid depreciation of the yen. “The change in policy has lowered the hurdle to helicopter money by one rung,” said Noriatsu Tanji, a senior bond strategist at Mizuho Securities in Tokyo. “So basically, it’s now up to what the government does on the fiscal side.” Kuroda has repeatedly ruled out helicopter money as an option even though consumer prices are falling as quickly now as when he launched his easing program three and a half years ago. Investors have so far struggled over what the latest policy revisions ultimately mean, with both bond yields and the yen swinging between extremes in the weeks since the Sept. 21 announcement.Japan’s Cabinet in August approved a second supplementary budget that included part of an economic stimulus package. An influential economic adviser to Prime Minister Shinzo Abe, Etsuro Honda, is pushing for a third supplementary budget and closer coordination between monetary and fiscal policy. “What I wanted to say the most was about managing fiscal and monetary policies in a unified manner,” Honda said in an interview Thursday, referring to discussions with Abe the previous week. “Japan should not be afraid of increasing bond issuance.”

Japan Passes $32 Billion in Extra Economic Stimulus, but Some Seek More - WSJ: Parliament passed an extra spending package Tuesday to get Prime Minister Shinzo Abe’s economic-revival plan back on track, but the Japanese leader is already facing calls to do more. A leading Abe adviser and some economists say the Bank of Japan is essentially offering unlimited funds to the government interest-free, and he shouldn’t let the opportunity pass. Opponents of ramping up such borrowing say that issuing more debt to finance more stimulus could send a signal that the nation has lost its fiscal discipline. The supplementary budget contained about ¥3.3 trillion ($32 billion) in additional spending, bringing the total budgeted for the current fiscal year—which ends in March 2017—to ¥100 trillion, up nearly 2% from the previous year.

BOJ ready to act if global downturn threatens inflation goal: board member | The Japan Times: The Bank of Japan will not hesitate to pull the trigger on additional monetary easing if a drastic global downturn threatens the bank’s efforts to achieve its inflation goal, a BOJ board member said Wednesday. “Japan remains far from reaching its limit in monetary easing policy,” Policy Board member Yutaka Harada said in a speech in Matsumoto, Nagano Prefecture. Harada appeared to dismiss concern in some quarters that the BOJ has exhausted its options. At a policy meeting in September, the advocate of aggressive easing voted to shift the central bank’s policy focus to controlling yield curves instead of greater asset buying. But some economists said Harada’s remarks are unlikely to fuel expectations that the BOJ will loosen its monetary grip when the Policy Board meets through Nov. 1. BOJ Gov. Haruhiko Kuroda said last week that the central bank is ready to conduct additional monetary easing if necessary, but he said the nation’s moderate economic recovery does not warrant action at present. The bank does not think it necessary “at this stage” to tinker with a negative 0.1 percent rate on some reserves that commercial banks park at the BOJ, Kuroda said in Washington.

Japan considers option of seeking return of Russian-held islands in two stages | The Japan Times: The government of Prime Minister Shinzo Abe is examining the option of concluding a peace treaty with Russia upon Moscow’s agreement to return two of the four disputed islands northeast off Hokkaido, government sources said Sunday. Abe hopes to resolve the long-standing sovereignty issue involving the Russian-controlled islands, also called the Northern Territories, in a flexible manner without sticking to the conventional stance of realizing the return of all of them at once, the sources said. The prime minister is scheduled to meet with Russian President Vladimir Putin in Peru on the sidelines of the Asia-Pacific Economic Cooperation forum summit in November and hold a bilateral summit in Nagato, Yamaguchi Prefecture, in December. According to the sources, Tokyo is considering concluding a peace treaty with Moscow to formally end World War II hostilities between the two countries by striking a deal stipulating the return of the Habomai group of islets and Shikotan Island. As for the larger Etorofu and Kunashiri islands, the Abe government will propose tentative joint administration and offer Japan’s cooperation for the economic promotion and development. Talks on their return to Japan will be held later. The government also aims to facilitate Japanese nationals’ visa-free visits to the islands.

The Philippines is preparing a major pivot toward China amid tensions with the US -- About 250 Philippine business executives will visit Beijing with President Rodrigo Duterte next week as he puts aside years of hostility to seek a new partnership with China at a time when tensions between Manila and its traditional ally, the United States, are mounting. There has been no announcement about the delegation, but business groups and government officials said registration to join Duterte on his Oct. 19-21 visit had been oversubscribed. Filipino executives are eager to talk with Chinese business leaders and government officials about deals in a range of sectors, from rail, and construction to tourism, agribusiness, power and manufacturing, the sources said. Initially only about two dozen Philippine entrepreneurs were to accompany Duterte but the number had ballooned to about 250, Trade Undersecretary Nora Terrado told Reuters. "I understand there are 100 more wanting to go," Terrado said, adding the size of the delegation was unusual because the two sides agreed on the visit only about one month ago. The trip could signal a transformation in a relationship dogged in recent years by mistrust over rival territorial claims in the South China Sea, and could upset strategic alliances in a region growing wary of China's influence and military might and where the United States has a strong presence. An arbitration court ruling in the Hague on July 12 that said China had breached the Philippines' sovereign rights in the South China Sea had threatened to lead to a further deterioration in ties between Manila and Beijing. But Duterte, who took office on June 30 after winning an election in May, has instead aggressively courted China and said he wants to reduce the nation's dependence on the United States. He has said he will hold talks with China on the South China Sea dispute. His promises to engage with China have in large part come in a near-daily barrage of hostility against Washington, raising questions about whether his overtures carried weight, or were simply aimed at boosting his profile at home by espousing a "pro-Filipino" foreign policy.

Splitting out Emerging Economies Changes the Picture on Global Trade -- Brad Setser -The Financial Times’ Big Read feature on hidden trade barriers included a chart showing the growth in trade relative to the growth of the world economy. The graph showed, accurately, that trade is now growing a bit more slowly than the world economy. The question is why. A relatively simple adjustment helps answer the question. Look at a plot of import growth (goods only in this graph, but it doesn’t change if you use goods and services) against growth in the advanced economies, using the IMF’s WEO data set. And now consider the same plot for the emerging economies. Eyeball economics tells us that import growth has really slowed in the emerging economies, both absolutely and relative to growth. 2015 emerging market import growth sort of look like 1998, and that wasn’t a good year for the emerging world. Advanced economy imports by contrast grew a bit faster than overall growth. Much more sophisticated economics tells a similar story. Europe is actually pulling its weight here. Eurozone imports have picked up along with the modest revival in eurozone demand over the last couple of years. The problem in the eurozone is that the demand recovery has been weak more than anything else. In the U.S. non-oil imports were rising at a decent clip in 2013 and 2014. Since then, import growth has slowed—in part because of high levels of inventories, and in part because of the slowdown in investment. Goldman’s U.S. economics team recently estimated that the investment slump accounts for about half of the slowdown in U.S. imports. And a large part of the fall in investment in the U.S.—as in the emerging economies—is tied to the fall in commodity prices. The policy lessons here are clear enough. There are the risks associated with a potential sharp turn inward in the advanced economies. But the emerging economies shouldn’t be let off the hook. Even after taking into account the fall in investment and the associated fall in demand, emerging market imports have been a bit on the soft side. Some of that is the introduction of new, hidden barriers to new kinds of trade, as Shawn Donnan and Lucy Hornby of the FT emphasized. But there are also a lot of old-fashioned, tax-at-the-border barriers to trade in many emerging economies. Over time China’s industrial policy has focused less on export promotion and more on import substitution. I suspect that we are now starting to see the result.

 Planted Stories in Indian Media - Last year, India's ex foreign secretary Sujata Singh bitterly complained about negative stories "planted in the media" by the Modi government to "tarnish" her reputation as part of the campaign to force her resignation. "The commentary that I have seen over the past two days has pained me deeply. I believe it was not necessary to get low and dirty," she said, according to India's First Post.Doing a Google search today on news about Pakistan shows the first page of the search results filled with negative stories that seem obviously planted by the Modi government in highly search-engine-optimized Indian media.The planted stories present Indian Army's claimed "surgical strikes" in Pakistan as fact. They do not bother to put quotes around "surgical strikes" as international media have done. They do not ask any questions nor offer proof of such "surgical strikes".Some of these planted stories claim "mass public protests" and "Pakistan flag burnings" in Azad Kashmir, Gilgit Baltistan and Balochistan  without offering any evidence.  Other such made-up stories are about civil-military tensions in Pakistan and the country's "international isolation".  Who plants these stories? And how? Let us examine this in a little more detail.

 Nigeria: Report - Govt May Be Approaching Debt Trap - As the federal government continues to search for ways to take the country out of its present economic recession, a report has indicated that Nigeria may be approaching a debt trap. Debt trap is a situation in which a debt is difficult or impossible to repay, typically because high interest payments prevent repayment of the principal. The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, gave the warning in a report at his latest monthly executive breakfast meeting at the Lagos Business School (LBS).Nigeria, Africa's top oil exporter has been hit by low oil prices and depleted foreign reserves that have plunged the country into recession. The National Bureau of Statistics (NBS) recently revealed that the country's GDP contracted by 2.06 per cent in the second quarter of 2016, compared to the negative growth of 0.36 per cent recorded in the first quarter. The country recently got a lifeline from the African Development Bank (AfDB), with the bank stating that it would support the country with the sum of $1 billion to help it address the N2.2 trillion deficit in the 2016 budget. It is also in talks with the World Bank to plug its budget deficit, just as it is getting set to issue a $1 billion Eurobond. But the report cautioned against a debt trap. It also pointed out that half of government revenue was being used to service debts.

 Mexican Peso Soars In Response To Trump Tapes Scandal -- When it comes to the market, there is one instrument which reveals, perhaps better than any other asset class, Trump's presidential chances: the Mexican Peso, or MXN.  As we reported in mid-September, the Mexican currency plunged to record lows at the same time as Trump's presidential odds were rapidly rising and even briefly surpassed Hillary's. However, following the first presidential debate two weeks ago, the Peso spiked, erasing much of its recent losses. More importantly, market participants were looking at the MXN to see how the market would react to the Trump Tapes scandal. The answer came moments ago when in early trading, the Mexican Peso has soared, and the USDMXN tumbled out of the gate, an indication of Peso strength, and a confirmation that at least for now, the market's reaction to the Trump Tapes is that his presidential chances have deteriorated substantially.

 Negative-Yield Debt Falls to $10.7 Trillion After September Rise - The market value of negative-yielding sovereign, government-related, corporate and securitized debt in the Bloomberg Barclays Global Aggregate Index hit $12.2 trillion in June. That was the highest month-end total since the figure began its unprecedented climb in August 2014, when the total was $476 billion, up from less than $7 billion a year before that. Japan, where policy makers have been trying to coax yields up since mid-September, remains ground sub-zero, accounting for almost exactly half the world’s total. About 44 percent comes from Western Europe. Germany, France, the Netherlands, Spain, Belgium and Italy are the continent’s top five. The U.S. accounts for $22 billion, just 0.2 percent of the global total, less than half the U.K’s $52 billion.Less than a tenth of the world’s negative-yielding debt was issued by businesses, through corporate bonds and securitized debt. These totals include both new negative-yielding issues and bonds with prices that rose enough to push their yields into the money-losing zone. The Bloomberg Barclays Global Aggregate Index has a market capitalization of $47 trillion and includes investment-grade debt from 24 developed- and emerging-economy markets. The benchmark gauge does not include maturities of less than a year, which tend to have lower yields, so the value of many short-term less-than-zero bonds aren’t counted here. The totals are based on market values, which include accrued interest. A similar Bloomberg News story last week was based on face amounts converted to dollars as of the end of each month, a slightly different metric.

Fed Vice Chairman Stanley Fischer: ‘Great Fear’ About Antiglobalization - WSJ: Federal Reserve Vice Chairman Stanley Fischer said Friday a rising tide of opposition to international trade and integration threatens global growth. “There are very few countries which have succeeded in growing rapidly in a sustained period without integrating in the global economy, and that’s the great fear I have about what’s going on politically,” he said in a discussion at the Institute of International Finance conference in Washington, D.C. Global trade this year will grow at the slowest pace since 2007, according to the World Trade Organization. Finance ministers and central bankers from around the world gathered in Washington, D.C., this week for annual meetings of the International Monetary Fund and the World Bank have pointed to rising antitrade sentiment as a major economic threat. Mr. Fischer echoed those fears in his remarks. “What worries me about the antiglobalization [view] is the view that globalization is useless and we ought to be back and worry about ourselves,” he said. Despite the political trends, “the importance of trade as a growth machine” hasn’t declined, he added. In the U.S., Republican presidential candidate Donald Trump has criticized trade deals he blames for sending jobs overseas. Growing opposition to trade also has put a congressional vote ratifying the Trans-Pacific Partnership on hold, to the frustration of the Obama administration, which considers it a key accomplishment. Mr. Fischer didn’t specifically address the TPP or Mr. Trump’s criticisms, but he suggested the current state of uncertainty has held back investment.

On the ongoing demise of globalisation -- Izabella Kaminska -  UBS has a big note out on Tuesday reviewing the passing of globalisation. It was a major thing. And now it’s gone. (Or is at least diminishing swiftly.)  To wit, here’s a chart from UBS depicting the striking reduction in total cross-border claims of banks since the crisis:  But it’s not just about financial claims, it’s also about a reduction in growth-creating real trade. According to strategists the elasticity of trade to GDP — a measure of wealth creating globalisation — rose as high as 2.2. in the so-called third wave of globalisation, which began in the 1980s. This compared to an average of 1.5 since the 1950s. In the post-crisis era, however, the elasticity of trade has fallen to 1.1, not far from the weak average of the 1970s and early 1980s but well below the second and third waves of globalisation. Since 2015, the beta of trade growth to industrial output has got even worse. It’s averaged below 1. Here are the charts that matter: But while lamenting the passing of globalisation alongside international capital and labour mobility seems instinctively logical, there is an argument to be made that the specific type of hyper globalisation experienced by the world since the 1980s may also be part of the problem.As the strategists note, some investors argue a significant part of the explosive growth of the past 20 years could have been illusory: a simple side-effect of an accounting artefact which obscured some of the fundamental asymmetry in global value chains: Counting both intermediate goods imports and also their exports of products further downstream in a vertically integrated chain exaggerated growth in trade volumes. Those who argue that globalisation isn’t going through a fundamental change posit that as the boom in global trade was never really about value added content, any slowdown in the growth of vertically integrated supply chains would dampen trade statistics relative to growth, but otherwise have limited relevance for global growth.  In short, sourcing product from half way around the world isn’t necessarily a value add activity in the aggregate if the key justification for the added complexity and transport costs are cheap labour resources.

EU, US negotiators officially drop aim of concluding TTIP in 2016 – Negotiators on both sides of the Atlantic have clearly given up on the idea of concluding TTIP talks this year, despite progress achieved on the technical aspects of the negotiations. “The rationale for TTIP remains strong”, Dan Mullaney, US chief negotiator for TTIP told journalists on Friday (07 October 2016). “The United States remains fully engaged in these negotiations and is committed as ever to their success”, Mullaney added. The US official also said both sides aim to continue to make progress in the coming months, before the Obama administration folds, in early January next year. This discourse is a radical change from calls made by Mullaney during the last round of TTIP negotiations in September in Brussels to conclude TTIP this year Negotiators and business expect TTIP negotiations to be halted in 2017 due primarily to United States elections, but also to elections in various EU member states. Some continue to put hope on the conclusion of a deal in 2018. It is not clear TTIP can be revived once a new US administration is in place. Both presidential candidates Hillary Clinton and Donald Trump have voiced strong criticisms of international trade agreements. Whether and when a possible Clinton administration will prioritise TTIP once a new new USTR is nominated is too early to say, although the Democrats are believed to be favourable to the idea of TTIP. With the UK’s planned exit from the EU the future of TTIP is also in question as the EU loses a key proponent of the deal and the US a major market for its exports and mulls a separate trade deal with the UK in future.

Walloon revolt against Canada deal torpedoes EU trade policy - The EU’s once-mighty trade negotiators never dreamed that their powers would be stripped from them so unceremoniously — and possibly for good. The Francophone parliament of the Federation of Wallonia-Brussels — only 10 minutes’ walk from EU headquarters — stands to win a place in history for sinking the EU’s landmark trade deal with Canada and potentially for scuppering the European Commission’s ability to lead the world’s biggest trade bloc for many years. Failure to conclude the Comprehensive Economic and Trade Agreement (CETA) by this month’s deadline would be a devastating blow to the EU, which has spent seven years working on the tariff-slicing agreement with Ottawa.  “It’s crazy. If we allow a regional parliament to block a trade deal that will benefit the whole EU, where does this lead us to?” said Christoph Leitl, president of the Global Chamber Platform, a worldwide alliance of business chambers. “CETA is not just a deal with Canada, it has model character for Europe’s future trade relations.” The Federation of Wallonia-Brussels parliament, which focuses on the cultural and educational concerns of 4.5 million French speakers in Belgium, voted Wednesday evening to reject CETA because of worries about public services and agriculture. Laetitia Naklicki, a spokesperson for Minister-President Rudy Demotte, said this vote meant that the government of the French-speaking community “would not issue its full power for signing CETA to the federal government.”Unless the Belgian central government can find an imaginative compromise quickly, the EU will be unable to corral the signatures of all 28 EU countries before an EU-Canada summit on October 27. The pressure on Belgian Prime Minister Charles Michel is only likely to increase Friday, when another regional assembly, Wallonia, also voted against CETA. Under Belgium’s complex constitution, all five regional governments must approve the trade deal before the federal government can give consent.  The ease with which CETA was vetoed by 68 junior Belgian legislators also sends an ominous signal to Britain, which is studying the pact as a potential model for U.K.-EU trade relations after Brexit.

Norway dips deeper into oil riches - Norway plans to spend a record amount of its oil riches next year -- an election year -- to stimulate its economy hit hard by oil price weakness, a budget bill presented on Thursday showed. The right-wing government plans to use 225.6 billion kroner (€25 billion, $28 billion at current exchange rates) of its oil revenues in 2017, or 20 billion kroner more than this year. That corresponds to an extra 0.4 points of gross domestic product (GDP), the government said in the budget bill. Norway's oil-dependent economy has slowed considerably as a result of the falling oil price, which has dropped from around $115 per barrel in mid-2014 to around $50 now. But the economy is showing signs of recovery. Thanks to interest rate cuts, a weaker Norwegian krone, and an expansionary budget policy, growth is picking up and the unemployment rate appears to be topping out at the enviable level of around 5.0 percent. Mainland GDP -- excluding oil, gas and shipping -- is expected to tick in at 1.0 percent this year, 1.7 percent next year, and 2.4 percent in 2018, according to the government's forecasts. "But it's too early to say that the Norwegian economy is cured," Finance Minister Siv Jensen said as she presented the 2017 budget bill. The government therefore plans to spend up to 3.0 percent of its sovereign wealth fund, the world's largest, today worth around 7.13 trillion kroner (€793 billion, $886 billion). That's more than the 2.8 percent used this year, but less than the 4.0 percent maximum that is authorised.

 SNB Can Cut Rates Further If Needed, President Jordan Says - Bloomberg: The Swiss National Bank can cut interest rates further into negative territory if needed, President Thomas Jordan said. “We have still some room to go further if necessary,” Jordan said Saturday in an interview in Washington with Bloomberg Television’s Francine Lacqua. Jordan, who is attending the annual meetings of the International Monetary Fund and the World Bank, noted that the bank has already pushed rates quite far. For almost two years, the SNB has pursued a twin-pillar strategy of negative interest rates of minus 0.75 percent and a pledge to intervene in currency markets. Additional easing in the neighboring euro area has repeatedly sparked speculation among economists that the SNB may decide to lower rates further in a bid to maintain the interest-rate differential and stop the franc from appreciating. Analysts think the SNB could cut its deposit rate to as low as minus 1.25 percent if needed, according to Bloomberg’s most recent monthly survey. The SNB’s current policy “makes sense and is appropriate for the foreseeable future,” Jordan also said. While negative rates have been widely criticized by financial institutions, Credit Suisse Group AG Chief Executive Officer Tidjane Thiam recently defended the measure being used in small countries. In Switzerland, which has the most severe sub-zero interest rate of any major central bank, a certain amount of cash is exempt from the SNB’s charge, with the threshold currently set at 20 times an institution’s minimum reserves. “It makes, definitely, sense for Switzerland,” Jordan said of negative rates, and there’s “a lot of evidence that the exchange rate channel is working.”

Small German banks warn on passing on negative rates to customers - Germany’s savings banks may have to pass negative interest rates on to private customers, the sector’s top banker has warned, in the latest sign of the strains caused by the European Central Bank’s ultra-loose monetary policy.  In an attempt to inject life into the eurozone’s economy, the central bank has cut rates to historic lows, and even pushed its deposit rate into negative territory — meaning that it effectively charges banks for parking excess reserves with it. Most German banks have started to pass on this levy on to big corporate clients. But with the exception of two tiny co-operative lenders in Thuringia and Gmund am Tegernsee, passing the levy on to private customers has remained taboo. Given their focus on saving, Germany’s savings banks have been particularly opposed to the idea of charging private clients for their deposits. But in an interview with the FT, Georg Fahrenschon, head of the German Savings Banks Association, conceded that they might not be able to avoid doing so indefinitely. “We are working with all our strength on the optimisation of back-office functions, on cost savings, in order to mitigate the impact [of negative rates],” he said. “But I can’t rule out the point where — like in Tegernsee — economics demands other decisions.”Germany’s 403 savings banks dominate the country’s retail banking landscape, accounting for the lion’s share of lending and deposit-taking. H owever, their inability to recycle all their deposits into loans has left them with about €100bn in excess deposits. Even though not all the excess is parked with the ECB, the central bank’s 0.4 per cent charge on surplus deposits is particularly painful.“We are in a situation where we are happy about every new customer — but where [as a result of the ECB’s negative deposit rate] if they have deposits we actually ought to turn them away. That doesn’t fit with our core credo,” Mr Fahrenschon said. “I find the signal that at the end of the year a small businessman shouldn’t be happy about his profits, but instead is punished for them, so dangerous. Psychologically, negative interests make planning ahead and profitability much harder.”

 It would be wrong to abandon the policy of negative rates - Ken Rogoff - The mixed results from experiments with negative interest rate policy in Europe and Japan have led many to conclude that the idea is ill begotten and should be abandoned. To do so would be a serious mistake. The negative rate policies that are in place certainly have significant limits and it is not clear how much more can be done in the short term. However, policy could be made far more effective in the long run, once a host of institutional constraints are dealt with. The thorniest problem is avoiding a run into zero-interest cash if interest rates become too negative but even this is far from an insurmountable obstacle, given time. In what could turn out to be a protracted era of low “normal” interest rates, the benefits of clearing the way for effective negative rate policy are potentially significant. If central banks had been able to adopt such policies at the height of the financial crisis, for example, it is likely this would have helped stem the fall in employment, output and asset prices. True, Janet Yellen, Federal Reserve chair, has argued that the US central bank should not need to rely on negative interest rates to fight the next deep recession. Unconventional monetary policy tools such as quantitative easing and forward guidance should be enough, she believes, if applied widely. One hopes she is right, given there will probably not be time to lay the foundations for effective negative rate policy before the next recession hits. Unfortunately, based on the academic literature and the experience of the past seven years, there is little reason to believe that is the case. Some people argue that negative interest rates are unnatural and unprecedented. This is certainly an emotive topic but we should at least get the facts straight. Negative rates are not unprecedented in any meaningful sense. Before paper currency, monarchs routinely debased money, for example by introducing coins with a lower silver content and using these to repay debts.The problem of the zero lower bound — the idea that interest rates could not go lower — only really emerged with paper currency, but then governments simply turned to the printing press to debase currency in real terms through inflation. To say that real interest rates caused by inflation are unfortunate but negative nominal rates are unnatural is to promulgate financial illiteracy.

Deutsche Bank eyes IPO for asset management unit: report - Bank is mulling a public listing of its asset management division to strengthen its capital buffers, the Financial Times reported Friday, citing unnamed sources. Any such move would only follow an expected multi-billion settlement with the U.S. Department of Justice for alleged mis-selling of mortgage-backed securities related to the 2008 financial crisis, the report added. Germany’s biggest bank has not made a final decision about the potential float of a minority stake in its asset management unit and an offering is unlikely before the first half of next year, according to several people briefed on the situation. The bank, and its shares, have been under pressure after news of the DoJ’s $14 billion settlement request prompted investor fears that the bank could be forced into raising capital or even require a government rescue.Separately, DB announced 1,000 jobs will be cut in Germany, according to the BBC. That’s in addition to 3,000 jobs eliminated in a June announcement.

 Qatari Investors Eyeing Controlling Stake in Deutsche Bank - SPIEGEL ONLINE: Strategic errors, massive fines and attacks by speculators have created a major crisis for Germany's most important bank. Now, investors from Qatar, who already own some 10 percent of Deutsche Bank, are considering taking control.On September 15, the Justice Department in the United States ordered the company to pay a $14 billion fine to settle accusations of fraud in Deutsche Bank's packaging and sale of mortgage-backed securities in the free-wheeling days that led to the global financial crisis. Speculators and politicians have been in a state of near panic since the announcement, with open speculation about the possibility of a government bailout for the prestigious bank. An atmosphere of frustration and depression is currently prevailing inside the bank and Cryan is trying to combat it with messages of perseverance. For a time, Deutsche Bank's market value plummeted below 15 billion euros, down from 35 billion a year ago. Large-scale investor HBJ and his cousin - the former Emir of Qatar, Sheik Hamad bin Khalifa al-Thani, who he has since brought in as an investor as well -- are believed to have lost more than a billion euros - on paper, at least. This summer, the two increased their holdings to just under 10 percent of the company, but Deutsche Bank's market capital has since continued to slide. And yet, it appears that the low share price is encouraging the sheikhs to invest even more now that it wouldn't take more than a few billion for them to gain control of Deutsche Bank. Information obtained by SPIEGEL indicates that the al-Thani cousins are considering propping up the bank with a fresh capital infusion and purchasing a blocking stake of 25 percent together with other investors. To do this, they could partner with sovereign wealth funds, some of which are apparently willing to invest in the company.

Deutsche Bank To Fire Another 10,000 Bankers, Bringing Total Layoffs To 20% Of Workforce - The hits for Deutsche Bank just keep on coming. One day after a report that the German lender has imposed a hiring freeze in the latest bid to reassure investors that it has expenses under control and is stemming the outflow of cash, moments ago Reuters reported that Deutsche Bank's finance chief told his staff that job cuts at the bank could be double that planned, a step that could remove 10,000 further employees.  Such cuts would likely take many years but setting such a goal could reassure investors that the bank is determined to tackle costs that sources said the European Central Bank sees as bloated. Unless, of course, they are forced to cut much faster. If 10,000 job losses were ultimately to follow the 9,000 announced by management in October 2015, roughly one in five of the bank's workforce around the globe would be affected."Schenck said that the bank would need to cut another 10,000 staff to bring down costs," said a person who attended the meeting with the chief financial officer cited by Reuters. Although no such decision has yet been taken, Marcus Schenck's remarks, at an internal meeting, signal the lender is considering further significant cost cuts, as it faces a multi-billion-euro fine and a crisis of confidence among investors.  The discussion about further job cuts comes as Deutsche's chief executive, John Cryan, reassesses a year-old strategy to revive the flagging group, as ebbing market confidence sends its stock price tumbling and prompts some customers to withdraw funds.. A second person familiar with these discussions said the management was also examining the countries where the bank was active to see "whether it was really worth its while (staying in those countries)".  DB's latest announcement follows Commerzbank, Germany's second biggest bank rival, which recently announced it would ax more than a fifth of its workforce - almost 10,000 staff.Still, it is not clear if DB can achieve the cuts: given potential high severance costs and revenue losses, it remains unclear whether a further attempt by Deutsche to trim staff can be achieved. Headcount has actually risen at the bank, despite the plans announced by Cryan in October 2015 to slash staff. Employee numbers, which stood at more than 101,300 in the middle of this year, are higher than the roughly 98,600 one year earlier.

 China-isation of working conditions and workers' rights in Europe -A recent publication of the European Trade Union Institute finds that electronics firms in Europe often get away with employment practices resembling those in mainland China. This evolution has an impact on working rights and conditions of European workers employed in the electronics sector, especially in Eastern Europe. In Hungary, the average income of a worker in the electronics sector is living wage of 83,941 HUF (294 EUR) or slightly higher and the net basic wages for unskilled workers are lower than the average net monthly earnings of a manual worker in the manufacturing sector in Hungary (381 EUR). On average, temporary workers in electronics firms vary from 15 to 50 or even 60 per cent. Because agency workers at Foxconn do not work full time (70 per cent), they receive a wage that is on average 10,000 HUF less than that of their permanent colleagues. Agency workers spend a proportionally higher amount of their wages on transport if they work only part-time (70 per cent) at Foxconn, which most of them do. In Czechia, the study found that Foxconn has used the strategy of externalising a substantial part of the workforce by contracting temporary work agencies. The indirect workforce, mostly migrant workers, constructed as an ideal workforce has ranged from 30 to 50 per cent of total manual workers. Temporary work agencies were found not providing social or health insurance (or provide falsified health insurance cards), not respecting holidays, delaying the payment of maternity benefits, threatening workers, partly paying envelope wages or asking workers to sign an agreement on the termination of the work contract at the very beginning of the contract. In addition to this, workers are subjected to three shifts of 11.5 hours, combined with the work accounts. In Turkish factories, the use of student interns and apprenticeships funded by the government is very similar to that found in Chinese factories that rely heavily on student labour. Overall, production targets are demanding and are constantly monitored. The two assembly lines produce about 5,000 computers in 24 hours at a rate of 110–115 computers per hour. Control of the space and workers’ movements is realised through CCTV cameras:

Greece might get stiffed on of some of its bailout cash - (Reuters) - Euro zone finance ministers gave Greece a positive review of its reforms on Monday but divided up the latest tranche of aid to Athens, disbursing a 1.1 billion euro loan but postponing its decision on a further 1.7 billion payout to later in October. As part of an 86 billion euro bailout programme agreed last year with other euro zone members, the third such package since 2010, Greece needs to complete a wide range of reforms on pensions and labour markets, carry out privatisations and tackle other sensitive issues. Euro zone countries have so far disbursed 33.5 billion euros under the third bailout and were expected to release a further tranche of 2.8 billion euros to conclude the first review of the aid programme. But in a meeting in Luxembourg on Monday, euro zone finance ministers decided to split the payment in two parts and gave their political green light only to a 1.1 billion euros payment. The release of the remaining 1.7 billion euros will depend on data on arrears payments for September that the Greek authorities are in the process of collecting. "It takes time," to collect this data, the chairman of the Eurogroup of euro zone finance ministers Jeroen Dijsselbloem told a news conference after the meeting. But he added that "we are fully confident that it will be fine." The actual disbursement of the 1.1 billion euro sub-tranche will be finalised in two weeks, on Oct. 24 or 25, when the board of directors of the euro zone bailout fund, the European Stability Mechanism, is to meet.

 Refugees or an Occupation Army? -- What does an occupation army do when it is installed in a country? It occupies the land, forcing residents to follow its own way of life. It implements measures against the country's inhabitants, it propagandizes its beliefs and uses force to have them imposed. This, sadly, is what has been happening in Greece from the migrants who seem to "forget" that they are hosted in Greece and force the Greeks to feel like guests in their own country. If someone is a war refugee or his life is in danger in his homeland, it would seem appropriate, when he arrives in the country which offers him asylum, to be grateful to this country, respect its history, its people its values and its laws. The same would hold true for an immigrant who wants to go to a country where he hopes he will find a better future. In Greece, conversely, illegal immigrants -- all of whom the media call "refugees," apparently trying artificially to legalize them in the moral consciousness of citizens -- have been occupying spaces that do not belong to them, using violence, blocking roads, committing crimes against public property, acting aggressively toward residents and the police, and saying that they feel offended when they see symbols that represent Christianity. The guests seem to be trying to take over the house.A few weeks ago, 200 North Africans and Pakistanis rioted in the middle of the night, demanding to leave Mytilene Island. They were chanting, "Jihad! Jihad!", smashing the residents' cars in the center of the island and disrupting the local community. The migrants claimed that someone told them about the death of seven migrants on a ship, so they rose up against the authorities. The police and NGO workers explained that this was misinformation, but the 200 migrants were evidently not interested in hearing that. The migrants were ready to wage jihad because they believed a rumor about an event for which, even had it been true, the Greek state and its inhabitants had no responsibility. The authorities were unsuccessful at calming them down and trying to make them return to their living area.

 Hungary To Amend Constitution, Block EU Migrant Plan -- Hungarian Prime Minister Viktor Orbán has proposed amending the Constitution to prevent the European Union from settling migrants in Hungary without the approval of Parliament. In a speech on October 4, Orbán said the amendment would be presented to Parliament on October 10, and, if approved, it would come into effect on November 8. Hungarian voters overwhelmingly rejected the European Union's mandatory migrant relocation plan in a referendum on October 2, but failed to turn out in sufficient numbers to make the referendum legally binding. More than 97% of those who voted in the referendum answered 'no' to the question: "Do you want the European Union to be entitled to prescribe the mandatory settlement of non-Hungarian citizens in Hungary without the consent of the National Assembly?" Voter turnout was only 40%, however, far short of the 50% participation required to make the referendum valid under Hungarian law. Orbán has been a vocal opponent of the EU's plan to relocate 160,000 "asylum seekers" from Greece and Italy. Under the scheme, 1,294 migrants would be moved to Hungary. The Czech Republic, Poland and Slovakia, all former Communist countries, are also opposed to the EU plan, which they say is an "EU diktat" that infringes on national sovereignty. Although the referendum has been invalidated, Orbán — whose eurosceptic Fidesz party has more support than all opposition parties combined — said he would not be deterred. Speaking to supporters after the polls closed, he said: "The European Union's proposal is to let the migrants in and distribute them in mandatory fashion among the member states and for Brussels to decide about this distribution. Hungarians today considered this proposal and they rejected it. Hungarians decided that only we Hungarians can decide with whom we want to live. The question was 'Brussels or Budapest' and we decided this issue is exclusively the competence of Budapest."

 Iceland finds all guilty in banker market-abuse case -- Iceland’s Supreme Court has return a guilty verdict for all nine defendants in the Kaupþing market manipulation case, the court trial for which began in April 2015. Back in June last year, the Reykjavik District Court found seven of the nine defendants guilty, acquitting two. By fully financing share purchases with no other surety than the shares themselves, the bankers were accused of giving a false and misleading impression of demand for Kaupþingi shares by means of deception and pretence. The Supreme Court has now overturned the acquittals, finding Björk Þórarinsdóttir (credit representative at Kaupþing) and Magnús Guðmundsson (former CEO of Kaupthing Luxembourg) also guilty alongside the other seven. No punishment has been handed out to Þórarinsdóttir and Guðmundsson, however. In addition, Hreiðar Már Sigurðsson, former Director of the bank, who had initially received no further penalty, having previously been sentenced in the ‘Al-Thani affair’, has now been given a sixth-month extension to his prison sentence.

RBS Looted Small Business Customers, Deliberately Driving Thousands in Bankruptcy, While Under Government Ownership - Yves Smith - BuzzFeed and BBC Newnight, with the considerable input of Ian Fraser, who has been dogging the fraudulent activities of the Royal Bank of Scotland, have documented how a RBS loan workout unit, the Global Restructuring Group systematically seized assets from small business customers, including deliberately forcing them into bankruptcy, with the cooperation of senior levels of the bank. The opener: The Royal Bank of Scotland killed or crippled thousands of businesses during the recession as a result of a deliberate plan to add billions of pounds to its balance sheet, according to a leaked cache of thousands of secret documents. In the UK, bankruptcy means liquidation, and RBS would use its control over the auction process to make sure it would pick up assets at bargain prices and dispose of them for a tidy profit. Here are the main charges, from BuzzFeed’s overview:

  • RBS managers encouraged employees to hunt for ways to boost their bonuses by forcing customers into loan restructuring in order to extract heavy fees as part of a profit drive nicknamed “Project Dash for Cash”.
  • Firms that had never missed a loan payment were pushed into GRG under the bank’s secret policies for reasons that had nothing to do with financial distress, including for telling RBS they wanted to leave the bank, falling out with managers, or threatening to sue over mistreatment.
  • Once in GRG, firms were hit with crippling fees, fines, and interest rate hikes that could run into seven figures, helping to net the restructuring unit a profit of more than a billion pounds in a single year.
  • Contrary to claims by the bank, there were no Chinese walls between GRG and West Register bosses, who sat together on both the controlling committee that held sway over which businesses were transferred into the restructuring unit and the property acquisition committee that signed off the bank’s bids for their distressed assets. Auditors repeatedly warned about perceived conflicts of interest in GRG.
  • The property division, which amassed assets worth £3.3 billion during the crisis, was passed information that was not available to other bidders when it wanted to acquire properties from businesses in GRG. In contrast to what RBS executives told parliament, properties could be sold to West Register without being advertised on the open market.
  • Staff were told to conceal conflicts of interest from customers when demanding cheap shares in their businesses or stakes in their properties.

I’ve never seen such a cynical, large scale exercise in orchestrated pilfering at a regulated financial institution before. GRG dealt with over 16,000 companies, and the article states it put thousands of them under, many of them for profit rather than out of necessity. I strongly urge you to read the entire article in full.

 Double trouble? How closely related are the UK’s ‘twin’ deficits, and should we be concerned? --Since the financial crisis the UK’s fiscal and current account balances have persistently been in deficit. These ‘twin’ deficits are significant in historical terms, with a record peacetime fiscal deficit in 2009 and a record current account deficit in 2015. But how closely related are these ‘twins’ and do they pose a risk to financial stability? Using a new ‘from-whom-to-whom’ dataset I find that the two deficits are not directly related to each other and are being financed through relatively stable channels. In this post, I use a constructed complete set of ‘from-whom-to-whom’ information across financial instruments and sectors. The new ONS experimental statistics cover most of the dataset, but there remain areas where full counterparty information is unavailable.  There has therefore been an allocation of the ‘unknown’ element. The method used is a simple proportional allocation: for each financial instrument, the sectors with unknown counterpart assets are proportionally matched with sectors with unknown counterpart liabilities. Occasionally, information on the underlying data enabled a more ‘intelligent’ estimate of the allocation. But this method has little impact on the analysis undertaken: all of the main movements are evident in the original dataset. The ‘from-whom-to-whom’ data can be visualised through the use of a chord diagram, shown in Figure 1. A chord from one sector to another (in the originating sector’s colour) represents the first sector’s holdings of the second’s liabilities. Returning to the twin deficits, the stock of public sector debt is represented by the series of chords into this sector, mainly from the domestic financial sector and the rest of the world (RoW), while the negative international investment position (IIP), a key component of the widening current account deficit, is represented by the difference between the total assets and liabilities of RoW. While this may look relatively small, it constitutes a RoW net asset position of £269bn.

Pound Fails to Shake Off Wounded Image After Week of Flash Crash - The pound resumed its decline as investors waited for clues about the cause of last week’s flash crash and on whether Britain is truly headed for a hard Brexit. The currency depreciated 4.2 percent last week, its worst performance since June 24, on the news that U.K. Prime Minister Theresa May planned by March to trigger Britain’s two-year withdrawal from the European Union. May will meet with foreign leaders this week in a bid to build understanding for her negotiating position ahead of this month’s EU summit, travelling to Denmark and the Netherlands on Monday. Twitter: Bloomberg Brexit on Twitter“It’s difficult to know what new can come out of this,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. “The Europeans are sticking very much to their hymn sheet, which is no informal pre-Article 50 negotiations.”The pound dropped 0.4 percent to $1.2387 as of 4:36 p.m. London time. Sterling was little changed at 90.03 pence per euro. Last week’s slide culminated in an unexplained 6.1 percent plunge during about two minutes in Asian hours on Friday. The currency finished that day down 1.4 percent. “The pound has been under depreciation pressure ever since the Tory party conference, in which May quite clearly signaled that the Brexit negotiations may end in a hard Brexit,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “You could see that clearly after the flash crash we had last week. Usually, such a flash crash, particularly in such a major currency, should be corrected immediately, but it didn’t correct entirely.”

Tesco pulls products over plunging pound - The plummeting pound is threatening UK households’ supplies of Ben & Jerry’s ice cream and Marmite spread, as Tesco, the country’s biggest supermarket, pulled dozens of products from sale online in a row over who should bear the cost of the weakening currency.  Unilever has demanded steep price increases to offset the higher cost of imported commodities, which are priced in euros and dollars, according to executives at multiple supermarket groups. But Tesco signalled it would fight the rises, removing Unilever products from its website and warning that some of the items could disappear from shelves if the dispute dragged on. Other supermarkets have warned that they could follow suit. Britain’s biggest grocer is led by Dave Lewis, a former Unilever “lifer” who ran the Anglo-Dutch company’s personal care business, overseeing brands that include Dove soap, Signal toothpaste and Tresemmé shampoo.   He had been seen as a potential successor to Paul Polman, chief executive of Unilever, before he jumped ship to Tesco two years ago. The pound has fallen 17 per cent since Britain voted to leave the EU. Officials cautioned ahead of the June 23 referendum that a vote for Brexit would cause food prices to rise, a warning that Eurosceptic MPs have dismissed as “scaremongering”.

Skip a generation when passing on homes, says housing minister -- The housing minister, Gavin Barwell, has suggested that parents should leave their houses and savings to their grandchildren rather than their children to help them get on the housing ladder. Barwell made the call for pensioners to skip a generation when writing their wills as he revealed that his 75-year-old mother had chosen to leave her £700,000 house in Croydon to her five grandchildren rather than himself and his brother. The MP for Croydon Central, who owns a £750,000 house three miles from his mother’s, said the decision could help to reduce intergenerational financial inequities. “Generally in life we all like to think that our children are going to be better off than us. In terms of new technology and life expectancy, they are going to be,” he told a fringe meeting at the Conservative party conference in Birmingham last week. “But at the moment, as things stand, they are less likely to own their own home and we need to do something about that.” However, Barwell added that he did not want to live in a country where it was necessary to have a wealthy grandparent simply to get on to to the housing ladder, the Telegraph reported. In her speech to the party conference on Wednesday, the prime minister, Theresa May, described the UK’s housing market as “dysfunctional” and said the “power of government” was needed to repair it. The average house price in England stands at £232,885, according to Land Registry figures, with the average in London more than double that figure at £484,716. Part of the problem is the UK’s failure to build enough houses to meet demand.

May’s Government Facing Split Over Plan to List Foreign Workers - Bloomberg: A government minister speaking on condition of anonymity condemned a proposal to force companies to list foreign workers, proposed by Home Secretary Amber Rudd at the Conservative Party conference on Tuesday, as illegal, discriminatory and said it would have to be abandoned because it would not pass a vote in Parliament.Grant Shapps, the former Conservative Party chairman, called on Rudd and May to ditch the “pernicious” plan. “I am sure this was an idea that was slipped in by well-meaning officials,” Shapps said in an interview. “Vilifying foreign workers at a time when Britain needs to show it is open for business in this post-Brexit world is just about the last thing that businesses need. There are plenty of lessons from history that show separating people out like this is a very bad idea.” The proposals added to evidence that curbs on immigration would be May’s priority, putting the U.K. on course for a so-called hard Brexit and sending shock waves through markets and the pound to a 31-year low. Rudd’s comments and May’s quip in her Wednesday speech that “if you believe you are a citizen of the world, you are a citizen of nowhere” dominated talk on the sidelines at the International Monetary Fund meeting in Washington. Officials also expressed concern that the U.K. still didn’t appear to have a clear plan for its exit from the European Union. Under the proposals from Rudd and her team, companies would have to list the non-U.K. nationals who work for them. Suggested measures included banks and landlords facing sanctions if they fail to make checks on foreigners doing business with them. The next day, May in a speech attacked “the people in position of power who behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the streets.”

Every EU migrant can stay in UK after Brexit: all 3.6 million to have residency rules or get amnesty  -- All EU nationals currently living in Britain will be allowed to stay following Brexit, after the Home Office discovered that five in six could not legally be deported.There are around 3.6 million EU citizens living in the UK, more than 80 per cent of whom will have permanent residency rights by the time Britain leaves the union in early 2019, official research has concluded.The remainder – more than 600,000 people – will be offered an amnesty, with several Cabinet ministers telling The Telegraph that those citizens will be offered the right to stay permanently, in a policy that may prove controversial.Theresa May, the Prime Minister, has refused to guarantee the rights of EU citizens currently living in the UK, saying she believes that the Government must not “reveal its hand” ahead of Brexit negotiations, which will begin when she triggers Article 50 next year. Once an EU citizen has been in the UK for more than five years, they are given permanent residency rights.  Home Office research has concluded that when Britain leaves the EU, just over 80 per cent of EU citizens in the UK will qualify for residency, sources said. “The remaining people will, of course, be allowed to stay in the UK,” a senior source said.

Scottish independence must be on the table  --The UK might have voted for Brexit. Scotland did not, says the first minister. By Nicola Sturgeon — Scotland is a European nation. From our history as an independent country, when we traded widely with our neighbors and friends on the continental mainland, through to more modern times when we have continued those links and have welcomed many of our fellow EU citizens to our shores, the history of our nation and of Europe as a whole are tightly woven together. In one sense, nothing can change that. Simple geography dictates that Scotland — and the rest of the United Kingdom — will remain, in the most real and obvious way, European. But Scotland’s distinctive relationship with Europe is under threat as never before. The decision in June by voters across the U.K. as a whole to reject continued membership of the EU came as a profound shock to many in the country and abroad. Personally, I was deeply disappointed — and in Scotland, where voters chose to remain in Europe by a 24-point margin, the shock was especially sharp. A simple glance at a map of the referendum results reveals in the starkest possible terms how Scotland stands out, underlining once again the growing divergence in political culture and priorities between our nation and the rest of the U.K. Every single one of Scotland’s 32 local authority areas voted to continue our more than 40-year membership of the European family.

Hard Brexit could cost £66bn a year - Cabinet ministers are being warned that the Treasury could lose up to £66 billion a year in tax revenues under a “hard Brexit”, according to leaked government papers. GDP could fall by as much as 9.5 per cent if Britain leaves the single market and has to rely on World Trade Organisation rules for trading with the continent, compared with if it stayed within the EU, the forecasts show. Such a steep drop in revenue would force ministers to slash public spending or raise taxes. The £66 billion drop, contained in a draft cabinet committee paper seen by The Times, is nearly a tenth of the £716 billion that the government is projected to collect in taxes this year, and is equivalent to 65 per cent of the annual budget of NHS England. Business leaders are increasingly worried that the UK could fail to negotiate a deal with the 27 remaining EU members by the time it leaves the union, and will face a “cliff edge” of trade tariffs and barriers. Several cabinet ministers who supported Remain are stepping up efforts to prioritise business concerns and the economy in Brexit discussions, fearing that Leave supporters fail to realise the scale of potential damage.

Britain’s Brexit delusions - Just eight months after David Cameron promised Britons “the best of both worlds” if they voted to stay in the European Union on his renegotiated terms, Britain is hurtling toward the worst of all worlds — a swift, hard Brexit on unfavorable trade terms. The dynamics of British politics since the June referendum have vaporized the softer options with breathtaking speed, while London’s main continental partners have their own domestic reasons to prefer a quick, clean break. Some European government officials say privately that only a nasty economic shock will make the U.K. more realistic in negotiations on their future relationship. In Britain, both major parties have interpreted the message of the June 23 Brexit vote as a mandate to leave the EU by the 2020 general election, control immigration and regain full parliamentary and judicial sovereignty. That, in essence, is what Theresa May, Cameron’s successor as prime minister, promised the Conservative Party conference last week. But it is incompatible with staying in either the single market or the EU’s customs union. The former requires countries to implement all EU rules in national law and allow free movement of goods, capital, services and — crucially — people. The latter would mean continuing to let the European Commission negotiate international trade deals on Britain’s behalf, rather than seeking the bilateral free trade agreements with countries like the U.S., China, India, Canada and Australia that May promised.True, May did say that the planned “Great Repeal Bill” to abrogate the European Communities Act that gives EU rules precedence over British statute would incorporate the existing body of European legislation into U.K. law before parliament starts the long process of amending or scrapping rules it doesn’t like. She also said the government would not roll back EU-mandated workers’ rights. That might appear to favor an orderly transition. Yet the prospects do not look good for negotiating favorable market access arrangements for the interim period between the likely Brexit date in spring 2019 and the day when the EU and Britain reach an eventual agreement on a future free trade pact.

Britain’s Economy Was Resilient After ‘Brexit.’  Its Leaders Learned the Wrong Lesson. - When British voters decided in June that they wanted to depart the European Union, I agreed with the conventional wisdom that the British economy would probably slow and that uncertainty put it at risk of recession. Advocates of “Brexit” argued that was hogwash, and the early evidence suggests they were right. For example, surveys of purchasing managers showed that both the British manufacturing and service sectors plummeted after the vote in July, yet were comfortably expanding in August and September. But the events of the last couple of weeks suggest that British leaders are drawing the wrong conclusions from the fact that their predictions proved right. The British currency is plummeting again, most immediately because of comments from French and German leaders suggesting they will take a tough line in negotiating Brexit. But the underlying reason is that the British government is ignoring the lessons from the relatively benign immediate aftermath of the vote. The British pound fell to about $1.24 on Friday from $1.30 a week earlier and continued edging down Monday. Even if you treat a “flash crash” in the pound on Asian markets Thursday night as an aberration — it fell 6 percent, then recovered in a short span — these types of aberrations seem to happen only when a market is already under severe stress. (See, for example, the May 2010 flash crash of American stocks, during a flare-up of the eurozone crisis). Sterling, as traders refer to the currency, is acting as the global market’s minute-to-minute referendum on how significant the economic disruption from Brexit will end up being. So what does the latest downswing represent? It’s worth understanding why British financial markets and the country’s economy stabilized quickly after the Brexit vote to begin with. The vote set off a chaotic time of political disruption, especially the resignation of the prime minister, David Cameron, who had advocated for the country’s remaining part of the E.U. Theresa May won the internal battle to become the next prime minister, which was to markets and business decision makers a relatively benign result.

May Backs Down to Allow Parliament Vote on Her Brexit Terms - Prime Minister Theresa May accepted that Parliament should be allowed to vote on her strategy for taking Britain out of the European Union as lawmakers who want to keep closer ties to the bloc began to assert themselves. The pound climbed against all of its 31 major peers as May’s move was seen as a conciliatory gesture, calming investor concern that she was taking a gung-ho approach to negotiations with the EU. Sterling had tumbled, losing more than 6 percent this month through Tuesday, after May signaled her intention to put immigration curbs before free trade and the City of London’s interests in pulling Britain out of the bloc. Parliament will from 12.30 p.m. on Wednesday debate a motion from the opposition Labour Party to eventually hold a “full and transparent debate on the government’s plan for leaving the EU” and for Parliament to be able to “properly scrutinize that plan” before she begins formal talks. The request is backed by some lawmakers from May’s own Conservative Party. It is not a vote on whether to leave the EU or not.In response to Labour’s gambit, May tabled an amendment late on Tuesday that effectively accepted the motion, and instead asked that her government should be given as much space as possible to work. It said that whatever form the debate took, there shouldn’t be an attempt to block Brexit or “undermine the negotiating position of the government.” The overnight development remains “pretty vague” and “may not monumentally change the political landscape,” Nick Probert of Nomura Holdings Inc. said in a note. “If the single market access line within that bill/vote/motion follows anything like the current rhetoric of ‘the best possible access’ to the single market, you still can’t rule out a hard Brexit.”

UK 'may still have to pay into EU even after Brexit' - BBC News: Whitehall officials believe the UK may need to make big payments to the EU to secure preferential trading terms after Brexit, BBC Newsnight has learned. During the EU referendum, Vote Leave claimed leaving the EU could save the UK £350m a week in contributions. But an unnamed cabinet minister has told Newsnight that the UK may end up "paying quite a lot" of that money to secure access to the single market. The government said it would not give a "running commentary" on negotiations. The UK's contributions to the EU became one of the most contentious issues in the EU referendum campaign after Vote Leave pledged to repatriate £350m a week - its estimate of the UK's gross weekly contributions to the EU. This is reduced by subsidies paid to the UK and by the UK budget rebate.But a leading light in the Brexit campaign said they now expected the UK could still end up paying as much as £5bn a year into EU funds, in return for access to the single market. This is roughly half of what the UK would have expected to contribute to the EU - estimated by the Office for Budget Responsibility to average around £9.6bn a year from 2015. A senior official has described the prospect of continuing UK contributions to the EU as the "dog that hasn't barked" after Prime Minister Theresa May made no reference to the issue when she set out her red lines for her forthcoming EU negotiations last week.

Tusk warns UK: ‘No compromises’ in Brexit talks - In unusually blunt language, European Council President Donald Tusk said Thursday that the U.K. should brace for the “painful” consequences of leaving the EU, and flatly ruled out any possibility of Britain gaining access to the single market without allowing the free movement of workers. British leaders, including Prime Minister Theresa May, have insisted that the U.K. will retake control of immigration policy — a core demand of the proponents of Brexit. But German Chancellor Angela Merkel has already said that the four fundamental freedoms enshrined in the EU treaty were non-negotiable, a position Tusk reiterated in plain, forceful language. “The only real alternative to a hard Brexit, is no Brexit,” Tusk said. “Even if today, hardly anyone believes in such a possibility.”  Describing the formal negotiations, which May has said she will trigger by March next year, Tusk said: “Our task will be to protect the interests of the EU as a whole, and the interests of each of the 27 member states, and also to stick unconditionally to the treaty rules and fundamental values. By this I mean, inter alia, the conditions for access to the single market with all four freedoms. There will be no compromises in this regard.” In recent days, some British officials have expressed confidence that a deal with the EU could be worked out, pointing to the examples of Norway and Switzerland, which are not members of the bloc but have access to the single market. But Norway and Switzerland each agreed to the freedom of movement as a condition for single-market access.  “The words uttered by one of the leading campaigners for Brexit and proponents of the ‘cake’ philosophy was pure illusion — that one can have the EU cake and eat it, too,” Tusk said. “To all who believe in it, I propose a simple experiment: buy a cake and eat it and see if it is still there on the plate.”  His Brussels audience, overwhelmingly pro-EU, roared with laughter. But Tusk’s tone quickly turned much darker. “The brutal truth is that Brexit will be a loss for all of us,” he said. “There will be no cakes on the table for anyone. There will be only salt and vinegar.”

If Europe insists on a hard Brexit, so be it - Ambrose Evans-Pritchard - If the central purpose of Brexit is to restore the supremacy of Parliament, we should congratulate Labour for forcing a debate on the proposed terms of withdrawal. Let us demand that MPs should have a vote as well. Brexit belongs to no faction. The referendum was not an election where the winner takes all. The circumstances are entirely sui generis and extremely delicate. Both Scotland and Northern Ireland voted to remain, and the constitutional implications of this have yet to be confronted. A great majority of those below the age of thirty opposed Brexit, and many feel betrayed. It amounts to an inter-generational crisis.  The exact contours of Brexit were never defined. There was no Manifesto. The binary ballot presented to us on June 23 - nolens volens - contained not a single word about immigration. Many who voted to leave the EU want a liberal, amicable, open settlement with Europe. It is the proper role of Parliament to discern the national will, and to impose its verdict on ministers. Theresa May is well-advised to bow to this imperative before Article 50 is triggered, even if raucous wrangling in the House greatly complicates negotiating tactics with Brussels. That said, one must guard against certain vested interests in the City that are actively seeking to whip up hysteria in financial markets. There is an attempt underway to create a bad Brexit narrative in the hope of overturning it, or at least to frighten the country into a minimalist outcome that achieves much the same thing. The interests of the financial elites should not be conflated with the national interest. A legitimate case can be made that they are in conflict. Paul Krugman, the Nobel trade theorist, says the UK has been suffering from a variant of the "Dutch Disease", an over-reliance on finance that drove up pound and hollowed out manufacturing industries. This economic deformation has greatly enriched London's financial set and those who service its wealth, if non-one else. There may be serious economic trials ahead as we extract ourselves from the EU after more than forty years, but the slump in sterling is not one of them. The devaluation is necessary and desirable. The pound is now near 'fair value' based on the real effective exchange rate used by the International Monetary Fund.

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